Finding No. 2022-005 Federal Agency: U.S. Department of Education (ED) Assistance Listing No. and Title: COVID-19 84.425 Education Stabilization Fund ED Subprogram: 84.425A Education Stabilization Fund – State Educational Agency (Outlying Areas; 84.425X American Rescue Plan – State Agency Educational Agency (Outlying Areas) Federal Award No.: COVID-19 S425A200001, COVID-19 S425X210001 Area: Allowable Costs/Cost Principles Questioned Costs: $246,285 Criteria: The Schedule of Expenditures of Federal Awards (SEFA) must be supported by underlying accounting and other records used in preparing the financial statements. 2 CFR 200.403(a) provides that costs must be necessary and reasonable for the performance of the Federal award and be allocable thereto. 2 CFR 200.403 (g) also provides that costs must be adequately documented. In an e-mail communication to PSS, U.S. Department of Education (ED) had stated that the proposed use of ESF funds for the purpose of paying a 10% retention incentive in response to the COVID-19 pandemic is allowable. 2 CFR 200.439(b) provides that capital expenditures for general purpose equipment, buildings, and land; special purpose equipment with a unit cost of $5,000 or more; and, improvements to land, buildings, or equipment which materially increase their value or useful life, are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. Condition: 1. For the year ended September 30, 2022, the total amount of payroll expense under ALN 84.027 determined from the journal entry details supporting the SEFA (or general ledger) was higher by $802,789 as compared to the total amount of payroll expense per labor cost summary (or subsidiary ledger). It was further noted that $404,198 out of this amount pertains to costs initially charged under ALN 84.027 but were later reclassified to ALN 84.425A through a general ledger entry only. No questioned costs are raised as the payroll costs that caused the variance were identified in detail. Condition, continued 2. For 2 (or 5%) of 40 payroll transactions tested, totaling $58,493 out of $32,152,897 in total gross wages incurred under the program, the employee was paid a retention incentive amounting to $3,000 instead of 10% of the employee’s annual salary, as provided by the retention incentive policy. We further noted that PSS provided fixed retention incentive payments amounting to $3,000 for employees whose annual salaries amounted to $30,000 and below, instead of using the rate of 10% as allowed by ED. No evidence was provided to justify the allowability of retention incentives in excess of the allowable amount for the aforementioned group of employees. Total known questioned costs for this condition amounted to $236,490 under ALN 84.425X. Below is a computation of the excess incentive amount for employees actively employed at fiscal year-end: See Schedule of Findings and Questioned Costs for chart/table. 3. For 1 (or 10%), no evidence of prior approval from the federal agency was provided for equipment acquisition PS-069896-US, which was acquired within fiscal year 2022 amounting to $9,795. Cause: PSS did not perform a reconciliation of the general ledger and subsidiary ledger for payroll costs. In addition, PSS failed to ensure that costs charged to the grant are adequately supported. Effect: PSS is in noncompliance with applicable allowable costs/cost principles requirements. Total known questioned costs of $246,285 are reported. Identification as a repeat finding: 2021-003 Recommendation: PSS should implement a regular reconciliation of its labor cost summary report with the general ledger journal entries and ensure that any discrepancies are resolved or validly supported. Further, PSS should strengthen recordkeeping procedures so that documents are readily available to substantiate costs charged to the grant. Views of responsible officials: The PSS Corrective Action Plan provides a detailed rationale for disagreement with the findings described in Conditions 1 and 2. Management agrees with Condition 3. Auditor response: Condition 1 – The finding does acknowledge that PSS reclassified the amount under ESF funds. Given the knowledge of the journal entry limitation, PSS failed to show evidence of effort to regularly reconcile the labor cost summary report with the general ledger. The condition remains. Condition 2 – A review of the communications between PSS and the U.S. Department of Education shows the latter’s approval to provide a retention incentive of 10% of annual salaries. There was no specific approval on the fixed amount of retention incentive provided for those employees with annual salaries not exceeding $30,000. The condition remains.
Finding No. 2022-006 Federal Agency: U.S. Department of Health and Human Services Assistance Listing No. and Title: 93.356/93.600 Head Start Cluster Area: Allowable Costs/Cost Principles Questioned Costs: $132,591 Criteria: 2 CFR 200.403 (g) provides that costs must be adequately documented. 42 U.S. Code (USC) § 9839 (g) and (h) provide that with prior written approval from the Administration for Children and Families (ACF), Head Start Agencies (HSAs) may use funds for capital expenditures (including paying the cost of amortizing the principal, and paying interest on, loans), such as construction of new facilities, purchase of new or existing facilities, major renovations of existing facilities, and purchase of vehicles used for programs conducted at the Head Start facilities. 42 USC 9839 (c) provides that shared and indirect costs attributable to common or joint use of personnel, facilities, or services by Head Start programs and other programs must be fairly allocated among the various programs that utilize such services. 2 CFR 200.439(b) provides that capital expenditures for general purpose equipment, buildings, and land; special purpose equipment with a unit cost of $5,000 or more; and, improvements to land, buildings, or equipment which materially increase their value or useful life, are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. Condition: 1. For 1 (or 2%) out of 40 payroll transactions tested totaling $45,917 out of $3,036,667 in total Program payroll costs, gross wages of $1,101 were incurred by the program under FAIN 09CH01116703 for Employee No. 21199 during the pay period ended 06/18/2022. No evidence of fair allocation of the employee’s payroll cost was provided. 2. For 2 (or 40%) out of 5 samples totaling $131,490 out of $165,367 of equipment tested, no evidence of prior approval from the federal agency was provided for equipment acquisitions PS-067026-US and PS-078607-US, which were acquired within fiscal year 2022 under FAIN COVID-19 09HE0009410C6. Cause: PSS failed to ensure that costs charged to the grant are adequately supported. Effect: PSS is in noncompliance with applicable allowable costs/cost principles requirements. The reportable questioned cost is $132,591. Recommendation: PSS should strengthen recordkeeping procedures so that documents are readily available to substantiate costs charged to the grant. Views of responsible officials: The PSS Corrective Action Plan provides a detailed rationale for disagreement with the findings. Auditor response: Condition 1 – The evidence of fair allocation was not provided. The condition remains. Condition 2 – The evidence of prior approval was not received. The condition remains.
Finding No. 2022-006 Federal Agency: U.S. Department of Health and Human Services Assistance Listing No. and Title: 93.356/93.600 Head Start Cluster Area: Allowable Costs/Cost Principles Questioned Costs: $132,591 Criteria: 2 CFR 200.403 (g) provides that costs must be adequately documented. 42 U.S. Code (USC) § 9839 (g) and (h) provide that with prior written approval from the Administration for Children and Families (ACF), Head Start Agencies (HSAs) may use funds for capital expenditures (including paying the cost of amortizing the principal, and paying interest on, loans), such as construction of new facilities, purchase of new or existing facilities, major renovations of existing facilities, and purchase of vehicles used for programs conducted at the Head Start facilities. 42 USC 9839 (c) provides that shared and indirect costs attributable to common or joint use of personnel, facilities, or services by Head Start programs and other programs must be fairly allocated among the various programs that utilize such services. 2 CFR 200.439(b) provides that capital expenditures for general purpose equipment, buildings, and land; special purpose equipment with a unit cost of $5,000 or more; and, improvements to land, buildings, or equipment which materially increase their value or useful life, are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. Condition: 1. For 1 (or 2%) out of 40 payroll transactions tested totaling $45,917 out of $3,036,667 in total Program payroll costs, gross wages of $1,101 were incurred by the program under FAIN 09CH01116703 for Employee No. 21199 during the pay period ended 06/18/2022. No evidence of fair allocation of the employee’s payroll cost was provided. 2. For 2 (or 40%) out of 5 samples totaling $131,490 out of $165,367 of equipment tested, no evidence of prior approval from the federal agency was provided for equipment acquisitions PS-067026-US and PS-078607-US, which were acquired within fiscal year 2022 under FAIN COVID-19 09HE0009410C6. Cause: PSS failed to ensure that costs charged to the grant are adequately supported. Effect: PSS is in noncompliance with applicable allowable costs/cost principles requirements. The reportable questioned cost is $132,591. Recommendation: PSS should strengthen recordkeeping procedures so that documents are readily available to substantiate costs charged to the grant. Views of responsible officials: The PSS Corrective Action Plan provides a detailed rationale for disagreement with the findings. Auditor response: Condition 1 – The evidence of fair allocation was not provided. The condition remains. Condition 2 – The evidence of prior approval was not received. The condition remains.
Finding No. 2022-006 Federal Agency: U.S. Department of Health and Human Services Assistance Listing No. and Title: 93.356/93.600 Head Start Cluster Area: Allowable Costs/Cost Principles Questioned Costs: $132,591 Criteria: 2 CFR 200.403 (g) provides that costs must be adequately documented. 42 U.S. Code (USC) § 9839 (g) and (h) provide that with prior written approval from the Administration for Children and Families (ACF), Head Start Agencies (HSAs) may use funds for capital expenditures (including paying the cost of amortizing the principal, and paying interest on, loans), such as construction of new facilities, purchase of new or existing facilities, major renovations of existing facilities, and purchase of vehicles used for programs conducted at the Head Start facilities. 42 USC 9839 (c) provides that shared and indirect costs attributable to common or joint use of personnel, facilities, or services by Head Start programs and other programs must be fairly allocated among the various programs that utilize such services. 2 CFR 200.439(b) provides that capital expenditures for general purpose equipment, buildings, and land; special purpose equipment with a unit cost of $5,000 or more; and, improvements to land, buildings, or equipment which materially increase their value or useful life, are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. Condition: 1. For 1 (or 2%) out of 40 payroll transactions tested totaling $45,917 out of $3,036,667 in total Program payroll costs, gross wages of $1,101 were incurred by the program under FAIN 09CH01116703 for Employee No. 21199 during the pay period ended 06/18/2022. No evidence of fair allocation of the employee’s payroll cost was provided. 2. For 2 (or 40%) out of 5 samples totaling $131,490 out of $165,367 of equipment tested, no evidence of prior approval from the federal agency was provided for equipment acquisitions PS-067026-US and PS-078607-US, which were acquired within fiscal year 2022 under FAIN COVID-19 09HE0009410C6. Cause: PSS failed to ensure that costs charged to the grant are adequately supported. Effect: PSS is in noncompliance with applicable allowable costs/cost principles requirements. The reportable questioned cost is $132,591. Recommendation: PSS should strengthen recordkeeping procedures so that documents are readily available to substantiate costs charged to the grant. Views of responsible officials: The PSS Corrective Action Plan provides a detailed rationale for disagreement with the findings. Auditor response: Condition 1 – The evidence of fair allocation was not provided. The condition remains. Condition 2 – The evidence of prior approval was not received. The condition remains.
Criteria: White House OMB Memo M20-26 which states, "payroll costs paid with the Paycheck Protection Program (PPP) loans or any other Federal CARES Act programs must not be also charged to current Federal awards as it would result in the Federal government paying for the same expenditures twice." 2 CFR 200.403 states that "except where otherwise authorized by statute, costs must meet the following general criterai in order to allowable under Federal awards...(f) not be included as a cost or used to meet cost sharing or matching requirements of any other federally-financed program in either the current or a prior period. Condition: Management used payroll from a federal grant (Head Start) to apply for PPP loan forgiveness. This same payroll was requested for reimbursement. Such payroll amounts cannot be reimbursed by both the PPP program and other federal funding. Effect: Previous reporting for Headstart grant expenditures was not accurate due to subsequent receipt of PPP funds forgiveness. The Agency is out of compliance with the PPP requirements, standards of White House OMB Memo M20-26 and 2 CFR 200.403. Cause: Management applied for the PPP loan not knowing if their grant funds were going to continue during the Covid-19 pandemic. The PPP loan was applied for 6 weeks prior to the White House OMB Memo M20-26 being issued, therefore Management's interpretation of the rules at that time did not contemplate the disallowance for costs also covered by a separate federal grant program. Recommendation: The Agency should seek grantor guidance regarding deferred grant funds. Management's Response: See the Management's Response to Findings section for management's detailed response to item 2022-001.
Title 2 U. S. Code of Federal Regulations, Part 200, Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (Uniform Guidance), 2 CFR 200.403(g) outlines the factors affecting allowability of costs charged to a federal award, specifically that costs should be adequately documented. While testing journal entries recorded to cash in the Special Revenue Fund, which accounts for federal programs, we noted several journal entries made by the Board to cash and expenditures that did not include documentation to support the expenditures. One of these journal entries charged costs totaling $35,913.40 to the Supporting Effective Instruction State Grants, a nonmajor federal program. The Board did not have procedures in place to ensure costs charged to the Supporting Effective Instruction State Grants were adequately documented. As a result, the Board did not comply with the Uniform Guidance as it pertains to documentation of costs charged to the Supporting Effective Instruction State Grants and questioned costs of $35,913.40 will be reported for the Supporting Effective Instruction Grants. Recommendation The Board should establish procedures to ensure all costs charged to federal programs, including journal entries, are supported by adequate documentation. Views of Responsible Officials of the Auditee The Board agreed with the finding.
Title 2 U. S. Code of Federal Regulations, Part 200, Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (Uniform Guidance), 2 CFR 200.403(g) outlines the factors affecting allowability of costs charged to a federal award, specifically that costs should be adequately documented. Twenty-five (25) expenditures were initially tested from the Education Stabilization Fund. The test indicated that the Board recorded a journal entry to charge $627,472.58 to the Education Stabilization Fund that was not supported by documentation. Six (6) additional journal entries were tested and four (4) of these journal entries that charged $405,002.44 to the Education Stabilization Fund were not supported by documentation. Therefore, a total of $1,032,475.02 in expenditures charged to the Education Stabilization Fund were undocumented and unsupported. The Board did not have procedures in place to ensure costs charged to the Education Stabilization Fund were adequately documented. As a result, the Board is not in compliance with Uniform Guidance as it pertains to documentation of costs charged to the Education Stabilization Fund. Questioned costs of $1,032,475.02 will be reported for the Education Stabilization Fund which represent material noncompliance to the program, and also a material misstatement to the Schedule of Expenditures of Federal Awards. Recommendation The Board should establish procedures to ensure all costs charged to federal programs, including journal entries, are supported by adequate documentation. Views of Responsible Officials of the Auditee The Board agreed with the finding.
Title 2 U. S. Code of Federal Regulations, Part 200, Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (Uniform Guidance), 2 CFR 200.403(g) outlines the factors affecting allowability of costs charged to a federal award, specifically that costs should be adequately documented. Twenty-five (25) expenditures were initially tested from the Education Stabilization Fund. The test indicated that the Board recorded a journal entry to charge $627,472.58 to the Education Stabilization Fund that was not supported by documentation. Six (6) additional journal entries were tested and four (4) of these journal entries that charged $405,002.44 to the Education Stabilization Fund were not supported by documentation. Therefore, a total of $1,032,475.02 in expenditures charged to the Education Stabilization Fund were undocumented and unsupported. The Board did not have procedures in place to ensure costs charged to the Education Stabilization Fund were adequately documented. As a result, the Board is not in compliance with Uniform Guidance as it pertains to documentation of costs charged to the Education Stabilization Fund. Questioned costs of $1,032,475.02 will be reported for the Education Stabilization Fund which represent material noncompliance to the program, and also a material misstatement to the Schedule of Expenditures of Federal Awards. Recommendation The Board should establish procedures to ensure all costs charged to federal programs, including journal entries, are supported by adequate documentation. Views of Responsible Officials of the Auditee The Board agreed with the finding.
Title 2 U. S. Code of Federal Regulations, Part 200, Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (Uniform Guidance), 2 CFR 200.403(g) outlines the factors affecting allowability of costs charged to a federal award, specifically that costs should be adequately documented. Twenty-five (25) expenditures were initially tested from the Education Stabilization Fund. The test indicated that the Board recorded a journal entry to charge $627,472.58 to the Education Stabilization Fund that was not supported by documentation. Six (6) additional journal entries were tested and four (4) of these journal entries that charged $405,002.44 to the Education Stabilization Fund were not supported by documentation. Therefore, a total of $1,032,475.02 in expenditures charged to the Education Stabilization Fund were undocumented and unsupported. The Board did not have procedures in place to ensure costs charged to the Education Stabilization Fund were adequately documented. As a result, the Board is not in compliance with Uniform Guidance as it pertains to documentation of costs charged to the Education Stabilization Fund. Questioned costs of $1,032,475.02 will be reported for the Education Stabilization Fund which represent material noncompliance to the program, and also a material misstatement to the Schedule of Expenditures of Federal Awards. Recommendation The Board should establish procedures to ensure all costs charged to federal programs, including journal entries, are supported by adequate documentation. Views of Responsible Officials of the Auditee The Board agreed with the finding.
Federal Agency: U.S. Department of Health and Human Services Program: Family Violence Prevention and Services/Discretionary Assistance Listing Number: 93.592 Major Program Compliance Requirement: Allowable Costs/Activities Allowed Criteria: In accordance with 200.403(g) in Subpart E of Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), all costs must be adequately documented. This includes all invoices or other supporting documentation associated with program expenses should be retained to ensure the expense was in accordance with the requirements of the federal program and reported appropriately. Condition: Accurate and reliable records are necessary to meet ongoing financial reporting and operations needs and requirements. During our testing of the Organization’s compliance with Assistance Listing 93.592 Family Violence Prevention and Services/Discretionary, the Organization was unable to provide approximately 17% of the invoices or other supporting documentation selected for testing that are associated with certain program expenses incurred. Cause: The Organization is understaffed and has experienced significant turnover in the accounting and finance department which makes it difficult to maintain internal controls designed to reasonably assure compliance with federal laws, regulations, and program compliance requirements. Effect: The absence of expenditure supporting documentation inhibits the Organization from complying with federal program requirements and the potential of disallowed costs and/or repayment to the federal agency. Recommendation: The Organization should retain all supporting documentation for reported expenditures.
Federal Agency: U.S. Department of Health and Human Services Program: Family Violence Prevention and Services/Discretionary Assistance Listing Number: 93.592 Major Program Compliance Requirement: Allowable Costs/Activities Allowed Criteria: In accordance with 200.403(g) in Subpart E of Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), all costs must be adequately documented. This includes all invoices or other supporting documentation associated with program expenses should be retained to ensure the expense was in accordance with the requirements of the federal program and reported appropriately. Condition: Accurate and reliable records are necessary to meet ongoing financial reporting and operations needs and requirements. During our testing of the Organization’s compliance with Assistance Listing 93.592 Family Violence Prevention and Services/Discretionary, the Organization was unable to provide approximately 17% of the invoices or other supporting documentation selected for testing that are associated with certain program expenses incurred. Cause: The Organization is understaffed and has experienced significant turnover in the accounting and finance department which makes it difficult to maintain internal controls designed to reasonably assure compliance with federal laws, regulations, and program compliance requirements. Effect: The absence of expenditure supporting documentation inhibits the Organization from complying with federal program requirements and the potential of disallowed costs and/or repayment to the federal agency. Recommendation: The Organization should retain all supporting documentation for reported expenditures.
2022-004—Allowable Costs/Cost Principles Federal program information: Funding agency: All Title: All ALN: All Award year and number: All Pass-through entity (if applicable): All Criteria: According to 2 CFR Part 200.403, to be allowable under federal awards, costs must be adequately documented. Additionally, according to 2 CFR Part 200.430, charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed, be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, and comply with established accounting policies and practices of the entity. Condition: Accurate and complete records to support payroll disbursements were not maintained for federal award programs. We specifically noted the following: • There is no documentation of an employee’s approved pay rate. • The Institute has not developed formal accounting or personnel policies and procedures that meet the requirements of federal statutes. Questioned Costs: Undeterminable Context: Six of six payroll disbursements tested were not adequately documented. Cause: The Institute was not aware of the Uniform Guidance requirements regarding allowable costs/cost principles (2 CFR Part 200.403), and compensation for personal services (2 CFR Part 200.430). Additionally, the Institute has not developed formal accounting or personnel policies. Effect: The Institute may not be able to demonstrate that costs charged to federal programs are allowable. Auditor’s Recommendations: The Institute should develop formal accounting and personnel policies and procedures that meet the requirements of the Uniform Guidance. Management’s Response: Management of the Institute did not provide any comments in response to this finding.
2022-004—Allowable Costs/Cost Principles Federal program information: Funding agency: All Title: All ALN: All Award year and number: All Pass-through entity (if applicable): All Criteria: According to 2 CFR Part 200.403, to be allowable under federal awards, costs must be adequately documented. Additionally, according to 2 CFR Part 200.430, charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed, be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, and comply with established accounting policies and practices of the entity. Condition: Accurate and complete records to support payroll disbursements were not maintained for federal award programs. We specifically noted the following: • There is no documentation of an employee’s approved pay rate. • The Institute has not developed formal accounting or personnel policies and procedures that meet the requirements of federal statutes. Questioned Costs: Undeterminable Context: Six of six payroll disbursements tested were not adequately documented. Cause: The Institute was not aware of the Uniform Guidance requirements regarding allowable costs/cost principles (2 CFR Part 200.403), and compensation for personal services (2 CFR Part 200.430). Additionally, the Institute has not developed formal accounting or personnel policies. Effect: The Institute may not be able to demonstrate that costs charged to federal programs are allowable. Auditor’s Recommendations: The Institute should develop formal accounting and personnel policies and procedures that meet the requirements of the Uniform Guidance. Management’s Response: Management of the Institute did not provide any comments in response to this finding.
2022-004—Allowable Costs/Cost Principles Federal program information: Funding agency: All Title: All ALN: All Award year and number: All Pass-through entity (if applicable): All Criteria: According to 2 CFR Part 200.403, to be allowable under federal awards, costs must be adequately documented. Additionally, according to 2 CFR Part 200.430, charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed, be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, and comply with established accounting policies and practices of the entity. Condition: Accurate and complete records to support payroll disbursements were not maintained for federal award programs. We specifically noted the following: • There is no documentation of an employee’s approved pay rate. • The Institute has not developed formal accounting or personnel policies and procedures that meet the requirements of federal statutes. Questioned Costs: Undeterminable Context: Six of six payroll disbursements tested were not adequately documented. Cause: The Institute was not aware of the Uniform Guidance requirements regarding allowable costs/cost principles (2 CFR Part 200.403), and compensation for personal services (2 CFR Part 200.430). Additionally, the Institute has not developed formal accounting or personnel policies. Effect: The Institute may not be able to demonstrate that costs charged to federal programs are allowable. Auditor’s Recommendations: The Institute should develop formal accounting and personnel policies and procedures that meet the requirements of the Uniform Guidance. Management’s Response: Management of the Institute did not provide any comments in response to this finding.
2022-004—Allowable Costs/Cost Principles Federal program information: Funding agency: All Title: All ALN: All Award year and number: All Pass-through entity (if applicable): All Criteria: According to 2 CFR Part 200.403, to be allowable under federal awards, costs must be adequately documented. Additionally, according to 2 CFR Part 200.430, charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed, be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, and comply with established accounting policies and practices of the entity. Condition: Accurate and complete records to support payroll disbursements were not maintained for federal award programs. We specifically noted the following: • There is no documentation of an employee’s approved pay rate. • The Institute has not developed formal accounting or personnel policies and procedures that meet the requirements of federal statutes. Questioned Costs: Undeterminable Context: Six of six payroll disbursements tested were not adequately documented. Cause: The Institute was not aware of the Uniform Guidance requirements regarding allowable costs/cost principles (2 CFR Part 200.403), and compensation for personal services (2 CFR Part 200.430). Additionally, the Institute has not developed formal accounting or personnel policies. Effect: The Institute may not be able to demonstrate that costs charged to federal programs are allowable. Auditor’s Recommendations: The Institute should develop formal accounting and personnel policies and procedures that meet the requirements of the Uniform Guidance. Management’s Response: Management of the Institute did not provide any comments in response to this finding.
2022-004—Allowable Costs/Cost Principles Federal program information: Funding agency: All Title: All ALN: All Award year and number: All Pass-through entity (if applicable): All Criteria: According to 2 CFR Part 200.403, to be allowable under federal awards, costs must be adequately documented. Additionally, according to 2 CFR Part 200.430, charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed, be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, and comply with established accounting policies and practices of the entity. Condition: Accurate and complete records to support payroll disbursements were not maintained for federal award programs. We specifically noted the following: • There is no documentation of an employee’s approved pay rate. • The Institute has not developed formal accounting or personnel policies and procedures that meet the requirements of federal statutes. Questioned Costs: Undeterminable Context: Six of six payroll disbursements tested were not adequately documented. Cause: The Institute was not aware of the Uniform Guidance requirements regarding allowable costs/cost principles (2 CFR Part 200.403), and compensation for personal services (2 CFR Part 200.430). Additionally, the Institute has not developed formal accounting or personnel policies. Effect: The Institute may not be able to demonstrate that costs charged to federal programs are allowable. Auditor’s Recommendations: The Institute should develop formal accounting and personnel policies and procedures that meet the requirements of the Uniform Guidance. Management’s Response: Management of the Institute did not provide any comments in response to this finding.
2022-004—Allowable Costs/Cost Principles Federal program information: Funding agency: All Title: All ALN: All Award year and number: All Pass-through entity (if applicable): All Criteria: According to 2 CFR Part 200.403, to be allowable under federal awards, costs must be adequately documented. Additionally, according to 2 CFR Part 200.430, charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed, be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, and comply with established accounting policies and practices of the entity. Condition: Accurate and complete records to support payroll disbursements were not maintained for federal award programs. We specifically noted the following: • There is no documentation of an employee’s approved pay rate. • The Institute has not developed formal accounting or personnel policies and procedures that meet the requirements of federal statutes. Questioned Costs: Undeterminable Context: Six of six payroll disbursements tested were not adequately documented. Cause: The Institute was not aware of the Uniform Guidance requirements regarding allowable costs/cost principles (2 CFR Part 200.403), and compensation for personal services (2 CFR Part 200.430). Additionally, the Institute has not developed formal accounting or personnel policies. Effect: The Institute may not be able to demonstrate that costs charged to federal programs are allowable. Auditor’s Recommendations: The Institute should develop formal accounting and personnel policies and procedures that meet the requirements of the Uniform Guidance. Management’s Response: Management of the Institute did not provide any comments in response to this finding.
2022-002—Unallowable Gift Card Disbursements Charged to Federal Program Type of Finding: (F) Instance of Noncompliance Related to Federal Awards Funding Agency: U.S. Department of Health and Human Services AL #: 93.231 – COVID-19: Epidemiology and Laboratory Capacity Award #: Various Award Period: 09/30/2021 – 09/29/2026 Estimated Questioned Costs: $15,300 Compliance Requirement: Allowable Costs/Cost Principles Statement of Condition AAIHB distributed gift cards to both salaried employees and independent contractors as a gesture of appreciation for working extended hours related to COVID-19 contact tracing efforts. The total value of the gift cards was approximately $15,300 and was charged to the COVID-19: Epidemiology and Laboratory Capacity grant (AL #93.231). For contractors, these gift cards were provided in addition to their regular compensation. The gift card disbursements were not processed through payroll nor formalized in contract terms, and there is no documentation indicating the entity obtained approval from the awarding agency. Criteria In accordance with 2 CFR § 200.403, costs charged to federal awards must be necessary, reasonable, allocable, and conform to limitations set forth in federal regulations. Per 2 CFR § 200.421(e)(3), the cost of gifts—including cash or cash equivalents such as gift cards—is generally unallowable. Compensation for employees must comply with 2 CFR § 200.430, including support through written policies and documentation of time and effort. Contractor payments must align with procurement standards in 2 CFR § 200.318–200.324 and be governed by written contracts. Effect The use of federal funds to provide gift cards constitutes an unallowable cost under Uniform Guidance. The questioned amount may be subject to repayment to the awarding agency or passthrough entity. Cause The auditee sought to recognize the extraordinary efforts of personnel during the COVID-19 public health response. However, they were unaware that the use of gift cards for this purpose was inconsistent with Uniform Guidance and lacked prior approval or supporting policy. Recommendation We recommend the auditee discontinue the use of federal funds for gift card distributions. All compensation for employees should be processed through payroll, supported by appropriate documentation and internal policies. Payments to contractors should be governed by written contracts and comply with applicable procurement standards. If the auditee believes these costs are justifiable, they should consult the awarding agency for a determination and, if necessary, reimburse the federal award.
2022-002—Unallowable Gift Card Disbursements Charged to Federal Program Type of Finding: (F) Instance of Noncompliance Related to Federal Awards Funding Agency: U.S. Department of Health and Human Services AL #: 93.231 – COVID-19: Epidemiology and Laboratory Capacity Award #: Various Award Period: 09/30/2021 – 09/29/2026 Estimated Questioned Costs: $15,300 Compliance Requirement: Allowable Costs/Cost Principles Statement of Condition AAIHB distributed gift cards to both salaried employees and independent contractors as a gesture of appreciation for working extended hours related to COVID-19 contact tracing efforts. The total value of the gift cards was approximately $15,300 and was charged to the COVID-19: Epidemiology and Laboratory Capacity grant (AL #93.231). For contractors, these gift cards were provided in addition to their regular compensation. The gift card disbursements were not processed through payroll nor formalized in contract terms, and there is no documentation indicating the entity obtained approval from the awarding agency. Criteria In accordance with 2 CFR § 200.403, costs charged to federal awards must be necessary, reasonable, allocable, and conform to limitations set forth in federal regulations. Per 2 CFR § 200.421(e)(3), the cost of gifts—including cash or cash equivalents such as gift cards—is generally unallowable. Compensation for employees must comply with 2 CFR § 200.430, including support through written policies and documentation of time and effort. Contractor payments must align with procurement standards in 2 CFR § 200.318–200.324 and be governed by written contracts. Effect The use of federal funds to provide gift cards constitutes an unallowable cost under Uniform Guidance. The questioned amount may be subject to repayment to the awarding agency or passthrough entity. Cause The auditee sought to recognize the extraordinary efforts of personnel during the COVID-19 public health response. However, they were unaware that the use of gift cards for this purpose was inconsistent with Uniform Guidance and lacked prior approval or supporting policy. Recommendation We recommend the auditee discontinue the use of federal funds for gift card distributions. All compensation for employees should be processed through payroll, supported by appropriate documentation and internal policies. Payments to contractors should be governed by written contracts and comply with applicable procurement standards. If the auditee believes these costs are justifiable, they should consult the awarding agency for a determination and, if necessary, reimburse the federal award.
2022-002—Unallowable Gift Card Disbursements Charged to Federal Program Type of Finding: (F) Instance of Noncompliance Related to Federal Awards Funding Agency: U.S. Department of Health and Human Services AL #: 93.231 – COVID-19: Epidemiology and Laboratory Capacity Award #: Various Award Period: 09/30/2021 – 09/29/2026 Estimated Questioned Costs: $15,300 Compliance Requirement: Allowable Costs/Cost Principles Statement of Condition AAIHB distributed gift cards to both salaried employees and independent contractors as a gesture of appreciation for working extended hours related to COVID-19 contact tracing efforts. The total value of the gift cards was approximately $15,300 and was charged to the COVID-19: Epidemiology and Laboratory Capacity grant (AL #93.231). For contractors, these gift cards were provided in addition to their regular compensation. The gift card disbursements were not processed through payroll nor formalized in contract terms, and there is no documentation indicating the entity obtained approval from the awarding agency. Criteria In accordance with 2 CFR § 200.403, costs charged to federal awards must be necessary, reasonable, allocable, and conform to limitations set forth in federal regulations. Per 2 CFR § 200.421(e)(3), the cost of gifts—including cash or cash equivalents such as gift cards—is generally unallowable. Compensation for employees must comply with 2 CFR § 200.430, including support through written policies and documentation of time and effort. Contractor payments must align with procurement standards in 2 CFR § 200.318–200.324 and be governed by written contracts. Effect The use of federal funds to provide gift cards constitutes an unallowable cost under Uniform Guidance. The questioned amount may be subject to repayment to the awarding agency or passthrough entity. Cause The auditee sought to recognize the extraordinary efforts of personnel during the COVID-19 public health response. However, they were unaware that the use of gift cards for this purpose was inconsistent with Uniform Guidance and lacked prior approval or supporting policy. Recommendation We recommend the auditee discontinue the use of federal funds for gift card distributions. All compensation for employees should be processed through payroll, supported by appropriate documentation and internal policies. Payments to contractors should be governed by written contracts and comply with applicable procurement standards. If the auditee believes these costs are justifiable, they should consult the awarding agency for a determination and, if necessary, reimburse the federal award.
2022-002—Unallowable Gift Card Disbursements Charged to Federal Program Type of Finding: (F) Instance of Noncompliance Related to Federal Awards Funding Agency: U.S. Department of Health and Human Services AL #: 93.231 – COVID-19: Epidemiology and Laboratory Capacity Award #: Various Award Period: 09/30/2021 – 09/29/2026 Estimated Questioned Costs: $15,300 Compliance Requirement: Allowable Costs/Cost Principles Statement of Condition AAIHB distributed gift cards to both salaried employees and independent contractors as a gesture of appreciation for working extended hours related to COVID-19 contact tracing efforts. The total value of the gift cards was approximately $15,300 and was charged to the COVID-19: Epidemiology and Laboratory Capacity grant (AL #93.231). For contractors, these gift cards were provided in addition to their regular compensation. The gift card disbursements were not processed through payroll nor formalized in contract terms, and there is no documentation indicating the entity obtained approval from the awarding agency. Criteria In accordance with 2 CFR § 200.403, costs charged to federal awards must be necessary, reasonable, allocable, and conform to limitations set forth in federal regulations. Per 2 CFR § 200.421(e)(3), the cost of gifts—including cash or cash equivalents such as gift cards—is generally unallowable. Compensation for employees must comply with 2 CFR § 200.430, including support through written policies and documentation of time and effort. Contractor payments must align with procurement standards in 2 CFR § 200.318–200.324 and be governed by written contracts. Effect The use of federal funds to provide gift cards constitutes an unallowable cost under Uniform Guidance. The questioned amount may be subject to repayment to the awarding agency or passthrough entity. Cause The auditee sought to recognize the extraordinary efforts of personnel during the COVID-19 public health response. However, they were unaware that the use of gift cards for this purpose was inconsistent with Uniform Guidance and lacked prior approval or supporting policy. Recommendation We recommend the auditee discontinue the use of federal funds for gift card distributions. All compensation for employees should be processed through payroll, supported by appropriate documentation and internal policies. Payments to contractors should be governed by written contracts and comply with applicable procurement standards. If the auditee believes these costs are justifiable, they should consult the awarding agency for a determination and, if necessary, reimburse the federal award.
2022-002—Unallowable Gift Card Disbursements Charged to Federal Program Type of Finding: (F) Instance of Noncompliance Related to Federal Awards Funding Agency: U.S. Department of Health and Human Services AL #: 93.231 – COVID-19: Epidemiology and Laboratory Capacity Award #: Various Award Period: 09/30/2021 – 09/29/2026 Estimated Questioned Costs: $15,300 Compliance Requirement: Allowable Costs/Cost Principles Statement of Condition AAIHB distributed gift cards to both salaried employees and independent contractors as a gesture of appreciation for working extended hours related to COVID-19 contact tracing efforts. The total value of the gift cards was approximately $15,300 and was charged to the COVID-19: Epidemiology and Laboratory Capacity grant (AL #93.231). For contractors, these gift cards were provided in addition to their regular compensation. The gift card disbursements were not processed through payroll nor formalized in contract terms, and there is no documentation indicating the entity obtained approval from the awarding agency. Criteria In accordance with 2 CFR § 200.403, costs charged to federal awards must be necessary, reasonable, allocable, and conform to limitations set forth in federal regulations. Per 2 CFR § 200.421(e)(3), the cost of gifts—including cash or cash equivalents such as gift cards—is generally unallowable. Compensation for employees must comply with 2 CFR § 200.430, including support through written policies and documentation of time and effort. Contractor payments must align with procurement standards in 2 CFR § 200.318–200.324 and be governed by written contracts. Effect The use of federal funds to provide gift cards constitutes an unallowable cost under Uniform Guidance. The questioned amount may be subject to repayment to the awarding agency or passthrough entity. Cause The auditee sought to recognize the extraordinary efforts of personnel during the COVID-19 public health response. However, they were unaware that the use of gift cards for this purpose was inconsistent with Uniform Guidance and lacked prior approval or supporting policy. Recommendation We recommend the auditee discontinue the use of federal funds for gift card distributions. All compensation for employees should be processed through payroll, supported by appropriate documentation and internal policies. Payments to contractors should be governed by written contracts and comply with applicable procurement standards. If the auditee believes these costs are justifiable, they should consult the awarding agency for a determination and, if necessary, reimburse the federal award.
2022-002—Unallowable Gift Card Disbursements Charged to Federal Program Type of Finding: (F) Instance of Noncompliance Related to Federal Awards Funding Agency: U.S. Department of Health and Human Services AL #: 93.231 – COVID-19: Epidemiology and Laboratory Capacity Award #: Various Award Period: 09/30/2021 – 09/29/2026 Estimated Questioned Costs: $15,300 Compliance Requirement: Allowable Costs/Cost Principles Statement of Condition AAIHB distributed gift cards to both salaried employees and independent contractors as a gesture of appreciation for working extended hours related to COVID-19 contact tracing efforts. The total value of the gift cards was approximately $15,300 and was charged to the COVID-19: Epidemiology and Laboratory Capacity grant (AL #93.231). For contractors, these gift cards were provided in addition to their regular compensation. The gift card disbursements were not processed through payroll nor formalized in contract terms, and there is no documentation indicating the entity obtained approval from the awarding agency. Criteria In accordance with 2 CFR § 200.403, costs charged to federal awards must be necessary, reasonable, allocable, and conform to limitations set forth in federal regulations. Per 2 CFR § 200.421(e)(3), the cost of gifts—including cash or cash equivalents such as gift cards—is generally unallowable. Compensation for employees must comply with 2 CFR § 200.430, including support through written policies and documentation of time and effort. Contractor payments must align with procurement standards in 2 CFR § 200.318–200.324 and be governed by written contracts. Effect The use of federal funds to provide gift cards constitutes an unallowable cost under Uniform Guidance. The questioned amount may be subject to repayment to the awarding agency or passthrough entity. Cause The auditee sought to recognize the extraordinary efforts of personnel during the COVID-19 public health response. However, they were unaware that the use of gift cards for this purpose was inconsistent with Uniform Guidance and lacked prior approval or supporting policy. Recommendation We recommend the auditee discontinue the use of federal funds for gift card distributions. All compensation for employees should be processed through payroll, supported by appropriate documentation and internal policies. Payments to contractors should be governed by written contracts and comply with applicable procurement standards. If the auditee believes these costs are justifiable, they should consult the awarding agency for a determination and, if necessary, reimburse the federal award.
Criteria Per 2 CFR § 200.403 and § 200.412–415 of the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), non-federal entities must have consistent and equitable methods for allocating indirect costs to federal programs. Condition The Organization was unable to provide adequate support to substantiate its allocation of indirect costs to federal awards. Cause The Organization does not have formal policies and procedures for the allocation and application of indirect costs to federal awards. Effect Without a formal policy, there is an increased risk of inconsistent or noncompliant cost allocation practices, which may lead to questioned costs, audit findings, or disallowed reimbursements by federal awarding agencies. Questioned Costs None Context The organization does not have procedures in place to allocate indirect costs to contracts. Auditor allocated costs based on allowed percentages as part of testing. Recommendation We recommend that management develop and implement a comprehensive indirect cost allocation policy that aligns with Uniform Guidance requirements. The policy should clearly define the methodology for calculating, allocating, and applying indirect costs to federal awards and be communicated to all relevant personnel. Views of Responsible Officials See the accompanying Corrective Action Plan.
Criteria Per 2 CFR § 200.403 and § 200.412–415 of the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), non-federal entities must have consistent and equitable methods for allocating indirect costs to federal programs. Condition The Organization was unable to provide adequate support to substantiate its allocation of indirect costs to federal awards. Cause The Organization does not have formal policies and procedures for the allocation and application of indirect costs to federal awards. Effect Without a formal policy, there is an increased risk of inconsistent or noncompliant cost allocation practices, which may lead to questioned costs, audit findings, or disallowed reimbursements by federal awarding agencies. Questioned Costs None Context The organization does not have procedures in place to allocate indirect costs to contracts. Auditor allocated costs based on allowed percentages as part of testing. Recommendation We recommend that management develop and implement a comprehensive indirect cost allocation policy that aligns with Uniform Guidance requirements. The policy should clearly define the methodology for calculating, allocating, and applying indirect costs to federal awards and be communicated to all relevant personnel. Views of Responsible Officials See the accompanying Corrective Action Plan.
Criteria Per 2 CFR § 200.403 and § 200.412–415 of the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), non-federal entities must have consistent and equitable methods for allocating indirect costs to federal programs. Condition The Organization was unable to provide adequate support to substantiate its allocation of indirect costs to federal awards. Cause The Organization does not have formal policies and procedures for the allocation and application of indirect costs to federal awards. Effect Without a formal policy, there is an increased risk of inconsistent or noncompliant cost allocation practices, which may lead to questioned costs, audit findings, or disallowed reimbursements by federal awarding agencies. Questioned Costs None Context The organization does not have procedures in place to allocate indirect costs to contracts. Auditor allocated costs based on allowed percentages as part of testing. Recommendation We recommend that management develop and implement a comprehensive indirect cost allocation policy that aligns with Uniform Guidance requirements. The policy should clearly define the methodology for calculating, allocating, and applying indirect costs to federal awards and be communicated to all relevant personnel. Views of Responsible Officials See the accompanying Corrective Action Plan.
Criteria Per 2 CFR § 200.403 and § 200.412–415 of the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), non-federal entities must have consistent and equitable methods for allocating indirect costs to federal programs. Condition The Organization was unable to provide adequate support to substantiate its allocation of indirect costs to federal awards. Cause The Organization does not have formal policies and procedures for the allocation and application of indirect costs to federal awards. Effect Without a formal policy, there is an increased risk of inconsistent or noncompliant cost allocation practices, which may lead to questioned costs, audit findings, or disallowed reimbursements by federal awarding agencies. Questioned Costs None Context The organization does not have procedures in place to allocate indirect costs to contracts. Auditor allocated costs based on allowed percentages as part of testing. Recommendation We recommend that management develop and implement a comprehensive indirect cost allocation policy that aligns with Uniform Guidance requirements. The policy should clearly define the methodology for calculating, allocating, and applying indirect costs to federal awards and be communicated to all relevant personnel. Views of Responsible Officials See the accompanying Corrective Action Plan.
Criteria Per 2 CFR § 200.403 and § 200.412–415 of the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), non-federal entities must have consistent and equitable methods for allocating indirect costs to federal programs. Condition The Organization was unable to provide adequate support to substantiate its allocation of indirect costs to federal awards. Cause The Organization does not have formal policies and procedures for the allocation and application of indirect costs to federal awards. Effect Without a formal policy, there is an increased risk of inconsistent or noncompliant cost allocation practices, which may lead to questioned costs, audit findings, or disallowed reimbursements by federal awarding agencies. Questioned Costs None Context The organization does not have procedures in place to allocate indirect costs to contracts. Auditor allocated costs based on allowed percentages as part of testing. Recommendation We recommend that management develop and implement a comprehensive indirect cost allocation policy that aligns with Uniform Guidance requirements. The policy should clearly define the methodology for calculating, allocating, and applying indirect costs to federal awards and be communicated to all relevant personnel. Views of Responsible Officials See the accompanying Corrective Action Plan.
Criteria Per 2 CFR § 200.403 and § 200.412–415 of the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), non-federal entities must have consistent and equitable methods for allocating indirect costs to federal programs. Condition The Organization was unable to provide adequate support to substantiate its allocation of indirect costs to federal awards. Cause The Organization does not have formal policies and procedures for the allocation and application of indirect costs to federal awards. Effect Without a formal policy, there is an increased risk of inconsistent or noncompliant cost allocation practices, which may lead to questioned costs, audit findings, or disallowed reimbursements by federal awarding agencies. Questioned Costs None Context The organization does not have procedures in place to allocate indirect costs to contracts. Auditor allocated costs based on allowed percentages as part of testing. Recommendation We recommend that management develop and implement a comprehensive indirect cost allocation policy that aligns with Uniform Guidance requirements. The policy should clearly define the methodology for calculating, allocating, and applying indirect costs to federal awards and be communicated to all relevant personnel. Views of Responsible Officials See the accompanying Corrective Action Plan.
Criteria Per 2 CFR § 200.403 and § 200.412–415 of the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), non-federal entities must have consistent and equitable methods for allocating indirect costs to federal programs. Condition The Organization was unable to provide adequate support to substantiate its allocation of indirect costs to federal awards. Cause The Organization does not have formal policies and procedures for the allocation and application of indirect costs to federal awards. Effect Without a formal policy, there is an increased risk of inconsistent or noncompliant cost allocation practices, which may lead to questioned costs, audit findings, or disallowed reimbursements by federal awarding agencies. Questioned Costs None Context The organization does not have procedures in place to allocate indirect costs to contracts. Auditor allocated costs based on allowed percentages as part of testing. Recommendation We recommend that management develop and implement a comprehensive indirect cost allocation policy that aligns with Uniform Guidance requirements. The policy should clearly define the methodology for calculating, allocating, and applying indirect costs to federal awards and be communicated to all relevant personnel. Views of Responsible Officials See the accompanying Corrective Action Plan.
Finding Number: 2022-023 Prior Year Finding Number: N/A Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles – Payroll Activities Program: U.S. Department of Agriculture Child Nutrition Cluster ALN: 10.555, 10.559, 10.582 Award #: 4V1300308 Award Period: 10/01/2021 – 9/30/2022 Government Department/Agency: Department of Education (VIDE) Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires the non-federal entities receiving Federal awards (1.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Management is responsible for establishing and maintaining a system of internal control that should include controls over its activities allowed or unallowed, allowable cost/cost principal process. CFR 200.403(g) states that for costs to be allowed under federal awards, they must be adequately documented. Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.430(i) and must be based on records that accurately reflect the work performed. These records must: • Be incorporated into the organization’s official records. • Reasonably reflect the total activity for which the employee is compensated across all grant-related and non-grant related activities (100%); and • Support the distribution of employee salary across multiple activities or cost objectives. Condition – During our testing of allowable costs for payroll expenditures incurred throughout the year, we sampled and selected 11 of 104 payroll disbursements and noted the following: • 11 instances where the approved timesheet for the pay period selected was not available for review. • 11 instances where VIDE did not provide support that time and effort is charged in accordance with A-87 requirements. • 4 instances where the NOPA provided did not include any evidence that the employee was approved to be federally reimbursed for the project code utilized in the payroll register. • One instance where the project code on the approved NOPA did not agree with the project code utilized on the payroll register. • 7 instances where the payroll register did not include and employee’s retirement and health insurance benefits for the pay period selected. • One instance where the employee’s pay rate in the approved NOPA provided did not agree with the pay rate in the payroll register. • One instance where the payroll register did not show any hours worked by the employee for the pay period selected. Questioned Costs – None. Context – This is a condition identified per review of VIDE’s compliance with the specified requirements using a statistically valid sample. The total payroll expenditures charged to the program in fiscal year 2022 were $205,418. The amount sampled is $22,738 The known amount of the instances of inconsistent funding allocation is $22,738. Effect – An ineffective control system related to review of transactions to ensure that only allowable costs are allocated to federal programs can lead to noncompliance with federal statutes, regulations, and the provisions of grant agreements that could ultimately lead to disallowed costs for the major programs. Cause – VIDE does not appear to have adequate policies and procedures to ensure compliance with applicable cost principles and ensure that an appropriate level of review and approval was completed prior to charging costs to a federal program. Recommendation – We recommend that VIDE reevaluate and improve internal controls to ensure adherence to federal regulations related to the fiscal administrative requirement for expending and accounting for payroll and to ensure proper and accurate funding allocation of payroll cost. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.
Finding Number: 2022-020 Prior Year Finding Number: 2021-019 Compliance Requirement: Allowable Costs/Cost Principles – Payroll Activities Program: U.S. Department of Agriculture Supplemental Nutrition Assistance Program Cluster (SNAP) ALN: 10.551, 10.561 Award #: 4VI400408 Award Year: 10/01/20 – 09/30/21 10/01/21 – 09/30/22 Government Department/Agency: Department of Human Services (DHS) Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires the non-federal entities receiving Federal awards (1.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Management is responsible for establishing and maintaining a system of internal control that should include controls over its activities allowed or unallowed, allowable cost/cost principal process. CFR 200.403(g) states that for costs to be allowed under federal awards, they must be adequately documented. Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.430(i) and must be based on records that accurately reflect the work performed. These records must: • Be incorporated into the organization’s official records. • Reasonably reflect the total activity for which the employee is compensated across all grant-related and non-grant related activities (100%); and • Support the distribution of employee salary across multiple activities or cost objectives. Condition – During our testing of allowable costs for payroll expenditures incurred throughout the year, we sampled and selected 60 of 1,854 payroll disbursements and noted the following: • 13 instances where DHS did not consistently apply funding allocation in accordance with the Notice of Personnel Action (NOPA). Of the 13, we found 5 instances where hours that should have been charged 100% to federal funds were split 50/50 (local/federal) and 8 instances in which hours that should have been split 50/50 were charged 100% (3), 95% (3), 75% (1), and 55% (1) to federal funds. • One instance where an employee’s compensation was charged to SNAP while working on a different federal program. • One instance in which overtime hours noted per the employees’ timesheet did not agree to the overtime hours in the payroll register. Further, we noted that internal controls identified did not appear to be operating at a level of precision to ensure compliance with the above-mentioned requirements. Questioned Costs – Not Determinable. Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. The total payroll expenditures charged to the program in fiscal year 2022 were $3,354,155. The amount sampled is $132,885. The known amount of the instances of inconsistent funding allocation is $6,453. Effect – An ineffective control system related to review of transactions to ensure that only allowable costs are allocated to federal programs can lead to noncompliance with federal statutes, regulations, and the provisions of grant agreements that could ultimately lead to disallowed costs for the major programs. Cause – DHS does not appear to have adequate policies and procedures to ensure compliance with applicable cost principles and ensure that an appropriate level of review and approval was completed prior to charging costs to a federal program. Recommendation – We recommend that DHS reevaluate and improve internal controls to ensure adherence to federal regulations related to the fiscal administrative requirement for expending and accounting for payroll and to ensure proper and accurate funding allocation of payroll cost. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The Department of Human Services (DHS) adopted the electronic Timeforce (STATS) system for payroll, replacing manual processes. Time and attendance are approved through management levels, with payroll based on Notice of Personnel Action (NOPA) cost centers. Financial Analysts reconcile payroll, and a workflow ensures accurate NOPA listings for payroll purposes. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.
Finding Number: 2022-056 Prior Year Finding Number: N/A Compliance Requirement: Allowable Costs/Cost Principles – Payroll Activities Program: U.S. Department of Health and Human Services Epidemiology and Laboratory Capacity for Infectious Disease ALN: 93.323 Award #: NU50CK000507 Award Year: 08/01/19 – 07/31/24 Government Department/Agency: Department of Health (DOH) Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Control Section (a), requires the non-federal entities receiving Federal awards (1.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Management is responsible for establishing and maintaining a system of internal control that should include controls over its activities allowed or unallowed, allowable cost/cost principle process. CFR 200.403(g) states that for costs to be allowed under federal awards, they must be adequately documented. Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.430(i) and must be based on records that accurately reflect the work performed. These records must: • Be incorporated into the organization’s official records; • Reasonably reflect the total activity for which the employee is compensated across all grant-related and non-grant related activities (100%); and • Support the distribution of employee salary across multiple activities or cost objectives. Condition – DOH was unable to reconcile the payroll expense include in the SEFA ($2,025,690) with the payroll expense in the payroll register ($1,909,128). As a result, the auditor was not able to establish the completeness of the population and was unable to perform testing procedures. Questioned Costs – None. Context – This is a condition identified per review of DOH’s compliance with the specified requirements. Cause – DOH does not appear to have adequate policies and procedures in place to review and reconcile program expenditures. Effect – Lack of proper reconciling information can result in noncompliance with laws and regulation along with loss of funding. Recommendation – We recommend that DOH improve internal controls to ensure program data is reconciled, monitored and retained in order to facilitate adherence to federal regulations and compliance requirements. Views of Responsible Official - The Government concurs with the auditor’s findings and recommendations. DOH acknowledges the auditor's finding regarding the inability to reconcile payroll expenses in the SEFA with the payroll register due to untimely payroll adjustments. To address this, DOH is training its team and ensuring staff have access to make necessary adjustments in the Government Financial Management System starting FY2024. Moving forward, DOH will enhance its SOPs by holding monthly reconciliation meetings with relevant program teams for timely adjustments and continuous monitoring. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.
Finding Number: 2022-063 Prior Year Finding Number: N/A Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles - Payroll Activities Program: U.S. Department of Health and Human Services CCDF Cluster ALN: 93.575, 93.489 Award #: Various Award Period: Various Government Department/Agency: Department of Human Services (DHS) Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires the non-federal entities receiving Federal awards (1.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Management is responsible for establishing and maintaining a system of internal control that should include controls over its activities allowed or unallowed, allowable cost/cost principal process. CFR 200.403(g) states that for costs to be allowed under federal awards, they must be adequately documented. Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.430(i) and must be based on records that accurately reflect the work performed. These records must: • Be incorporated into the organization’s official records. • Reasonably reflect the total activity for which the employee is compensated across all grant-related and non-grant related activities (100%); and • Support the distribution of employee salary across multiple activities or cost objectives. Condition – We sampled and selected 67 out of 302 payroll transactions and in all instances found that DHS did not consistently apply funding allocation in accordance with the Notice of Personnel Action (NOPA). We found the project code approved on the NOPA did not agree to the project code used on the payroll register. However, in all instances we found the employee’s actual time and effort was appropriately charged to the CCDF program. Thus, internal controls were not operating at a level of precision to ensure compliance with the allowable costs compliance requirement. Questioned Costs – None. Context – This is a condition identified per review of DHS’s compliance with the specified requirements using a statistically valid sample. The total amount of payroll expenditures charged to the program were $820,305. Total amount sampled was $202,805. Effect – Failure to properly update an employee’s NOPA can result time and effort charged to the incorrect project code resulting in noncompliance with laws and regulations along with loss of funding. Cause – DHS does not appear to have adequate policies and procedures in place to ensure compliance with applicable cost principles. Recommendation – We recommend that DHS improve internal controls to ensure adherence to Federal regulations related to the fiscal and administrative requirements for expending and accounting for payroll expenditures. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The Division of Human Resources is updating the Notice of Personnel Actions to include the necessary Project code at the start of each fiscal year. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.
Finding Number: 2022-074 Prior Year Finding Number: 2021-061 Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles – Non-Payroll Activities Program: U.S. Department of Health and Human Services Medicaid Cluster ALN: 93.775, 93.778 Award #: 75X0512 Award Period: 10/01/2015 – 09/30/2022 Government Department/Agency: Department of Human Services (DHS) Criteria –2 CFR Section 200.403, Factors Affecting Allowability of Costs, “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 amounts 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.” Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Condition – In the prior year, BDO noted one instance where DHS paid a monthly fee for a trailer to store excess furniture and other administrative items. It was determined that the Medicaid staff no longer needed the trailer. The amount charged to the Medicaid program in fiscal year 2022 related to trailer totals $4,870. Further, internal controls were not operating at a level of precision to ensure compliance with the compliance requirement. Questioned Costs – $4,870. Context - This is a condition identified per review of DHS’ compliance with the specified requirements. Effect - DHS is not in compliance with the stated provisions. Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause - DHS does not have adequate policies and procedures in place to ensure that expenses are reviewed and approved to ensure reasonability and necessity. Recommendation – We recommend that DHS improve internal controls to ensure adherence to Federal regulations related to the fiscal and administrative requirements for expending and accounting for non-payroll expenditures. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. This was an isolated occurrence during the transition of the MAP program from one building to another. Since the equipment could not be used at the new location, it was stored for future use. The Director of Asset Management now oversees the storage of inventory to prevent similar occurrences in the future. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.
Finding No. 2022-016 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D20AP00005 and D20AP00037 Area: Period of Performance Questioned Costs: $494,836 Criteria: 1. 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)). 2. A non-federal entity must liquidate all financial obligations incurred under the federal award not later than 120 calendar days after the end date of the period of performance as specified in the terms and conditions of the federal award (2 CFR section 200.344(b)). Condition: Of eight expenditures tested, aggregating $593,531 of a total population of $692,970, the following were noted: 1. For four (or 50%), CNMI was unable to provide supporting documents, such as purchase orders or contracts, to support that expenditures were incurred within the period of performance. 2. For one (or 13%), CNMI was unable to provide the cancelled check to support that the expenditure was liquidated within 120 days after the end date of the period of performance. Cause: The CNMI did not provide sufficient and appropriate audit evidence to substantiate the expenditures over compliance with applicable period of performance requirement. Effect: The CNMI is in noncompliance with applicable period of performance requirements and questioned cost of $494,836 result. Recommendation: CNMI should provide timely and consistent communication with the auditors to avoid future noncompliance due to lack of supporting evidence. Having the correct documentation is crucial in determining compliance to each requirement. Views of Responsible Officials: Condition 1 - The Office of Grant Management (OGM) disagrees with this finding. Due to internal scheduling constraints and the compressed timeline required to complete the FY2022 audit, the requested documents were not submitted by the specified deadline, resulting in this finding. However, OGM maintains all relevant supporting documentation and is prepared to provide it upon request from the Grantor. Based on our records, grant award D20AP00005 remains active with a period of performance extending through September 30, 2025, while grant award D20AP00037 was closed on September 30, 2024. Both grants remained operational well beyond the originally prescribed September 30, 2022 deadline. Given the extended period of performance authorized by the awarding agency, all associated questioned costs ($494,660.00) are supported by active grant activity and should be deemed allowable. Accordingly, OGM respectfully requests that these questioned costs be removed, as they reflect legitimate expenditures incurred within the approved grant periods. Condition 2 - CIP agrees with the finding. The responsible official will report progress on corrective actions to the CNMI leadership and maintain documentation of all implemented changes. Evidence of compliance (updated policies, training records, and self-audit reports) will be provided to the auditors upon request. Refer to CNMI’s Corrective Action Plan for additional information. Auditor Response: Condition 1 - CNMI states disagreement; however, CNMI also acknowledges that documentation supporting program costs were not provided. Questioned costs are retained, as costs at the time of the audit were not supported by adequate documentation.
Finding No. 2022-024 Federal Agency: U.S. Department of the Treasury AL Program: 21.023 Emergency Rental Assistance Program Federal Award No.: 20010001/000021 Area: Period of Performance Questioned Costs: $26,329 Criteria: 1. In accordance with 2 CFR 200.344(c), the recipient must liquidate all financial obligations incurred under the Federal award no later than 120 calendar days after the conclusion of the period of performance; 2. In accordance with the U.S. Department of Treasury closeout activities guidance dated 09/16/22, obligated funds may be expended by grantees for up to 120 calendar days after the end of the award period of performance for allowable administrative activities; and Condition: Of fifty ERA 1 expenditures tested, aggregating $90,179 of a total population of $191,896, the following were noted: 1. For twenty-seven (or 54%), costs were liquidated after the grant award’s end of the 120-day liquidation period of 01/30/23. 2. For one (or 2%), obligating and liquidation documentations were not provided. Accordingly, the CNMI was not able to substantiate that the cost was incurred/obligated and liquidated within the period of performance. Cause: CNMI did not enforce compliance with the applicable period of performance requirements and lacks monitoring control over the verification that costs charged to the program were incurred/obligated and liquidated within the period of performance. Effect: CNMI is in noncompliance with the applicable period of performance requirements and questioned costs of $26,329 result. Recommendation: CNMI should strengthen and enforce compliance with the applicable period of performance requirements and implement and enforce monitoring controls over program costs to ensure that costs charged to the program are within the specified period of performance and implement and establish systematic filing of relevant documentation for easy retrieval. Views of Responsible Officials: Condition 1 - The Office of Grant Management (OGM) disagrees with this finding. OGM recollects prior guidance and program discussions indicating that U.S. Territories administering ERA were afforded greater flexibility in the period of performance, in recognition of their geographic remoteness and the additional time required to receive technical assistance and implement compliant systems. This understanding informed OGM’s administration of ERA funds. Additionally, several disbursed checks were returned, which created reconciliation delays and made it difficult to ascertain the true unobligated balance of the grant until sufficient time had passed for all transactions to clear. To address compliance concerns, CNMI officials traveled to Washington, D.C. in February 2025 to meet with U.S. Treasury representatives and resolve outstanding ERA1 documentation issues. Following those meetings, OGM submitted the necessary reports and initiated the closeout process for ERA1 in accordance with federal requirements. The questioned cost of $26,329 reflects expenditures that were directed toward eligible households impacted by COVID-19. These expenditures were necessary, reasonable, and allocable under 2 CFR 200.403, and fully aligned with the statutory purpose of ERA to prevent housing instability. Disallowing these costs would effectively negate assistance that was properly delivered to beneficiaries and undermine the program’s objective. For these reasons, OGM respectfully requests that the questioned cost be removed. Condition 2 - The Office of Grant Management (OGM) disagrees with this finding. Due to internal scheduling constraints and the compressed timeline required to complete the FY2022 audit, the requested documents were not submitted by the specified deadline, resulting in this finding. However, OGM maintains all relevant supporting documentation and is prepared to provide it upon request from the Grantor. Refer to CNMI’s Corrective Action Plan for additional information. Auditor Response: Condition 1 - Documentation of the afforded flexibility over the period of performance requirements for the CNMI’s ERA grants was not provided. Questioned costs are retained, as costs at the time of the audit were not supported by adequate documentation. Condition 2 - CNMI states disagreement; however, CNMI acknowledges that documentation supporting program costs were not provided.
Finding No. 2022-035 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.767 Children’s Health Insurance Program Federal Award No.: 7510515, 7520515 Area: Period of Performance Questioned Costs: $38,556 Criteria: 1. 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)). 2. A non-federal entity must liquidate all financial obligations incurred under the federal award not later than 120 calendar days after the end date of the period of performance as specified in the terms and conditions of the federal award (2 CFR section 200.344(b)). Condition: CNMI was unable to provide supporting documents (i.e. invoices, contracts, etc.) to support compliance with period of performance requirements for two (or 25%) of eight expenditures tested totaling $2,105,155 of a total population of $2,163,439 . Cause: CNMI lacks monitoring control over adequate documentation and systematic filing of relevant documentations supporting program costs. Effect: CNMI is in noncompliance with applicable period of performance requirements and questioned cost of $38,556 result. Recommendation: CNMI should implement more stringent record-keeping mechanisms to ensure timely submission of audit documents upon request of the auditors used for the testing of compliance requirements. Views of Responsible Officials: The CNMI Medicaid Office disagrees with this finding. Due to internal scheduling constraints and the compressed timeline required to complete the FY2022 audit, the requested documents were not submitted by the specified deadline, resulting in this finding. However, the office maintains all relevant supporting documentation and is prepared to provide it upon request from the Grantor. Refer to CNMI’s Corrective Action Plan for additional information. Auditor Response: CNMI states disagreement; however, CNMI also acknowledges that documentation supporting program costs were not provided.
Reference Number: 2022-005 Prior Year Finding: No Federal Agency: U.S. Department of Homeland Security/FEMA Pass-through Agency: Various Federal Program: Emergency Food and Shelter National Board Program ALN Number: 97.024 Compliance Requirement: Period of Performance Type of Finding: Significant Deficiency, Non-compliance Criteria or specific requirement: Compliance Supplement 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: Division receive Emergency Food and Shelter National Board Program funds from the U.S. Department Homeland security/FEMA and various pass-through entities. The Division’s pass-through Contract requires period of performance and also requires funds must be expended by certain date. Of the Sixty (60) files selected for testing We noted that the Division: • For 4 samples, we noted that Division program expenses were recorded prior to Contract starting date. Cause: Division did not ensure that Division 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 pass-through entity made the federal award that were authorized by the pass-through entity. Effect: Division’s will be in noncompliance with its Period of Performance compliance. Questioned costs: Cannot be determined. Recommendation: We recommend Division charge only allowable costs incurred during the approved budget period of a pass-through award’s period of performance and any costs incurred before the pass-through entity made the federal award that were authorized by the pass-through entity. Views of responsible officials: The Division will charge only allowable costs incurred during the approved budget period of a pass-through award’s period of performance and any costs incurred before the pass-through entity made the federal award that were authorized by the pass-through entity. See corrective action plan.
Criteria: Federal regulations, in addition to the program’s operating contract, require recipients of federal funds to maintain documentation sufficient to support the allowability, allocability, and reasonableness of costs charged to federal programs. Under 2 CFR §200.302(b)(3), entities must maintain records that adequately identify the source and application of grant funds, and 2 CFR §200.403 provides that a cost is allowable only when it is adequately documented. Additionally, 2 CFR §200.333 establishes federal record retention requirements, obligating entities to retain financial records and supporting documentation for a prescribed period and to ensure such records are available for audit. In addition to the Uniform Guidance, the entity’s operating contract requires that all documentation related to expenditures and activities under the contract be retained for three years from the date of final payment under the contract. Collectively, these regulations require entities to maintain and retain supporting documentation for all expenditures charged to the federal program. Condition: During testing of non‑payroll disbursements, the entity was unable to provide invoices or other supporting documentation for 18 transactions. As a result, the auditor could not determine the nature, purpose, or allowability of the expenditures, nor could allowability testing be performed for any of these transactions. The unsupported disbursements resulted in total of $39,940 in actual and projected questioned costs. The entity was also unable to provide copies of checks for 15 disbursements to verify required dual signatures, and seven non‑payroll disbursements lacked documented approval or signature on the invoice. Additionally, personnel files could not be provided for 20 selected employees, and support for the amount or approval of three pay rates (one bonus and two regular paychecks) was not available, with available supporting documents reflecting amounts higher than the amounts actually paid. Although documentation for certain payroll files and pay‑rate approvals was missing, the auditor was able to verify the allowability of the payroll costs through alternative audit procedures. Cause: The underlying cause appears to be inadequate internal controls over the retention and organization of documentation supporting disbursements and payroll charged to the federal program. The entity does not have effective procedures to ensure that supporting documents—including invoices, approvals, check copies, personnel files, and pay‑rate authorizations—are consistently maintained, reviewed, and retained. Responsibilities for maintaining required records and ensuring compliance with retention requirements do not appear to be clearly assigned or enforced. As a result, the entity’s document retention processes were insufficient to ensure that required supporting documentation was preserved and available for audit. Effect: Failure to maintain accurate and complete financial information for review resulted in the auditor being unable to verify whether a portion of non-payroll disbursements were allowable, allocable, properly authorized, or reasonable under the Uniform Guidance, resulting in $39,940 in questioned costs. Although no questioned costs resulted from payroll testing, the documentation weaknesses related to payroll records indicate deficiencies in internal control that increase the risk of unsupported or unallowable costs being charged to the program in the future. Recommendation: The entity should enhance its internal control procedures to ensure all disbursements and payroll transactions charged to the federal program are supported by complete and properly approved documentation consistent with 2 CFR Part 200 and the operating contract. This includes retaining invoices, approvals, check copies, personnel files, and pay-rate authorizations. Management should assign clear responsibility for recordkeeping, implement periodic reviews for completeness, and provide staff training on documentation and retention expectations. Management’s Response: Management agrees with the findings and will ensure that all original supporting documents are maintained at the organization’s office in a secure location for a minimum of three years after an independent audit, and that every transaction is properly authorized and documented before expending monetary resources.
Assistance Listing Number, Federal Agency, and Program Name: Assistance Listing Number 21.019, Department of Treasury, Covid-19: Coronavirus Relief Fund Federal Award Identification Number and Year: n/a Pass-through Entity ? Oakland County Finding Type ? Material weakness in internal control over compliance Repeat Finding ? No Criteria ? Per 2 CFR ? 200.403(h), costs must be incurred during the approved budget period. Budget period means the time interval from the start date of a funded portion of an award to the end date of that funded portion during which recipients are authorized to expend the funds awarded, including any funds carried forward or other revisions pursuant to 200.308. A non-Federal entity may charge to the Federal award only allowable costs incurred during the period of performance. Condition ? During our testing for Period of Performance, it was noted that 8 out of 49 disbursements tested did not comply with the Period of Performance requirements as specified in the Oakland County grant agreement. Funds were disbursed for expenses incurred after the expiration date of the grant. Identification of How Questioned Costs Were Computed ? Actual error of $28,801 was extrapolated to the entire population. Likely questioned cost, (extrapolated amount) are $44,725. Likely Questioned Costs ? $44,725 Known Questioned Costs ? $28,801Cause ? Management did not follow their internal controls to ensure that compliance with Period of Performance requirements were met. Effect ? Certain expenditures were disbursed for expenses incurred after the expiration date of the grant. Recommendation ? We recommend that all expenditures charged under the grant fall within the required Period of Performance requirements as specified in the grant agreement. View of Responsible Officials and Corrective Action Plan ? Grant expenditures that specify a period of coverage and/or performance will be amortized based on the service contract terms. Amortization costs that go beyond a grant?s expiration date will not be recorded against the expired grant.
2022-004 Period of Performance Federal Agency: U.S. Department of Homeland Security Federal Program Title: Homeland Security Grant Program (HSGP) ALN: 97.067 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: 3708603, 3902402, 4164001 3/1/2020 ? 630/2022, 4/1/2020 ? 5/31/2022, 9/1/2020 ? 2/28/2022 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or specific requirement: Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per 2 CFR 200.403(h) cost must be incurred during the approved budget period. The Federal awarding agency is authorized, at its discretion, to waive prior written approvals to carry forward unobligated balances to subsequent budget periods pursuant to ? 200.308(e)(3). Condition: The Office of the Texas Governor (OOG) is the prime recipient of federal awards for the Homeland Security Grant Program. The Department of Public Safety (DPS) receives allocations of these funds for individual projects. A Statement of Grant Award (SOGA) is issued by OOG to DPS for each project with start, end, and liquidation dates. For projects with period of performance ending dates during the fiscal year, as stipulated by OOG, audit procedures included testing transactions posted to the general ledger during the last month and after the period of performance end date. We noted the following instances of noncompliance: ? For the twelve sampled transactions, totaling $1,240,691, five of the expenditures, totaling $78,749, were related to costs incurred after the period of performance end date or liquidated after the liquidation period end date. Questioned costs: $78,749 Context: See ?Condition.? Cause: Current controls are not at the correct precision level to detect costs charged outside of the period of performance or paid after the liquidation date as specified in the project grant agreement. Effect: Ineffective internal controls may result in questioned costs and noncompliance with the terms of the grant. Repeat Finding: No Recommendation: DPS should enhance and/or modify existing controls (both manual and automated) to ensure that costs are not charged to a project unless (1) the service dates fall within the period of performance stated in the SOGA, and (2) the costs have been paid prior to the liquidation period end date. Views of responsible officials: The Department of Public Safety acknowledges and agrees with the findings. Through analysis of the exceptions identified in the audit, the Department of Public Safety will work to develop and implement corrective action to further improve the processes.
Assistance Listing Number, Federal Agency, and Program Name: Assistance Listing Number 21.019, Department of Treasury, Covid-19: Coronavirus Relief Fund Federal Award Identification Number and Year: n/a Pass-through Entity ? Oakland County Finding Type ? Material weakness in internal control over compliance Repeat Finding ? No Criteria ? Per 2 CFR ? 200.403(h), costs must be incurred during the approved budget period. Budget period means the time interval from the start date of a funded portion of an award to the end date of that funded portion during which recipients are authorized to expend the funds awarded, including any funds carried forward or other revisions pursuant to 200.308. A non-Federal entity may charge to the Federal award only allowable costs incurred during the period of performance. Condition ? During our testing for Period of Performance, it was noted that 8 out of 49 disbursements tested did not comply with the Period of Performance requirements as specified in the Oakland County grant agreement. Funds were disbursed for expenses incurred after the expiration date of the grant. Identification of How Questioned Costs Were Computed ? Actual error of $28,801 was extrapolated to the entire population. Likely questioned cost, (extrapolated amount) are $44,725. Likely Questioned Costs ? $44,725 Known Questioned Costs ? $28,801Cause ? Management did not follow their internal controls to ensure that compliance with Period of Performance requirements were met. Effect ? Certain expenditures were disbursed for expenses incurred after the expiration date of the grant. Recommendation ? We recommend that all expenditures charged under the grant fall within the required Period of Performance requirements as specified in the grant agreement. View of Responsible Officials and Corrective Action Plan ? Grant expenditures that specify a period of coverage and/or performance will be amortized based on the service contract terms. Amortization costs that go beyond a grant?s expiration date will not be recorded against the expired grant.
2022-004 Period of Performance Federal Agency: U.S. Department of Homeland Security Federal Program Title: Homeland Security Grant Program (HSGP) ALN: 97.067 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: 3708603, 3902402, 4164001 3/1/2020 ? 630/2022, 4/1/2020 ? 5/31/2022, 9/1/2020 ? 2/28/2022 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or specific requirement: Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per 2 CFR 200.403(h) cost must be incurred during the approved budget period. The Federal awarding agency is authorized, at its discretion, to waive prior written approvals to carry forward unobligated balances to subsequent budget periods pursuant to ? 200.308(e)(3). Condition: The Office of the Texas Governor (OOG) is the prime recipient of federal awards for the Homeland Security Grant Program. The Department of Public Safety (DPS) receives allocations of these funds for individual projects. A Statement of Grant Award (SOGA) is issued by OOG to DPS for each project with start, end, and liquidation dates. For projects with period of performance ending dates during the fiscal year, as stipulated by OOG, audit procedures included testing transactions posted to the general ledger during the last month and after the period of performance end date. We noted the following instances of noncompliance: ? For the twelve sampled transactions, totaling $1,240,691, five of the expenditures, totaling $78,749, were related to costs incurred after the period of performance end date or liquidated after the liquidation period end date. Questioned costs: $78,749 Context: See ?Condition.? Cause: Current controls are not at the correct precision level to detect costs charged outside of the period of performance or paid after the liquidation date as specified in the project grant agreement. Effect: Ineffective internal controls may result in questioned costs and noncompliance with the terms of the grant. Repeat Finding: No Recommendation: DPS should enhance and/or modify existing controls (both manual and automated) to ensure that costs are not charged to a project unless (1) the service dates fall within the period of performance stated in the SOGA, and (2) the costs have been paid prior to the liquidation period end date. Views of responsible officials: The Department of Public Safety acknowledges and agrees with the findings. Through analysis of the exceptions identified in the audit, the Department of Public Safety will work to develop and implement corrective action to further improve the processes.
Assistance listing program: Education Stabilization Fund - Higher Education Emergency Relief Fund (HEERF) Assistance Listing Number: 84.425F Award identification number: P425F204999 Award period: September 29, 2020 to June 30, 2023 Federal agency: U.S. Department of Education Pass-through entity: N/A Category: Internal Control / Compliance Finding Type: Material Weakness Compliance requirement: Allowed Cost / Cost Principles Condition and context In testing compliance and internal controls over cost allowability / cost principles, we selected a sample of ten (10) transactions which amounted to $445,522 of HEERF Institutional aid funds expenditures. Our sample was a statistically valid sample. During our expenditure test, we noted the following deficiencies: a) In one transaction of a sample of ten (10) disbursements (10%) the vendor quote was not available for examination. The transaction amounted to $5,899. The Institution indicated that they followed the micro purchase threshold of $10,000 as defined in 48CFR Part 2, subpart 2.1. However, this determination was not properly documented. b) In two (2) transactions of our sample (20%) the cost per quote did not agree with the amount of the invoice. The amount invoiced in excess of the quote cost was $1,090. c) In three (3) transactions of our sample (30%) we did not find documentation that the equipment was received (date and the employee who received the item). We inquired the Institution?s Management about this matter, and they explained that the Institution does not have a formal procedure or form to document the receipt of goods. Management confirmed and represented us that the items were properly received. d) In one transaction of our sample (10%) the expenditure was related to the amount of lost revenue claimed by the Institution in the fiscal year 2021-22. Upon examination of the Institution analysis, we noted that the lost revenue was not properly determined because the following situations: 1. For the loss of revenue calculation, the Institution used the unaudited figures for the fiscal year ended July 31, 2021. 2. We noted that the Institution considered in its analysis revenue that was not in accordance with the program guidelines (transactions that were not reimbursable under the HEERF grant program). 3. We noted that the lost revenue determined by the Institution was incorrectly determined (lost revenue claimed was understated by approximately $80,000) as result of the net effect of the deficiencies 1 and 2, above. Criteria 2 CFR 200.302 (b) (3) and (7) require records that identify adequately the source and application of funds for federally funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income, and interest and be supported by source documentation. Written procedures for determining the allowability of costs in accordance with subpart E of this part and the terms and conditions of the Federal award. 2 CFR 200.303 (a) to (d) establish that the non-Federal entity must: (a) Establish and maintain effective internal control over the Federal awards that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal awards. 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). (b) Comply with the U.S. Constitution, Federal statutes, regulations, and the terms and conditions of the Federal awards. (c) Evaluate and monitor the non-Federal entity's compliance with statutes, regulations and the terms and conditions of Federal awards. (d) Take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings. 2 CFR 200.400 (a) to (d) establish that the application of these cost principles is based on the fundamental premises that: (a) The non-Federal entity is responsible for the efficient and effective administration of the Federal award through the application of sound management practices. (b) The non-Federal entity assumes responsibility for administering Federal funds in a manner consistent with underlying agreements, program objectives, and the terms and conditions of the Federal award. (c) The non-Federal entity, in recognition of its own unique combination of staff, facilities, and experience, has the primary responsibility for employing whatever form of sound organization and management techniques may be necessary in order to assure proper and efficient administration of the Federal award. (d) The application of these cost principles should require no significant changes in the internal accounting policies and practices of the non-Federal entity. However, the accounting practices of the non-Federal entity must be consistent with these cost principles and support the accumulation of costs as required by the principles and must provide for adequate documentation to support costs charged to the Federal awards. 2 CFR 200.403, related to factors affecting allowability of cost, (c) and (g) establish that except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity, and be adequately documented. 2 CFR 200.404 establishes that a cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost. The question of reasonableness is particularly important when the non-Federal entity is predominantly federally-funded. In determining reasonableness of a given cost, consideration must be given to: (a) whether the cost is of a type generally recognized as ordinary and necessary for the operation of the non-Federal entity or the proper and efficient performance of the Federal award; (b) the restraints or requirements imposed by such factors as: sound business practices; arm's-length bargaining; Federal, state, local, tribal, and other laws and regulations; and terms and conditions of the Federal award; (c) market prices for comparable goods or services for the geographic area; (d) whether the individuals concerned acted with prudence in the circumstances considering their responsibilities to the non-Federal entity, its employees, where applicable its students or membership, the public at large, and the Federal Government; and (e) whether the non-Federal entity significantly deviates from its established practices and policies regarding the incurrence of costs, which may unjustifiably increase the Federal award's cost. 2 CFR 200.406 (a) establishes that applicable credits refer to those receipts or reduction-of-expenditure-type transactions that offset or reduce expense items allocable to the Federal awards as direct or indirect (F&A) costs. Examples of such transactions are: purchase discounts, rebates or allowances, recoveries or indemnities on losses, insurance refunds or rebates, and adjustments of overpayments or erroneous charges. To the extent that such credits accruing to or received by the non-Federal entity relate to allowable costs, they must be credited to the Federal award either as a cost reduction or cash refund, as appropriate. 2 CFR 200.334 establishes that financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. 2 CFR 200.337 (a) establishes that the Federal awarding agency, Inspectors General, the Comptroller General of the United States, and the pass-through entity, or any of their authorized representatives, must have the right of access to any documents, papers, or other records of the non-Federal entity which are pertinent to the Federal award, in order to make audits, examinations, excerpts, and transcripts. The right also includes timely and reasonable access to the non-Federal entity's personnel for the purpose of interview and discussion related to such documents. The Higher Education Emergency Relief Fund (HEERF I, II, and III) Lost Revenue Frequently Asked Questions (FAQs) published on March 19, 2021, in question number four establishes that sources of lost revenue that are not reimbursable under the HEERF grant programs include the following: capital outlays associated with facilities related to athletics (including fees assessed for capital athletic facility construction), acquisition of real property (including bond revenue), contributions or donations to the institution, marketing or recruitment activities, revenue related to sectarian instruction or religious worship, alcohol sales, and investment income (including endowment and quasi-endowment revenue. Cause The cause of the deficiencies noted were the result of the following situations: a) Lack of written policies and procedures did not provide the Institution?s personnel responsible for the purchasing process a guidance on how to perform and document the purchase transactions under this federal program. b) The vendor invoice was not compared to the quote and no inquiries were made and/or documented explaining the cause of the difference. c) The Institution does not have formal and written procedures to document when materials and/or equipment are received by the Institution?s personnel. d) The Institution management did not consult or requested assistance from the Department of Education program coordinator to ascertain that the request was properly performed and to clarify questions related to the allowable revenue to be considered in the analysis. Also, the Institution failed to review the financial figures of the audited trial balance for 2021. Effect Noncompliance with the above-mentioned requirements could lead to administrative actions by the grantor. It could also be interpreted as a failure to manage federal awards in compliance with laws, regulations, and provisions of contracts and grant agreements. Also, the above conditions could result in the reimbursement of federal funds to the grantors for those disbursements not properly supported and reviewed by the Institution?s management. Questioned costs Refer to finding 2022-010. Identification as a Repeat Finding No repeated finding. Recommendations We recommend the Institution to establish adequate procedures and controls, which shall consider, among others, the following: ? Maintain adequate documentation to support the allowability of its expenditures. ? Purchases must be properly documented to provide the appropriate audit trail of the transactions and allow proper review of the transactions. Adequate documentation should be sufficient to explain the Institution?s analysis and determination. ? Improve its policies and procedures, and internal controls to incorporate the comparison of the vendor invoices with the quotes after the invoice is received to ascertain that expenses and liabilities are properly recorded. Instruct personnel of accounts payable to contact the vendor when discrepancies are identified and document in writing the inquiry performed, the results, and conclusions. ? Implement a formal process with receiving reports or checklist where upon receipt of equipment and/or materials purchased could detail description, amount received, date of receipt, and a reference to the invoice. Copies of the receiving reports and invoices should then be forwarded to the accounting department for processing. Payment of a vendor?s invoice should not be made unless a copy of a receiving report is attached. ? The Institution management should review the Loss of Revenue claims and/or analysis performed by any employee or consultant that was designated to perform such a task. The Institution?s management should verify and ascertain that the analysis performed using the Institution?s financial information agree with the Institution?s audited financial statements. ? The Institution?s management should consult with the US Department of Education program coordinator when questions or concerns arise, especially if management is not familiar with program regulations and/or the federal program is new. Views of Responsible Officials Refer to the Institutional comments included in the Corrective Action Plan.
Assistance listing program: Education Stabilization Fund - Higher Education Emergency Relief Fund (HEERF) Assistance Listing Number: 84.425F Award identification number: P425F204999 Award period: September 29, 2020 to June 30, 2023 Federal agency: U.S. Department of Education Pass-through entity: N/A Category: Internal Control / Compliance Finding Type: Material Weakness Compliance requirement: Allowed Cost / Cost Principles Condition and context In testing compliance and internal controls over cost allowability / cost principles, we selected a sample of ten (10) transactions which amounted to $445,522 of HEERF Institutional aid funds expenditures. Our sample was a statistically valid sample. During our expenditure test, we noted the following deficiencies: a) In one transaction of a sample of ten (10) disbursements (10%) the vendor quote was not available for examination. The transaction amounted to $5,899. The Institution indicated that they followed the micro purchase threshold of $10,000 as defined in 48CFR Part 2, subpart 2.1. However, this determination was not properly documented. b) In two (2) transactions of our sample (20%) the cost per quote did not agree with the amount of the invoice. The amount invoiced in excess of the quote cost was $1,090. c) In three (3) transactions of our sample (30%) we did not find documentation that the equipment was received (date and the employee who received the item). We inquired the Institution?s Management about this matter, and they explained that the Institution does not have a formal procedure or form to document the receipt of goods. Management confirmed and represented us that the items were properly received. d) In one transaction of our sample (10%) the expenditure was related to the amount of lost revenue claimed by the Institution in the fiscal year 2021-22. Upon examination of the Institution analysis, we noted that the lost revenue was not properly determined because the following situations: 1. For the loss of revenue calculation, the Institution used the unaudited figures for the fiscal year ended July 31, 2021. 2. We noted that the Institution considered in its analysis revenue that was not in accordance with the program guidelines (transactions that were not reimbursable under the HEERF grant program). 3. We noted that the lost revenue determined by the Institution was incorrectly determined (lost revenue claimed was understated by approximately $80,000) as result of the net effect of the deficiencies 1 and 2, above. Criteria 2 CFR 200.302 (b) (3) and (7) require records that identify adequately the source and application of funds for federally funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income, and interest and be supported by source documentation. Written procedures for determining the allowability of costs in accordance with subpart E of this part and the terms and conditions of the Federal award. 2 CFR 200.303 (a) to (d) establish that the non-Federal entity must: (a) Establish and maintain effective internal control over the Federal awards that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal awards. 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). (b) Comply with the U.S. Constitution, Federal statutes, regulations, and the terms and conditions of the Federal awards. (c) Evaluate and monitor the non-Federal entity's compliance with statutes, regulations and the terms and conditions of Federal awards. (d) Take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings. 2 CFR 200.400 (a) to (d) establish that the application of these cost principles is based on the fundamental premises that: (a) The non-Federal entity is responsible for the efficient and effective administration of the Federal award through the application of sound management practices. (b) The non-Federal entity assumes responsibility for administering Federal funds in a manner consistent with underlying agreements, program objectives, and the terms and conditions of the Federal award. (c) The non-Federal entity, in recognition of its own unique combination of staff, facilities, and experience, has the primary responsibility for employing whatever form of sound organization and management techniques may be necessary in order to assure proper and efficient administration of the Federal award. (d) The application of these cost principles should require no significant changes in the internal accounting policies and practices of the non-Federal entity. However, the accounting practices of the non-Federal entity must be consistent with these cost principles and support the accumulation of costs as required by the principles and must provide for adequate documentation to support costs charged to the Federal awards. 2 CFR 200.403, related to factors affecting allowability of cost, (c) and (g) establish that except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity, and be adequately documented. 2 CFR 200.404 establishes that a cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost. The question of reasonableness is particularly important when the non-Federal entity is predominantly federally-funded. In determining reasonableness of a given cost, consideration must be given to: (a) whether the cost is of a type generally recognized as ordinary and necessary for the operation of the non-Federal entity or the proper and efficient performance of the Federal award; (b) the restraints or requirements imposed by such factors as: sound business practices; arm's-length bargaining; Federal, state, local, tribal, and other laws and regulations; and terms and conditions of the Federal award; (c) market prices for comparable goods or services for the geographic area; (d) whether the individuals concerned acted with prudence in the circumstances considering their responsibilities to the non-Federal entity, its employees, where applicable its students or membership, the public at large, and the Federal Government; and (e) whether the non-Federal entity significantly deviates from its established practices and policies regarding the incurrence of costs, which may unjustifiably increase the Federal award's cost. 2 CFR 200.406 (a) establishes that applicable credits refer to those receipts or reduction-of-expenditure-type transactions that offset or reduce expense items allocable to the Federal awards as direct or indirect (F&A) costs. Examples of such transactions are: purchase discounts, rebates or allowances, recoveries or indemnities on losses, insurance refunds or rebates, and adjustments of overpayments or erroneous charges. To the extent that such credits accruing to or received by the non-Federal entity relate to allowable costs, they must be credited to the Federal award either as a cost reduction or cash refund, as appropriate. 2 CFR 200.334 establishes that financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. 2 CFR 200.337 (a) establishes that the Federal awarding agency, Inspectors General, the Comptroller General of the United States, and the pass-through entity, or any of their authorized representatives, must have the right of access to any documents, papers, or other records of the non-Federal entity which are pertinent to the Federal award, in order to make audits, examinations, excerpts, and transcripts. The right also includes timely and reasonable access to the non-Federal entity's personnel for the purpose of interview and discussion related to such documents. The Higher Education Emergency Relief Fund (HEERF I, II, and III) Lost Revenue Frequently Asked Questions (FAQs) published on March 19, 2021, in question number four establishes that sources of lost revenue that are not reimbursable under the HEERF grant programs include the following: capital outlays associated with facilities related to athletics (including fees assessed for capital athletic facility construction), acquisition of real property (including bond revenue), contributions or donations to the institution, marketing or recruitment activities, revenue related to sectarian instruction or religious worship, alcohol sales, and investment income (including endowment and quasi-endowment revenue. Cause The cause of the deficiencies noted were the result of the following situations: a) Lack of written policies and procedures did not provide the Institution?s personnel responsible for the purchasing process a guidance on how to perform and document the purchase transactions under this federal program. b) The vendor invoice was not compared to the quote and no inquiries were made and/or documented explaining the cause of the difference. c) The Institution does not have formal and written procedures to document when materials and/or equipment are received by the Institution?s personnel. d) The Institution management did not consult or requested assistance from the Department of Education program coordinator to ascertain that the request was properly performed and to clarify questions related to the allowable revenue to be considered in the analysis. Also, the Institution failed to review the financial figures of the audited trial balance for 2021. Effect Noncompliance with the above-mentioned requirements could lead to administrative actions by the grantor. It could also be interpreted as a failure to manage federal awards in compliance with laws, regulations, and provisions of contracts and grant agreements. Also, the above conditions could result in the reimbursement of federal funds to the grantors for those disbursements not properly supported and reviewed by the Institution?s management. Questioned costs Refer to finding 2022-010. Identification as a Repeat Finding No repeated finding. Recommendations We recommend the Institution to establish adequate procedures and controls, which shall consider, among others, the following: ? Maintain adequate documentation to support the allowability of its expenditures. ? Purchases must be properly documented to provide the appropriate audit trail of the transactions and allow proper review of the transactions. Adequate documentation should be sufficient to explain the Institution?s analysis and determination. ? Improve its policies and procedures, and internal controls to incorporate the comparison of the vendor invoices with the quotes after the invoice is received to ascertain that expenses and liabilities are properly recorded. Instruct personnel of accounts payable to contact the vendor when discrepancies are identified and document in writing the inquiry performed, the results, and conclusions. ? Implement a formal process with receiving reports or checklist where upon receipt of equipment and/or materials purchased could detail description, amount received, date of receipt, and a reference to the invoice. Copies of the receiving reports and invoices should then be forwarded to the accounting department for processing. Payment of a vendor?s invoice should not be made unless a copy of a receiving report is attached. ? The Institution management should review the Loss of Revenue claims and/or analysis performed by any employee or consultant that was designated to perform such a task. The Institution?s management should verify and ascertain that the analysis performed using the Institution?s financial information agree with the Institution?s audited financial statements. ? The Institution?s management should consult with the US Department of Education program coordinator when questions or concerns arise, especially if management is not familiar with program regulations and/or the federal program is new. Views of Responsible Officials Refer to the Institutional comments included in the Corrective Action Plan.
CRITERIA Campus management is responsible for establishing and maintaining internal controls over disbursements that are adequate to ensure that all financial activities are properly processed and reported. Additionally, the Campus is required, except where otherwise authorized by statute, to ensure costs meet the general criteria outlined in 2 CFR 200.403 in order to be allowable under federal awards, including the costs be necessary and reasonable for the performance of the federal award and be allocable thereto under these principles. The Single Audit Reporting Package must have a report date nine months after fiscal year-end. CONDITION The Campus did not follow its Board adopted policies for federal regulations regarding disbursements to ensure all financial activities were properly processed, recorded in the appropriate fiscal year, and supported. The Campus did not provide all of the audit information for fiscal year 2021-22 in a timely manner to allow sufficient time for the audit to be completed by the deadline. CAUSE The Campus has not implemented controls over disbursement transactions. In addition, documentation was not always maintained. EFFECT The Campus was not in compliance with Board adopted policies for federal regulations and guidelines. CONTEXT The following items were noted during our review of disbursement transactions: For four of 40 disbursements reviewed, supporting documentation was not maintained. The Campus did not maintain credit card statements for all credit cards. The Campus did not maintain a complete list of credit card users to ensure possession was monitored. For six of 40 disbursements reviewed, dual signatures were not obtained when issuing the check.
CRITERIA Campus management is responsible for establishing and maintaining internal controls over disbursements that are adequate to ensure that all financial activities are properly processed and reported. Additionally, the Campus is required, except where otherwise authorized by statute, to ensure costs meet the general criteria outlined in 2 CFR 200.403 in order to be allowable under federal awards, including the costs be necessary and reasonable for the performance of the federal award and be allocable thereto under these principles. The Single Audit Reporting Package must have a report date nine months after fiscal year-end. CONDITION The Campus did not follow its Board adopted policies for federal regulations regarding disbursements to ensure all financial activities were properly processed, recorded in the appropriate fiscal year, and supported. The Campus did not provide all of the audit information for fiscal year 2021-22 in a timely manner to allow sufficient time for the audit to be completed by the deadline. CAUSE The Campus has not implemented controls over disbursement transactions. In addition, documentation was not always maintained. EFFECT The Campus was not in compliance with Board adopted policies for federal regulations and guidelines. CONTEXT The following items were noted during our review of disbursement transactions: For four of 40 disbursements reviewed, supporting documentation was not maintained. The Campus did not maintain credit card statements for all credit cards. The Campus did not maintain a complete list of credit card users to ensure possession was monitored. For six of 40 disbursements reviewed, dual signatures were not obtained when issuing the check.
Information on Federal Program(s) - Department of Health and Human Services, Assistance Listing Number 93.498 COVID-19 - Provider Relief Fund and American Rescue Plan Rural Distribution, Schedule of Expenditures of Federal Awards Reporting Periods 2 and 3, Agency Fiscal Year-Ended June 30, 2022. Criteria – The Code of Federal Regulations Section 200.403(g) states that for costs to be allowable under Federal awards, they must be adequately documented. Pursuant to 2 CFR section 200.303(a), the nonfederal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Condition – During our testing of direct expenditures, we noted the following exceptions: • Two of the sixty expenditures sampled did not have necessary approvals. The original invoices with approvals could not be found, however we were able to determine that the invoices were properly recorded to the general ledger. • Two of the sixty expenditures sampled did not have adequate supporting documentation. • Two of the sixty expenditures had supporting documentation that was coded to cost centers and/or accounts that were inconsistent with what was recorded in the general ledger. However, the actual postings to the general ledger were recorded to the correct cost centers and/or accounts. Cause - Policies and procedures were not appropriately adhered to in certain instances to ensure that supporting documentation was maintained correctly to evidence that costs were allowable and that an appropriate level of review and approval was completed prior to charging costs to a federal program. Effect or Potential Effect - We were unable to confirm the allowability, validity, or completeness of the two expenses lacking supporting documentation that were claimed as federal expenditures. Questioned Costs – Likely questioned costs were projected to be less than $25,000 based on the sampling procedures that were performed. Context – We tested a sample of forty direct expense transactions using a statistically valid sample and found four exceptions relating to the absence of supporting documentation and/or necessary approvals. At that point, a significant deficiency was raised and we revised our risk assessment over compliance and determined it to be high risk. We then selected an additional twenty direct expense transactions using a statistically valid sample and found two additional exceptions relating to improper adherence to certain activity level controls, however, no additional compliance deviations were identified. Views of Responsible Officials – The nature of the COVID emergency, and local shutdown orders, as well as the timing of the funding made available to prevent the viruses spread, challenged long established and effective internal control procedures. In response the Agency, under the direction of the Controller, created emergency overrides to existing protocols to be administered within the accounting department that in the cases above were not documented as they would have been under non-emergency circumstances. In order to mitigate the possible impact of these emergency overrides a detailed review for reasonableness of all items funded with the funds appropriated was performed by the Controller prior to the completion of the audit. Internal control procedures for use in future emergency situations will be developed that will address the deficiencies or challenges identified above. Recommendation - We recommend that the Agency ensure its policies and procedures are followed on a consistent basis and for emergency situations, have alternative policies and procedures that can be implemented without delay.
Finding 2022-004 Lack of Internal Controls over Activities Allowed or Unallowed and Allowable Costs/Cost Principles Federal Agency: Office of Naval Research Federal Program: Office of Naval Research Technology and Innovation Development in Alaska ALN Number: 12.300 Award Number: N00014-19-1-2030 Award Years: 2022 Type of Finding: Material Weakness over compliance and noncompliance Criteria: 2 CFR Part 200.403.g states that costs must be adequately documented in order to be allowable under Federal awards. Condition and Context: There was not an adequate system in place to track the payroll costs charged to this program. The client was unable to provide support for the salary expenses charged to this program, or support for which employees were eligible to be paid from this award, making it impossible to test transactions for allowable costs. Cause: Lack of internal control over allowable payroll transactions charged to the major program. Repeat Finding: This is not a repeat finding. Effect: The lack of supporting documentation allows for the potential for misstatement of expenditures due to employees being incorrectly charged to funding sources for which their payroll is an unallowable cost. Questioned Costs: The total amount of salary and fringe expenditures charged to the program was $749,570. Recommendation: We recommend that Launch Alaska begins to maintain documentation for employees eligible to charge to various programs, as well as maintaining documentation for tracking the payroll costs charged to each program. Management Response: Management concurs with this finding. See Corrective Action Plan.