FINDING REFERENCE NUMBER 2025-001 FEDERAL PROGRAMS (ALN – 84.027) SPECIAL EDUCATION – GRANTS TO STATES (IDEA, PART B) – SPECIAL EDUCATION CLUSTER (IDEA) (ALN – 84.173) SPECIAL EDUCATION – PRESCHOOL GRANTS (IDEA PRESCHOOL) – SPECIAL EDUCATION CLUSTER (IDEA) U.S. DEPARTMENT OF EDUCATION AWARD NUMBERS H027A230003 (07/01/2023 – 09/30/2024); H027A240003 (07/01/2024 – 09/30/2025); H173A230002 (07/01/2023 – 09/30/2024); H173A240002 (07/01/2024 – 09/30/2025) COMPLIANCE REQUIREMENTS ACTIVITIES ALLOWED OR UNALLOWED // ALLOWABLE COSTS/COSTS PRINCIPLES TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA 2 CFR Section 200.302 (a) establishes that each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state’s own funds. In addition, the state and the other non-Federal entity’s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. In addition, 2 CFR Section 200.403 (b) establishes that except where otherwise authorized by statute, costs must be adequately documented in order to be allowable under Federal awards. In addition, IDEA’s Special Education—Grants to States program (IDEA, Part B) provides grants to states, and through them to LEAs, to assist them in providing special education and related services to eligible children with disabilities ages 3 through 21 (20 USC 1411). STATEMENT OF CONDITION As part of our procedures over internal controls and compliance for the allowable activities’ requirement, we selected a sample of eighty-five (85) disbursement to suppliers made during fiscal year under audit. We noted the following deficiencies: 1. In three (3) disbursement vouchers, the Excel master sheet and the adjustment report presented different amounts. No justification was provided for the differences in the reports. 2. In one (1) disbursement we found that the therapy, monthly, and tuition costs per student did not match the contract, which already stipulated a cost for each service per student. We were not presented with any evidence that the contract had been amended; we were only provided with a letter from PRDE approving the cost increase across the board. 3. In forty-three (43) vouchers evaluated, it was found that the invoiced expenses corresponded to both cluster programs (ALNs 84.027 and 84.173), and the invoices established this. However, the expenses in the system were recognized in grant ALN 84.027, not according to the participants attending and invoiced, according to their age. 4. In five (5) disbursement vouchers related to educational services and therapies, we found in the master Excel spreadsheet of three (3) different entities, participants ranging in age from 22 to 31 years old were provided educational services. In total, seven (7) students over 21 years of age were identified among the three entities. The amount related to these students is $85,535. 5. In two (2) disbursement vouchers related to educational services in private institutions, three (3) participants were invoiced and paid, who, in accordance with the excel master of each institution, attend to another private institution. 6. In eight (8) disbursement vouchers related to therapies provided by private educational institutions, the costs for therapies are higher than the costs according to the contract fee schedule. 7. In eight (8) disbursement vouchers, no details were provided on how the monthly educational costs were determined. The proposals submitted are inconsistent with the invoices and do not describe the services included in each monthly payment. 8. Of the selected sample, there was one (1) disbursement voucher for which we were not provided with evidence of the master Excel spreadsheet, a document that details each participant, the service provided, the cost of the service, among other information necessary to evaluate the disbursement. The amount paid for this invoice was $568,968. 9. On a disbursement voucher, we noticed that the invoice included 38.5 hours of service. However, the invoice details only showed 36 hours of service rendered, with payment made for 2.5 hours for which no details of the services rendered were provided. The total overpayment to the supplier is $312.50. QUESTIONED COSTS We understand that the $312.50 described in the condition number 9 is not allowable. In addition, because the PRDE was not able to provide the Excel Master spreadsheet for a disbursement voucher, we were unable to audit this transaction. The amount of this voucher is $568,968. In relation to participants who are more than 21 years old, the amount included in the vouchers evaluated is $85,535; for a total estimated amount of $654,815.50. PERSPECTIVE INFORMATION This deficiency is a systemic problem that is related to lack of proper training and controls that require standard evaluation, approval, and reporting of expenditures incurred. In addition, standardized documentation in the educational services should be maintained which presents clear costs for services provided and reasons for modification of the legal contract, modifying amounts and services, should be available for inspection. The sample was statistically valid sample. STATEMENT OF CAUSE According to interviews carried out and documentation evaluated, some goods and services are received in the different Regional Offices (ORE), and each one carries out similar, but not standard, processes when certifying as received or pre-intervening invoices. No evidence regarding how the PRDE monitors the age of the participants when they reach 21 years of age and properly documents the reasons to continue providing the services after reaching 21 years of age. Regarding the distribution of expenses, according to interviews and evaluated documentation, it was found that at the time of binding a contract, an analysis of the assigned participants is not made, in order to be able to make a distribution between the two programs of the cluster according to the age of the participant. In addition, according to interviews, although the contract budget is validated, they only limit themselves to verifying the amount available in general and there is no distribution of the expense according to the service provider's invoice. There is no clear process in place for negotiations with private institutions, nor is there a clear way to determine whether the cost of educational services is reasonable. POSSIBLE ASSERTED EFFECT The PRDE is reporting expenses within the cluster that do not necessarily reflect the actual expenses incurred by each program in the cluster, this deficiency requires that when the period of availability of funds is ending, some adjustments be made to reclassify expenses, up to the amount of the award. In addition, the PRDE may have incurred payments for which the service or good were not provided as contracted. The PRDE was not able to present how they are monitoring that the services provided to the participants are reasonable and comply with the necessities of the child. Furthermore, no proper documentation is maintained when services are provided to participants who reach 21 years and are required to provide any service. IDENTIFICATION OF REPEAT FINDING This is a repeat finding (Finding Reference Number 2024-002). RECOMMENDATIONS We recommend that the PRDE establish standardized written guidelines and train the staff of the Regions to carry out and document the reviews and approvals of services and ascertain that this information is uploaded in the accounting system of SIFDE. In addition, the personnel must be instructed to account for the budget and expense of therapy and related services, according to the enrollment of students who will attend, in accordance with the program that applies within the cluster.
FINDING REFERENCE NUMBER 2025-002 FEDERAL PROGRAM (ALN – 84.938A) HURRICANE EDUCATION RECOVERY – INMMEDIATE AID TO RESTART SCHOOL OPERATIONS (RESTART) U.S. DEPARTMENT OF EDUCATION AWARD NUMBER S938A180002 (04/26/2018 – 09/30/2025) COMPLIANCE REQUIREMENTS ACTIVITIES ALLOWED OR UNALLOWED // ALLOWABLE COSTS/COSTS PRINCIPLES // EQUIPMENT AND REAL PROPERTY MANAGEMENT TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – SIGNIFICANT DEFICIENCY AND NONCOMPLIANCE CRITERIA 2 CFR §200.302(b)(3)(4) establishes that the recipient's and subrecipient's financial management system must provide for the following: maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. Effective control over and accountability for all funds, property, and assets. The recipient or subrecipient must safeguard all assets and ensure they are used solely for authorized purposes. 2 CFR §200.403 establishes that costs must meet the following criteria to be allowable under Federal awards: (g) be adequately documented. The Fiscal Process Guide – Program Funds Restart designed by the PRDE establishes that all movable and immovable property with a unit cost of five hundred dollars ($500.00) or more and a useful life of more than two (2) years will be capitalized. Both conditions must exist. These will be classified in the E5000 expense accounts, as appropriate. Also, indicate that capitalizable equipment (E5000) and non-capitalizable equipment (E4414) purchased with program funds will be labeled with the number assigned by the Property Registry System, as established in Section X of the "Procedure for the Control and Accounting of the Property of the Department of Education”. Also as stated in the Section 102(h)(3) of the 2018 Hurricane Relief Act, states that public control of funds and property for services provided to non-public schools must remain with a public agency, which also administers the funds and resources or contracts for services with public or private entities. STATEMENT OF CONDITION As part of our audit procedures over internal controls and compliance with the allowable activity’s requirement, we selected a sample of forty (40) disbursements from a population of six hundred forty-two (842) disbursements to suppliers made during the fiscal year 2024-2025. During our testing, the following deficiencies were noted: 1. For five (5) reimbursement payments for purchase of equipment were incorrectly recorded in account E6170 (Donations and Contributions to Private Entities) rather than in one of the E5000-series accounts designated for equipment. Also, these equipment were not included in the property & equipment register of the PRDE. According to the Restart Fiscal Process Guide, all the equipment purchased or reimbursed to the private schools should be recorded as part of the property list that belongs to the PRDE. In other words, PRDE must maintain ownership over the property bought with the Restart funds. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This is a systemic deficiency. The codifications of these transactions were not properly reviewed in order to avoid missed codification, considering that the PRDE has the Third-Party Fiduciary Agent that had reviewed them and did not detect the missing codification and the missing documentation for the proper accounting and authorization process. The sample was statistically valid sample. STATEMENT OF CAUSE The PRDE lack of training or oversight on proper accounting practices, which leads to equipment expenses being coded incorrectly in account E6170 rather than the proper E5000 series. POSSIBLE ASSERTED EFFECT The PRDE incorrect accounting of equipment expenses could result in inaccurate financial reporting and a potential noncompliance issue with Federal regulations that require proper codification of expenses. IDENTIFICATION OF REPEAT FINDING Yes, this finding is a repeat of a finding reported in the prior audit. The corresponding prior year Finding Number is 2024-003. RECOMMENDATIONS We recommend that the PRDE provides training to all relevant personnel on the importance of accurate accounting and documentation, particularly for equipment purchases, and ensures that such expenses are properly coded. Implement a review process to verify that equipment reimbursements are supported by the required receiving report, invoice and that disbursements are coded appropriately in the accounting system (SIFDE).
FINDING REFERENCE NUMBER 2025-003 FEDERAL PROGRAMS FEDERAL PROGRAMS IN THE CONSOLIDATED FUNDS: (ALN – 84.010A) TITLE I GRANTS TO LOCAL EDUCATIONAL AGENCIES (TITLE I, PART A OF THE ESSEA) (ALN – 84.287) TWENTY-FIRST CENTURY COMMUNITY LEARNING CENTERS (ALN – 84.367A) SUPPORTING EFFECTIVE INSTRUCTION STATE GRANTS (FORMERLY IMPROVING TEACHER QUALITY STATE GRANTS) U.S. DEPARTMENT OF EDUCATION AWARD NUMBERS S010S220052 (Fiscal Year: 07/01/2022 – 09/30/2023); S010S230052 (Fiscal Year: 07/01/2023 – 09/30/2024); S010S240052 (Fiscal Year: 07/01/2024 – 09/30/2025) S287C230039A (Fiscal Year: 0701/2023 – 09/30/2024); S287C230039A (Fiscal Year: 0701/2023 – 09/30/2024) S367A230052 (Fiscal Year: 0701/2023 – 09/30/2024); S367A240052B (Fiscal Year: 0701/2024 – 09/30/2025) COMPLIANCE REQUIREMENT ALLOWABLE COSTS/COSTS PRINCIPLES TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards Subpart E establish the requirements for Cost Principles – Allowable Costs under Federal awards. This Section at § 200.403 discloses factors affecting allowability of costs – states that costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles; and (g) Be adequately documented. Section § 200.404 Reasonable costs add: 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 including (c) Market prices for comparable goods or services for the geographic area. Also, § 200.405 Allocable Costs include that: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received; including (2) Benefits both the Federal award and other work of the non-Federal entity and can be distributed in proportions that may be approximated using reasonable methods. STATEMENT OF CONDITION During our internal control and compliance tests of disbursements for Federal programs (included in the Consolidated Fund), we selected seven (7) payments of professional services of Third-Party Fiduciary Agent Services ("TPFA") as part of our samples of the different Federal major programs. During our tests, we noted the following conditions: 1. Reasonableness of costs: The payment made to the vendor is a "flat fee" monthly payment agreed to in the professional service contract. Although the vendor invoice includes a detail of hours of service and expense summary, this information is solely for "information purposes" and not to be taken into account for the actual invoice payment process. The monthly payment amount only consideration is the agreed upon "flat fee". In the invoices evaluated (see detail below), the vendor includes a total hours incurred for each invoice with a price per hour range from $195 to $695. Also, the invoices include an expense summary for the period. When we compared the actual payment to the hours incurred and related expenditures, we noted an unreasonable charge to the PRDE and its Federal funds based upon the payment being made versus the actual service hours/expenses included on the invoice; when it is compared to price estimates made during the RFP process when the per hour price ranges were from $65 to $352. VOUCHER NUMBER VOUCHER DATE VOUCHER AMOUNT INVOICE NUMBER INVOICE DATE SERVICE PERIOD TOTAL HOURS INVOICED INVOICE AMOUNT TOTAL RELATED EXPENSES AVERAGE HOURLY RATE CALCULATED 25AP0268 7/29/2024 $ 2,500,000.00 830311-2024-39 7/1/2024 Jun-24 5,421.00 $ 2,500,000.00 $ 672,893.25 $ 337.04 1277646 9/9/2024 2,500,000.00 830311-2024-40 8/1/2024 Jul-24 5,777.00 2,500,000.00 89,160.12 417.32 1281131 9/23/2024 2,500,000.00 830311-2024-41 9/1/2024 Aug-24 6,414.00 2,500,000.00 55,557.56 381.11 1287473 10/11/2024 2,500,000.00 830311-2024-42 10/1/2024 Sep-24 6,082.00 2,500,000.00 142,510.00 387.62 1300722 12/5/2024 2,500,000.00 830311-2024-43 11/1/2024 Oct-24 6,311.00 2,500,000.00 56,081.93 387.25 1301526 1/7/2025 2,500,000.00 830311-2024-44 12/2/2024 Nov-24 5,060.00 2,500,000.00 70,654.00 480.11 1309568 2/14/2025 2,500,000.00 830311-2025-45 1/1/2025 Dec-24 5,302.00 2,500,000.00 60,040.27 460.20 1316767 3/5/2025 2,500,000.00 830311-2025-46 2/1/2025 Jan-25 5,538.00 2,500,000.00 37,906.95 444.58 1324572 3/25/2025 2,500,000.00 830311-2025-47 3/1/2025 Feb-25 4,961.00 2,500,000.00 80,429.52 487.72 1333390 / 1333392 4/25/2025 & 5/6/2025 2,500,000.00 830311-2025-48 4/1/2025 Mar-25 5,260.00 2,500,000.00 58,231.99 464.21 1345009 5/26/2025 2,375,000.00 830311-2025-50 5/1/2024 Apr-25 5,223.00 2,375,000.00 614,961.22 ● 336.98 1356525 6/26/2025 2,375,000.00 830311-2025-51 6/1/2024 May-25 5,187.00 2,375,000.00 229,866.71 413.56 $ 29,750,000.00 $ 29,750,000.00 $ 2,168,293.52 ●This amount include $570,000 of Performance Bond Insurance. 2. Allocability – the payment made was distributed among several Federal programs (Consolidated Funds) and state funds as follows: State Fund CONSOLIDATED FUNDS (SEA/LEA) TOTAL ALLOCATED AMOUNT $ - $ 2,500,000.00 $ 2,500,000.00 - 2,500,000.00 2,500,000.00 - 2,500,000.00 2,500,000.00 - 2,500,000.00 2,500,000.00 2,500,000.00 - 2,500,000.00 2,500,000.00 - 2,500,000.00 2,500,000.00 - 2,500,000.00 2,500,000.00 - 2,500,000.00 2,500,000.00 - 2,500,000.00 195,723.15 2,304,276.85 2,500,000.00 2,375,000.00 - 2,375,000.00 - 2,375,000.00 2,375,000.00 $ 15,070,723.15 $ 14,679,276.85 $ 29,750,000.00 50.66% 49.34% Based on the payment documentation of the evaluated invoices, the allocations were made based on available budget of administrative allocation of Federal awards that “consolidate administration funds of those programs”, the invoices didn't include any basis for the allocation of costs between Federal and non-Federal funds, and no allocation was made to programs that do not consolidated administration funds but benefited from the TPFA process. QUESTIONED COSTS Based on the Criteria established on Part II, § 200.403 and § 200.404 for Cost Principles – Allowable Costs under Federal awards, the based used for the costs distribution without specific services rendered to Federal Programs, as described in the Statement of Condition, we estimate as minimum the amount of $14,679,276.85 as questioned costs for not supported documentation. See also Perspective Information for more support. PERSPECTIVE INFORMATION This is a systemic deficiency. The total contract amount awarded for the services over the two-year period is $79,675,000, with a flat fee of $3,143,750 for the first twelve months, and $3,495,833 for the next twelve months. In the fiscal year 2023 there were 3 amendments to the original contract where it was agreed to pay a total fee of $2,995,833 for the months of April and May 2023 and the total amount of $23,333,333 for 10 additional months or $2,333,333 monthly from June 2023 to March 2024. During fiscal year 2024 there were two (2) amendments to the original contract where it was agreed to pay a total monthly fee of $2,500,000 for the months of April 2024 to March 2025, and a total monthly fee of $2,375,000 for the months of April 2025 to October 2025. From the first year of the contract up to the last amendment the total contract amount is approximately $155,625,000. Based on the inconsistent cost allocation method and the lack of a requirement for the payments being made for actual works performed, we considered this a systematic problem in the contract management and payment. Based on the information provided and evaluated, the allocation between Federal and non-Federal funds is not applied consistently. In accordance with the documentation provided the allocation used is based on the budget amounts available from state and Federal funds; during this fiscal year the total amount paid to the supplier was $29,750,000. Of this amount 50.66% were covered with state funds, and 49.34% with consolidated activities administrative funds of Federal Awards of some programs. Some payments were charged completely to state funds or consolidated funds, while others were prorated between the two funding sources without documentation of services provided. STATEMENT OF CAUSE The PRDE did not include on the RFP process and the contract negotiation a clause that requires that the payment of services will be made upon actual hours incurred or that a final reconciliation process will be made during the contract period of performance based on actual service hours and expense incurred. The PRDE agreed upon a "flat fee" contract based on an estimate / budget of hours presented by the vendor on its proposal without considering the requirement of adjusting the payment for actual workhours incurred as part of its contract negotiation. The PRDE staff could not provide the basis used to distribute the cost between the different programs and state funds in accordance with the benefit obtained from the costs incurred. There is no consistent treatment or basis for the allocation of the payment costs between Federal programs and state funds. The contract includes the accounting codes that can be charged for the contract costs; however, no amounts, limitations, or basis for the cost’s distributions were included in the contract or in the payment documentation. POSSIBLE ASSERTED EFFECT Unreasonable costs may be charged to the PRDE's Federal programs that may result in questionable or unallowable costs by the Federal grantors. IDENTIFICATION OF REPEAT FINDING This is a repeat finding (Finding Reference 2024-004). RECOMMENDATIONS We recommend PRDE to establish an adequate and consistent allocation method of each invoice amount that reflects the relative benefits that the Federal program received from the services provided by the supplier during the invoice period, so the Federal program can be charged for the costs of that period. In addition, we recommend that the PRDE revised the contract terms to include a reconciliation of total hours and rates to adjust the payments made to the vendor before the contract expiration. Also, we recommend that the PRDE should request that adequate supporting evidence from the vendors be presented for any expenses to be reimbursed by the PRDE.
FINDING REFERENCE NUMBER 2025-004 FEDERAL PROGRAMS (ALN – 10.553) SCHOOL BREAKFAST PROGRAM (SBP) – CHILD NUTRITION CLUSTER (ALN – 10.555) NATIONAL SCHOOL LUNCH PROGRAM (NSLP) – CHILD NUTRITION CLUSTER (ALN – 10.559) SUMMER FOOD SERVICE PROGRAM FOR CHILDREN (SFSP) – CHILD NUTRITION CLUSTER (ALN – 10.582) FRESH FRUIT AND VEGETABLE PROGRAM (FFVP) – CHILD NUTRITION CLUSTER U.S. DEPARTMENT OF AGRICULTURE (ALN – 84.010A) TITLE I GRANTS TO LOCAL EDUCATIONAL AGENCIES (TITLE I, PART A OF THE ESSEA) (ALN – 84.027) SPECIAL EDUCATION – GRANTS TO STATES (IDEA, PART B) (ALN – 84.425D) COVID-19 EDUCATION STABILIZATION FUND: ELEMENTARY AND SECONDARY SCHOOL EMERGENCY RELIEF FUND (ALN – 84.425U) COVID-19 EDUCATION STABILIZATION FUND: AMERICAN RESCUE PLAN – ELEMENTARY AND SECONDARY SCHOOL EMERGENCY RELIEF (ARP ESSER) U.S. DEPARTMENT OF EDUCATION AWARD NUMBERS 1PRAEA18SCESUBA (10/01/2017 – 09/30/2018); 1PRAEA19SCESUBA (10/01/2018 – 09/30/2019); 1PRAEA20SCESUBA (10/01/2019 – 09/30/2020); 1PRAEA21SCESUBA (10/01/2020 – 09/30/2021); 1PRAEA22SCESUBA (10/01/2021 – 09/30/2022); 1PRAEA23SCESUBA (10/01/2022 – 09/30/2023); 1PRAEA24SCESUBA (10/01/2023 – 09/30/2024); 1PRAEA25SCESUBA (10/01/2024 – 09/30/2025); H027A1200003 (07/01/2020 – 09/30/2021); H027A2200003 (07/01/2022 – 09/30/2023); H027A2300003 (07/01/2023 – 09/30/2024); H027A2400003 (07/01/2024 – 09/30/2025); V048A180052 (07/01/2018 – 09/30/2019); S425D200029 (06/16/2020 – 09/30/2021); S425D210029 (01/05/2021 – 09/30/2022); S425U210029 (03/24/2021 – 09/30/2023) COMPLIANCE REQUIREMENT ACTIVITIES ALLOWED OR UNALLOWED // ALLOWABLE COSTS/COSTS PRINCIPLES TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA 2 CFR Section 200.403 (g) establishes that except where otherwise authorized by statute, costs must be adequately documented in order to be allowable under Federal awards. In addition 2 CFR Section 200.1, defines improper payments as a payment that should not have been made or that was made in an incorrect amount under statutory, contractual, administrative, or other legally applicable requirements. The term improper payment includes any payment to an ineligible recipient, any payment for ineligible goods or service, any duplicate payment, any payment for a good or service not received (except for those payments where authorized by law), any payment that is not authorized by law, and any payment that does not account for credit for applicable discounts. STATEMENT OF CONDITION As part of our audit procedures and interviews over financial reporting, we obtained a detail of accounts receivable related to duplicate or incorrect payments made for payroll transactions in the amount of $3,756,580. Invoices issued during the fiscal year ended June 30, 2025, balance, were distributed as federal and state, as follows: Assistance Listing Number Program Description Transaction Balance 10.553/ 10.555/ 10.559/ 10.582 Child Nutrition Program Cluster $ 94,915 84.010A Title I Grants to Local Educational Agencies (Title I, Part A of the ESEA) 13,665 84.027 Special Education – Grants to States (IDEA, Part B) 33,798 84.425D COVID-19 Education Stabilization Fund: Elementary and Secondary School Emergency Relief Fund 43,252 84.425U COVID-19 Education Stabilization Fund: American Rescue Plan – Elementary and Secondary School Emergency Relief (ARP ESSER) 55,837 Subtotal 241,467 Not Determined Schoolwide Program (State and Federal Funds) 2,106,827 Not Determined Consolidated Funds (State and Federal Funds) 32,730 Not Applicable State Funds 1,375,556 Total Invoices Issued Balance at 06/30/2025 $ 3,756,580 QUESTIONED COSTS Identified questioned costs are $241,467, which were identified as employees that didn't work for the Federal program. Other amount may be unallowed, if the PRDE can identify the portion of Federal funding incurred in Schoolwide and Consolidated activities. PERSPECTIVE INFORMATION This is a systemic deficiency. The amount of $3,756,580, corresponds to incorrect payroll payments made from current and prior years, for which during fiscal year 2024-2025, the PRDE determined that an invoice for excess payroll payments proceeds. The PRDE was unable to indicate which amount of Schoolwide or Consolidated funds corresponds to Federal funding, because these funds close at year end. STATEMENT OF CAUSE The PRDE sends the Treasury Department of Puerto Rico a balance of the payroll, before the end of the fortnight, to speed up the payment process. By sending this information without balancing the hours worked, it causes errors in the payroll computations. POSSIBLE ASSERTED EFFECT The PRDE incurred payments to employees for hours not worked, and for which specific grants were received. IDENTIFICATION OF REPEAT FINDING This is a repeat finding (Finding Reference Number 2024-005). RECOMMENDATIONS We recommend PRDE design and implement adequate internal controls and payroll processes that will identify in real – time or sooner any incorrect payroll payment made.
Finding 2025-003 Assistance Listing Number(s): 93.558 Name of Federal Program or Cluster: Temporary Assistance for Needy Families Name of Federal Agency: Department of Health and Human Services Name of Pass-through Entity: Virginia Department of Social Services Pass-through Entity Identifying Number: BEN-21-029 Award Period: July 1, 2024 through June 30, 2025 Criteria or Specific Requirement: Per 2 CFR 200.430, charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed and must be supported by a system of internal controls.Fringe benefits must be based on actual costs incurred and be allocable to the federal award. Per 2 CFR 200.403, costs must be allowable, reasonable, and properly supported. Condition and Context: UCM did not maintain effective internal controls over payroll and employee benefit costs charged to the federal award. Testing of all 14 employees charged to the program identified the following: Payroll costs – time and effort reporting • No internal controls existed over time and effort reporting for 2 out of 14 employees charged to the federal award. • Required after-the-fact documentation of actual time worked was not maintained. Retroactive time and effort certifications were received during audit for 10 out of 14 employees who worked within the program. • 5 of 14 employees were charged to the federal award at amounts exceeding the time reflected on time certifications, indicating payroll charges were not based on actual effort. Employee Benefits – lack of controls and overcharging • There were no internal controls to ensure that employee benefits charged to the award reflected actual costs incurred. • 13 of 14 employees had employee benefit costs charged to the federal award that exceeded actual benefits incurred, indicating the use of budgeted or estimated amounts rather than actual costs. Cause: UCM lacked formal written policies and procedures governing time and effort reporting, employee benefit allocations, and documentation standards. Significant management personnel turnover resulted in inadequate federal grant knowledge and inconsistent application of Uniform Guidance requirements. Effect or Potential Effect: Unallowable, unsupported, or inaccurately allocated costs were charged to the federal award. UCM may be required to repay federal funds and implement corrective actions. Repeat Finding: This finding is a repeat of 2024-001. Questioned Costs: Questioned costs include the 2 out of 14 unsupported time and effort costs, excess salaries and employee benefits than actual allocable to the employees within the program, and 10% de minimis charged on the questioned costs. Payroll: $55,523 Employee benefits: 99,980 Indirect overcharge on above questioned costs: 15,550 Total known questioned costs: $171,053 Recommendation: UCM should develop and implement comprehensive written policies and proceduresaddressing time and effort, employee benefits, payroll allocations, and documentation standards. Staff responsible for grant accounting should receive Uniform Guidance training. Views of Responsible Officials: Management acknowledges the finding and will work to implement appropriate corrective actions to address the deficiency and improve compliance going forward.
Finding 2025-005 Assistance Listing Number(s): 93.558 Name of Federal Program or Cluster: Temporary Assistance for Needy Families Name of Federal Agency: Department of Health and Human Services Name of Pass-through Entity: Virginia Department of Social Services Pass-through Entity Identifying Number: BEN-21-029 Award Period: July 1, 2024 through June 30, 2025 Criteria or Specific Requirement: Per 2 CFR 200.403 Factors affecting allowability and 2 CFR 200.404 Reasonable costs, costs charged to Federal awards must be adequately documented, reasonable, and based on actual costs. Allocations must be supported and not based on unsupported estimates. Condition and Context: 9 of 60 disbursements tested (totaling $2,736 in the sample) were allocated to the Federal award using estimates for insurance, software, IT support, telephone system, payroll processing, and benefit plan administration. Total charges to the award for these categories were approximately $18,838. Cause: The entity used estimated allocations without adequate supporting documentation or reconciliation to actual costs. Effect or Potential Effect: Costs charged to the Federal award may not be accurate, allowable, or properly allocated, resulting in likely questioned costs of $18,838. Repeat Finding: This finding is a repeat of 2024-002 representing the continued instance of noncompliance identified separately in the current year. Questioned Costs: $18,838. This is the total of allocated costs charged to the federal award. Actual bases for allocation were not determined at time of audit. Recommendation: UCM should develop and implement comprehensive written policies and procedures addressing allowability and documentation standards. Controls should ensure only actual costs are charged. Staff responsible for grant accounting should receive Uniform Guidance training. Views of Responsible Officials: Management acknowledges the finding and will work to implement appropriate corrective actions to address the deficiency and improve compliance going forward.
Finding 2025-001: Material Weakness in Internal Control and Material Noncompliance, Activities Allowed or Unallowed and Allowable Costs/Cost Principles. Assistance Listing Program Title and Number: Education Stablization Fund: COVID-19 American Rescue Plan - Elementary and Secondary School Emergency Relief (ARP ESSER) (84.425U) Federal Agency: U.S. Department of Education Pass-Through Entity: Illinois State Board of Education Award Year: 2024-2025 Award Number: 25-4998-C3 and 24-4998-E3 Criteria or Specific Requirement: Per 2 CFR §§ 200.403 and 200.438, costs charged to federal awards must be necessary, reasonable, and allowable under federal statutes, regulations, and the terms and conditions of the award. Costs for entertainment, gifts, or similar items are generally unallowable unless they serve a documented, programmatic purpose and are explicitly authorized. In addition, U.S. Department of Education guidance for the ARP ESSER program indicates that funds may not be used to provide direct monetary incentives, such as gift cards, to students or families to encourage attendance or participation, as such expenditures do not meet federal allowability requirements. Condition: During our testing of nine transactions totaling $428,326, we identified one transaction in the amount of $38,200 for the purchase and distribution of Amazon gift cards to students as incentives to improve attendance. Further inquiry of the District’s management and specific identification of all expenditures labeled as “prepaid gift cards” indicated that the District expended $113,200 of ARP ESSER funds during the fiscal year ended June 30, 2025 on prepaid gift cards for similar purposes. Cause: The condition was caused by inadequate design and implementation of controls over the review and approval of nonpayroll expenditures charged to federal awards, specifically the lack of procedures to evaluate allowability in accordance with federal regulations and program guidance prior to purchase. The District submitted an application for the use of funds and the pass through entity approved the submitted annual ESSER budget for the period ending June 30, 2025. Effect: District incurred unallowable costs and was not in compliance with federal requirements. As a result of the noncompliance, the District may be required to return the funds to the State. Additionally, the lack of effective controls increases the risk that additional unallowable expenditures could occur and not be detected in a timely manner. Context: The unallowable costs of $113,200 represented approximately 12% of the $915,106 in total expenditures reported for this award. The sample used was not a statistically valid sample. Questioned Costs: Questioned costs of $113,200 represent the total amount of ARP ESSER funds expended on prepaid gift cards identified through testing and follow-up procedures as unallowable. Repeat Finding: N/A Recommendation: We recommend the District strengthen internal controls over federal expenditures by implementing procedures to: • Evaluate and document allowability of expenditures prior to approval, • Require review of expenditures against Uniform Guidance and program-specific requirements, and • Provide training to relevant personnel regarding allowable and unallowable costs under federal programs. Views of Responsible Officials: The District's determination was based on its interpretation of available guidance and the approval of the related grant budget; however, the District acknowledges that additional reviews should have been performed to independently assess and document the allowability of the expenditures under federal requirements. However, the District recognizes that approval of a budget does not relieve the District of its responsibility to independently evaluate and document compliance with federal allowability requirements. The District will strengthen its review and approval procedures for expenditures charged to federal programs by providing additional training to personnel responsible for grant administration and implementing enhanced procedures to evaluate and document allowability before costs are incurred and charged to federal awards.
2025-003 – Allowable Costs (Significant Deficiency) ______________________________________________________________________ Federal Program Information: Funding Agency: U.S. Department of Energy Title: Nuclear Energy Research, Development and Demonstration Assistance Listing Number: 81.121 Award Number: DE-NE0009334 and DE-NE0009328 Award Period: 09/29/2023-09/28/2025; 05/04/2023-05/03/2026 Criteria: In accordance with 2 CFR §200.403, except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards: Be necessary and reasonable for the performance of the federal program. Be adequately documented. Conform to any limitations or exclusions set forth in the federal award. Further, 2 CFR §200.302(b)(3) the entity should maintain records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. Additionally, 2 CFR §200.473 says that the cost of alcoholic beverages is unallowable. Condition: During our expenditure testwork we noted the following: 1. The Alliance could not provide supporting documentation, such as an invoice, purchase order or receipt, for $197 out of $14,881 expenses tested. 2. There were no itemized receipts for four purchases of $315. 3. One of the submitted receipts included an unallowable alcoholic beverage purchase totaling $39.Context: Four out of Five invoices sampled for reimbursed expenses tested. Questioned Costs: $552. Cause: The Alliance did not ensure that reimbursed expenses were supported by appropriate documentation and there was a lack of review to identify unallowable costs. Effect: The program was charged for costs that were not adequately supported and included unallowable costs. Recommendation: We recommend that the Alliance strengthen internal controls over the allowability and documentation of expenditures charged to federal awards by requiring original, itemized receipts for all purchases prior to reimbursement or payment. Additionally, the Alliance should implement a documented review and approval process to verify that each expenditure is allowable, reasonable, allocable, and adequately supported in accordance with Uniform Guidance. Management Response: ECA believes that the documentation existed at the time for the charges as we have all of the receipts prior to creating any bills. However, for the unallowable costs ($39), ECA is reversing the charge and has already implemented a process to ensure that such costs are not charged to the grants in the future
EMERGENCY RENTAL ASSISTANCE PROGRAM – 21.023 Federal Awarding Agency: U.S. Department of the Treasury (TREAS) Federal Award Fiscal Years: 2021 to 2025 Federal Award Number: ERAE0006 Administered by: Rhode Island Department of Administration (DOA), Pandemic Recovery Office (PRO) CORONAVIRUS STATE AND LOCAL FISCAL RECOVERY FUNDS – 21.027 Federal Awarding Agency: U.S. Department of the Treasury (TREAS) Federal Award Fiscal Years: 2021 to 2025 Federal Award Number: SLFRP0136 Administered by: Rhode Island Department of Administration (DOA), Pandemic Recovery Office (PRO) Compliance Requirements: Subrecipient Monitoring; Allowable Costs/Cost Principles SUBRECIPIENT PAYMENTS AND MONITORING Subrecipient monitoring procedures were insufficient to ensure subrecipient audit reports are obtained and reviewed. Monitoring procedures were not in place to ensure adequate documentation was obtained regarding the use of payment advances. Background: The Pandemic Recovery Office, as the administering agency of both the Emergency Rental Assistance Program (ERA) and the State Fiscal Recovery Fund (SFRF), executes memoranda of understanding with the various departments and agencies to conduct projects under the allowable uses of the program. The departments and agencies then often execute subawards within the scope of the specific project. In fiscal 2025, expenditures related to these subawards were primarily executed by the Executive Office of Housing. Criteria: 2 CFR §200.332(e) Requirements for pass-through entities requires that all pass-through entities must “monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward. The pass-through entity is responsible for monitoring the overall performance of a subrecipient to ensure that the goals and objectives of the subaward are achieved.” That monitoring must include (1) reviewing financial and performance reports, (2) following up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and other means, (3) issuing a management decision for audit findings pertaining to the Federal award, and (4) resolving audit findings specifically related to the subaward. Uniform Guidance cost principles dictate that, in order to be allowable under Federal awards, costs must be adequately documented (2 CFR §200.403(g)). 2 CFR §200.332(b)(1) requires that subawards clearly identify certain federal award identification information to the subrecipient. Condition: For SFRF, our sample consisted of 34 subawards executed with 20 unique subrecipients. For ERA, our sample consisted of 29 subawards executed with 15 unique subrecipients. In fiscal 2025, subrecipient Single Audit Reports were not obtained and reviewed by the pass-through entity for 19 of the 20 SFRF subrecipients or any of the 15 ERA subrecipients. Note: Between ERA and SFRF, there were 27 unique subrecipients; eight subrecipients received funding from the Executive Office of Housing under both programs. Subrecipients noted under both programs were issued separate subawards for ERA and SFRF. As part of our testing, we performed an independent review of Single Audit Reports submitted to the Federal Audit Clearinghouse (FAC) for each sampled subrecipient to identify if there were any findings reported. While we did not note any findings related to the subawards sampled (i.e. no findings reported on ERA or SFRF), we did note several subrecipient entities with findings reported on internal control over financial reporting and/or internal control over compliance with federal awards on other programs that could be of interest to the pass-through entity in evaluating the level of monitoring necessary for each subrecipient. Additionally, many of these subrecipients receive funding on a periodic basis. Of 34 SFRF subrecipient payments reviewed, 4 were payment advances to subrecipients for which no additional documentation or reconciliation was available to support subrecipient expenditures related to those prepayments. We noted several other subrecipient reimbursement payments for SFRF that were lacking adequate support for the expenditures being reimbursed. We did not note any deficiencies in the review of reimbursement requests for ERA. The Executive Office of Housing (responsible for 32 of the 34 sampled subawards and 18 of the 20 subrecipients under SFRF and all subawards under ERA) made several improvements to its subrecipient monitoring procedures in fiscal year 2026, including periodic site visits (depending on the nature of the project) and requiring subrecipients to submit their Single Audit Report or financial audit report when requesting annual funding. Monitoring deficiencies in fiscal 2025 were significantly impacted by organization restructuring and related resource constraints. We also noted several subawards that were missing certain required federal award identifying information; subawards include an appendix that details the required information. For ERA, we noted 1 subaward that appeared to include the incorrect entity name in the appendix, 1 subaward that was missing the Federal Award Identification Number (FAIN), Assistance Listing Number (ALN), and program title, and 2 instances where a subrecipient had differing Unique Entity IDs (UEIs) between their respective subawards. For SFRF, we noted 4 subawards that did not include the UEI, 3 subawards that did not include the FAIN, 5 subawards that did not include the ALN and program title, and 6 subawards that did not include the federal award date. Cause: Subrecipient monitoring procedures are not in place to ensure audit reports are reviewed and management decisions are issued, as required by Uniform Guidance. Other monitoring procedures were inadequate to ensure that subrecipients appropriately utilized the funds provided to support program objectives. Effect: Noncompliance with program guidelines and/or federal regulations at the subrecipient level could go undetected and unresolved. Questioned Costs: Undetermined Valid Statistical Sample: Not Applicable RECOMMENDATIONS 2025-039a Enhance internal control procedures to ensure timely review of audit reports and issuance of management decisions in accordance with Uniform Guidance. Ensure review of reports is adequately documented, including notation of findings unrelated to the subaward, which could have an indirect impact on the administration of the subaward. 2025-039b Enhance controls to ensure adequate documentation of monitoring procedures performed and support for subrecipient expenditures is obtained. Document any meetings and/or conversations with the subrecipients and discussion had therein. 2025-039c Continue to strengthen and improve subrecipient monitoring procedures to ensure subrecipient compliance with terms and conditions of the grant award and subaward. 2025-039d Enhance controls to ensure all award identifying information required by 2 CFR §200.332(b)(1) is accurately included in the subaward.
Significant Deficiency /Other Non-compliance Program: Assistance Listing: 10.553/10.555 – Child Nutrition Cluster Repeat Finding from prior year: Yes; 2024-002 Criteria: 2 CFR §200.112 – Conflict of Interest requires non-federal entities to disclose in writing any potential conflicts of interest to the federal awarding agency or pass-through entity. 2 CFR §200.302 - Financial Management requires funds to be expended and accounted for the federal award in accordance with state laws and procedures for expending and accounting for state funds which include Miss. Code Ann. §25-1-53 and Miss. Code Ann. §25-4-105. 2 CFR §200.303 – Internal Controls requires non-federal entities to establish and maintain effective internal control over federal awards that provides reasonable assurance of compliance with federal statutes, regulations, and the terms and conditions of the award. 2 CFR §200.403- Factors Affecting Allowability of Costs states that federal award costs must be necessary, reasonable, and allowable. The COSO Internal Control—Integrated Framework and the GAO Standards for Internal Control in the Federal Government (Green Book) provide the accepted framework for evaluating internal control over compliance (Control Environment and Control Activities). Condition: As reported in the prior year, we observed that the District's system of internal controls is not adequate to ensure compliance with applicable federal and state laws and regulations governing conflicts of interest and personnel hiring practices. We observed that the Food Service Director's child was employed by the Food Service Department, creating a potential conflict-of-interest situation and a violation of applicable federal conflict-of-interest requirements and state nepotism laws. Specifically, we observed that the Board's minutes do not clearly identify the individual who recommended the employee to the board for hire, and the District failed to report the employment of individual to the appropriate division of the Mississippi Department of Education as required. This resulted in the payment of $22,194, including salary and related benefits paid to the related employee for potentially unallowable costs associated with the federal grant. Context/Perspective: This finding is a result of our statistically valid random sample of twenty-five payroll disbursements for single audit purposes and our follow up of a prior year audit finding. Cause: The District’s internal control system over personnel activities is not adequately designed to ensure that conflicts of interest related to hiring decisions are identified and prevented in accordance with applicable state and federal statutes and prevent unallowable cost being charged to the federal program. Effect: Failure to establish and maintain adequate internal controls over personnel hiring practices increases the risk of noncompliance with applicable federal and state laws and regulations which could result in unallowable costs charged to the program due to conflicts of interest. Recommendation: The District should strengthen internal controls over hiring of personnel to ensure compliance with applicable laws, regulations, and conflict-of-interest requirements and to ensure that only allowable costs are charged to the federal grant program. This should also include implementing procedures for the disclosure and independent review of potential conflicts of interest, providing periodic ethics training, and establishing monitoring processes to ensure ongoing compliance with state nepotism laws and federal conflict-of-interest requirements as well as improvements to the internal controls over the preparation of the board minutes to ensure that the position and name of person recommending personnel to the board for hiring is clearly identified. Questioned Cost: None. Views of Responsible Official(s): The Auditee’s Corrective Action Plan lists the District’s response to the finding.
Period of Performance Federal Agency: U.S. Department of Labor Federal Program Title: Unemployment Insurance State Administering Department: Employment Development Department (EDD) ALN: 17.225 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: 23A60UB00053; April 1, 2023 - May 22, 2025 23A60UB000081; April 1, 2023 - May 22, 2025 25A60UD000072; January 8, 2025 - January 8, 2028 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: Title 2 – Federal Financial Assistance Subtitle A – Office of Management and Budget Guidance for Grants and Agreements. Chapter II – Office of Management and Budget Guidance. Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D – Post Federal Award Requirements. § 200.303 - Internal controls (2 CFR 200.303): The recipient and subrecipient must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Subpart E – Cost Principles § 200.403 – Factors affecting allowability of costs Except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards: (h) Administrative closeout costs may be incurred until the due date of the final report(s). If incurred, these costs must be liquidated prior to the due date of the final report(s) and charged to the final budget period of the award unless otherwise specified by the Federal agency. All other costs must be incurred during the approved budget period. At its discretion, the Federal agency is authorized to waive prior written approvals to carry forward unobligated balances to subsequent budget periods. See § 200.308(g)(3). Condition: For awards with period of performance start dates occurring during the fiscal year, audit procedures included testing 40 transactions recorded in the general ledger during the initial month of the award. Based on these procedures, we identified five instances where a portion of payroll hours charged to the grant related to services performed prior to the approved period of performance start date of January 8, 2025. The total amount of payroll costs charged outside of the period of performance at the beginning of the award was $12,898. For awards with period of performance end dates occurring during the fiscal year, audit procedures included testing 40 transactions recorded in the general ledger during the final month of the award and subsequent to the period of performance end date. Based on these procedures, we identified 25 instances where a portion of payroll hours charged to the grants related to services performed after the approved period of performance end date of May 22, 2025. The total amount of payroll costs charged outside of the period of performance at the end of the award was $12,968. Questioned costs: $25,866 Context: See “Condition.” Cause: The condition resulted from controls over payroll cost allocation that were not performed with sufficient precision to ensure payroll charges were reviewed against authorized award start and end dates prior to being recorded to Federal awards. As a result, payroll costs incurred outside of the approved period of performance were not prevented or detected in a timely manner. Effect: The Department charged payroll costs to Federal awards outside the approved budget period, resulting in noncompliance with Federal requirements and a potential overstatement of allowable Federal expenditures. Repeat finding: No Recommendation: We recommend that management strengthen internal controls over payroll charging to Federal awards by implementing procedures to verify that project service dates fall within the authorized award dates before costs are charged to the grant. We also recommend the Department implement supervisory or system-based review controls to identify payroll charges posted outside the approved budget period and prevent such costs from being charged to Federal awards. These actions will help ensure payroll costs charged to federal awards are allowable, reduce the risk of unallowable charges, and improve compliance with Uniform Guidance. Views of responsible officials: Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report.
Period of Performance Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Epidemiology and Laboratory Capacity for Program Infectious Diseases (ELC) State Administering Department: California Department of Public Health ALN: 93.323 Pass-Through Agency: Heluna Health Pass-Through Number(s): 95-2557063 Award Number and Period: NU50CK000539; August 1, 2019 – July 31, 2027 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: Title 2 – Federal Financial Assistance Subtitle A – Office of Management and Budget Guidance for Grants and Agreements. Chapter II – Office of Management and Budget Guidance. Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D – Post Federal Award Requirements. § 200.303 - Internal controls (2 CFR 200.303): The recipient and subrecipient must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Subpart E – Cost Principles § 200.403 – Factors affecting allowability of costs Except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards: (h) Administrative closeout costs may be incurred until the due date of the final report(s). If incurred, these costs must be liquidated prior to the due date of the final report(s) and charged to the final budget period of the award unless otherwise specified by the Federal agency. All other costs must be incurred during the approved budget period. At its discretion, the Federal agency is authorized to waive prior written approvals to carry forward unobligated balances to subsequent budget periods. See § 200.308(g)(3). Condition: For awards with period of performance end dates occurring during the fiscal year, audit procedures included testing transactions recorded in the general ledger during the final month and after of the award. We tested a sample of nineteen transactions totaling $2,643,649. Our testing identified three transactions, totaling $33,571, for which costs were incurred after the ending of the period of performance. Specifically, the award period end date on July 31, 2024; however, the associated costs were incurred between August 1, 2024 and February 28, 2025. Questioned costs: $66,833 ($33,571 related to the sample tested and $33,262 in the untested population). Context: See “Condition.” Cause: Controls over the review of expenditures at the end of the period of performance were not operating with sufficient precision to ensure that only allowable costs incurred before the award end date were charged to the appropriate Federal award. Specifically, management did not consistently apply procedures to verify that expenditures were recorded to the correct grant and within the applicable period of performance, resulting in the misclassification of post-award costs to the grant. Effect: Ineffective internal controls may result in questioned costs and noncompliance with the terms of the grant. Repeat finding: No Recommendation: The Department should strengthen controls over grant accounting by implementing procedures to ensure that expenditures are both charged to the correct grant and incurred within the applicable period of performance. This should include establishing controls to verify grant coding and transaction dates prior to posting or reimbursement, as well as enhancing supervisory review processes to detect and prevent misclassification of expenditures and the recording of unallowable post-award costs. Additionally, the Department should provide training to personnel responsible for grant accounting on proper grant coding and period-ofperformance requirements. Views of responsible officials: Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report.
Period of Performance Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Child Care and Development Block Grant/Child Care Mandatory and Matching Funds of the Child Care and Development Fund State Administering Department: California Department of Social Services (CDSS) ALN: 93.575, 93.596 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: 2534CACCDD; October 1, 2024 – September 30, 2027 2534CACCDM; October 1, 2024 – September 30, 2026 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: Title 2 – Federal Financial Assistance Subtitle A – Office of Management and Budget Guidance for Grants and Agreements. Chapter II – Office of Management and Budget Guidance. Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D – Post Federal Award Requirements. § 200.303 - Internal controls (2 CFR 200.303): The recipient and subrecipient must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Subpart E – Cost Principles § 200.403 – Factors affecting allowability of costs Except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards: (h) Administrative closeout costs may be incurred until the due date of the final report(s). If incurred, these costs must be liquidated prior to the due date of the final report(s) and charged to the final budget period of the award unless otherwise specified by the Federal agency. All other costs must be incurred during the approved budget period. At its discretion, the Federal agency is authorized to waive prior written approvals to carry forward unobligated balances to subsequent budget periods. See § 200.308(g)(3). Condition: For awards with period of performance start dates occurring during the fiscal year, audit procedures included testing 60 transactions recorded in the general ledger during the initial month of the award. Based on these procedures, we identified 25 instances where a portion of costs charged to the grant related to services performed prior to the approved period of performance start date of October 1, 2024. The total amount of costs charged outside of the period of performance at the beginning of the award was $7,013,956. Questioned costs: $7,013,956 Context: See “Condition.” Cause: The condition is due to ineffective controls over aligning expenditure recording with the approved period of performance, including insufficient review procedures to ensure that costs are charged to Federal awards based on the actual service period rather than timing of payment or accrual. In addition, controls did not adequately prevent or detect the systematic charging of pre-award service costs to newly awarded funding sources. Effect: Charging costs incurred prior to the period of performance results in noncompliance with Federal requirements and causes expenditures to be improperly shifted to ineligible funding periods. This practice overstates allowable costs at the beginning of the award and increases the risk that funds are used for activities not authorized under the award, potentially resulting in questioned costs and required repayment. Repeat finding: No Recommendation: We recommend that management strengthen internal controls over costs charged to Federal awards by implementing procedures to ensure that expenditures are aligned with the approved period of performance. This should include controls to verify, prior to recording, that service periods and underlying activities fall within authorized award dates. In addition, the Department should implement supervisory and/or system-based controls to detect and prevent costs recorded outside the period of performance, including mechanisms that flag transactions associated with pre-award or post-expiration service periods and ensure that costs are consistently charged to the appropriate funding source based on when services were performed. These actions will help ensure that costs charged to Federal awards are allowable and properly timed, reduce the risk of unallowable charges, and improve compliance with period of performance requirements under Uniform Guidance. Views of responsible officials: Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report.
Finding 2025-005 – Revenue Recognition Cutoff and Schedule of Expenditures of Federal Awards – Material Weakness in Internal Control Over Compliance and Noncompliance (Repeat Finding – Prior Year 2024-002) Criteria or Specific Requirement: The Uniform Guidance, 2 CFR 200.510(b), requires the auditee to prepare a Schedule of Expenditures of Federal Awards (SEFA) for the period covered by the financial statements, which must include the total federal awards expended as determined in accordance with 2 CFR 200.502. Additionally, 2 CFR 200.403 requires that costs charged to federal awards be allocable, allowable, and properly recorded in the period in which they are incurred. 27 Condition: During the audit of the fiscal year ended June 30, 2025, it was determined that revenue earned under the Indian Health Service Behavioral Health Programs grant (CFDA 93.654, Award No. BH22IHS0008) during the fiscal year ended June 30, 2024 was not recognized until the fiscal year ended June 30, 2025. The misapplication of the revenue recognition cutoff resulted in federal award revenue and expenditures being reported on the SEFA in the incorrect fiscal year, requiring a material post-close adjusting journal entry. This finding is a repeat of prior year Finding 2024-002. Cause and Effect: Controls over the period-end review of federal award revenue recognition and SEFA preparation were not operating effectively. The Organization did not perform a sufficient review of grant expenditure activity and award eligibility requirements relative to the June 30 fiscal year-end cutoff. The recurrence of this condition, despite being identified and reported in the prior year audit, indicates that corrective actions implemented were not sufficient to prevent the issue from recurring. Auditors' Recommendations: Management should implement a formal SEFA preparation and review process to ensure federal award expenditures are accurately reported for each fiscal year. A designated Finance staff member with sufficient knowledge of the Uniform Guidance requirements should be responsible for overseeing SEFA preparation for each fiscal year-end. A grant-by-grant SEFA reconciliation should be completed prior to year-end close. Management should engage its external accountants earlier in the year-end close process to allow sufficient time to identify and correct any SEFA discrepancies prior to fieldwork. Management's Response: Management has implemented a series of 3 checks and balance procedures for monthly review for SEFA procedures. A finance staff member with Uniform Guidance requirements will prepare the annual statement preparation at year end with review from Director of Finance and Board Treasurer before submission.
Compliance Requirement C. Cash Management Finding Type Material Weakness in Internal Control Over Compliance and Compliance Finding Federal Agency U.S. Department of Health and Human Services Federal Program Title Administration for Children & Families - Head Start Assistance Listing Number 93.600 Criteria: The Organization receives federal assistance from the Department of Health and Human Services. The Organization requests draw down of grant funds based on actual expenditures incurred. The Organization is required to maintain adequate internal controls over financial reporting in order to ensure expenditures are properly supported, reported under the correct funding source, and within the correct grant period. 2 CFR 200.403 details the factors affecting the allowability of cost. Specifically, 2 CRF 200.403(e) provides that costs must be determined in accordance with generally accepted accounting principles (GAAP). GAAP provides that costs are not incurred until the services are performed or the product is received. In addition, Uniform Guidance 200.305(b)(1) states advance payments to a non-Federal entity must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the non-Federal entity in carrying out the purpose of the approved program or project. Condition: During audit procedures, we noted total reimbursements received exceeded expenditures. The Organization requested reimbursements but could not provide supporting documentation as to how the amount requested for reimbursement of costs was determined. We consider this to be a material weakness. Cause: The Organization lacks established procedures which provide formal evidence that the accuracy and completeness of internal reports used to support reimbursement requests were verified, reviewed and approved before grant draw downs were requested. Effect: Without formal review controls in place, the Organization is more susceptible to reporting errors and/or noncompliance with federal requirements. Questioned Costs: $ 329,233 Identification as a Repeat Finding: This was reported as a finding in the prior audit report. Content: During the year ended June 30, 2024, the Organization received funds of $ 562,831 in excess of expenditures incurred. Subsequent to June 30, 2024, $ 346,944 of those funds were obligated and expended, leaving a remaining balance of $ 215,887. During the year ended June 30, 2025, the Organization requested and received reimbursements in excess of expenditures of $ 329,233. Recommendations: We recommend that the Organization implement a formal process for verifying the accuracy and completeness, and review of supporting documentation used to justify draw down requests. A reconciliation should be prepared of the expenditures recorded on the books and records to the amount submitted for reimbursement on a regular basis. All excess; unexpended funds should be returned to remain in compliance. All supporting documentation should be maintained for future reference. View of Responsible Officials: The Organization agrees with this audit finding.
Finding 2025-002 Material Weakness & Non-Compliance: U.S. Department of Education Passed-through Mississippi Department of Education Program Name: Elementary and Secondary School Emergency Relief ARP (ESSER) Program ALN: 84.425U Compliance Requirement: Allowable Costs/Cost Principles CRITERIA: 2 CFR 200.302(b)(3) requires non-Federal entities to maintain records that adequately identify the source and application of funds provided for federally-assisted activities. Additionally, 2 CFR 200.403(g) requires costs to be adequately documented in order to be allowable under Federal awards. The district’s internal control procedures require that disbursements be supported by an approved invoice, receiving documentation, and evidence of authorization prior to payment. CONDITION: During our test of 30 disbursements selected from the vendor payment population for the ARP ESSER grant, we noted 3 instances for which the district could not provide all the vendor invoices supporting the amount disbursed. In these instances, we were unable to substantiate that the goods or services were received or that the amount paid agreed to an amount owed. CONTEXT: The 3 instances involved different vendors indicating the issue was not isolated to a single vendor or purchase. CAUSE: The cause is a result of not properly implementing a designed system of accounting and internal controls. EFFECT: Noncompliance with federal recordkeeping and cost documentation requirements, and an increased risk that unallowable or unsupported costs could be charged to the federal award without detection. IDENTIFICATION OF REPEAT FINDING: No QUESTIONED COSTS: None. Although the district could not provide all the invoices for the 3 disbursements noted, the vendors and purchase descriptions were consistent with allowable ESSER program costs based on other documentation available (e.g., purchase orders, check detail, or contracts), and no indication of unallowable or unauthorized purchases was identified. RECOMMENDATION: The school district should implement policies and procedures to ensure all applicable compliance requirements are being met. VIEWS OF RESPONSIBLE OFFICIALS: We will implement policies or procedures to establish an internal control system that will ensure strong financial accountability, including compliance with federal purchasing requirements.
Federal Program: ALN 93.575 Child Care and Development Block Grant (CCDBG) Category: Compliance Compliance requirements: Allowable Costs / Cost Principles Record retention Condition: BGCPR did not maintain sufficient documentation to demonstrate compliance with minimum personnel qualification requirements. Criteria: Pursuant to 2 CFR §200.430(a)(2), costs of compensation are allowed only to the extent that the total compensation for individual employees follows an appointment made in accordance with the recipient's or subrecipient's laws, rules, or written policies Additionally, 2 CFR §200.303(a) requires recipients and subrecipients to establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance of compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Further, 2 CFR §200.403(g) requires costs charged to Federal awards to be adequately documented. Moreover, pursuant to 2 CFR §200.334, recipients and subrecipients must retain all Federal award records, including financial records, supporting documentation, and statistical records, for a minimum of three years from the date of submission of the final financial report. If litigation, claims, or audit findings are initiated before the expiration of the retention period, the records must be retained until all such matters are resolved and final action has been taken. Context: During testing of four payroll-related transactions selected for Allowable Activities and Allowable Costs compliance testing, we noted that one sampled employee did not meet the minimum educational and experience qualifications established for the position. Cause: For one payroll-related item, the personnel file did not contain documentation demonstrating that the employee met the minimum educational and experience qualifications established for the position. The employee did not possess the required bachelor's degree at the time of promotion. Although management subsequently provided an undated narrative explaining the basis for the hiring decision, no supporting documentation evidencing an approved exception at the time of promotion was maintained in the personnel file. Questioned cost: Amount is below the threshold to be considered a questioned cost. Effect or potential effect: As a result, BGCPR could not demonstrate that the employee's appointment was made in accordance with its established hiring requirements. Consequently, compensation costs charged to the Federal award may not be fully supported as allowable. Recommendation: Ensure personnel files contain documentation demonstrating that employees meet the minimum qualifications for their positions and retain evidence of any approved exceptions or waivers supporting hiring or promotion decisions. Views of officials responsible: BGCPR will provide additional training and guidance to Human Resources personnel to ensure consistent adherence to the internal procedures established. Anticipated completion date: September 30, 2026
Federal Program: ALN 93.575 Child Care and Development Block Grant (CCDBG) Category: Compliance Compliance requirements: Allowable costs Record retention Condition: The BGCPR did not maintain sufficient documentation to demonstrate compliance with employee background check requirements. Criteria: Pursuant to 2 CFR §200.430(a)(2), compensation costs are allowable when appointments are made in accordance with the recipient's written policies and procedures. Further, 2 CFR §200.303(a) requires recipients to establish and maintain effective internal controls to ensure compliance with applicable requirements. Additionally, 2 CFR §200.403(g) requires costs charged to Federal awards to be adequately documented. Moreover, pursuant to 2 CFR §200.334, recipients and subrecipients must retain all Federal award records, including financial records, supporting documentation, and statistical records, for a minimum of three years from the date of submission of the final financial report. If litigation, claims, or audit findings are initiated before the expiration of the retention period, the records must be retained until all such matters are resolved and final action has been taken. Per the BGCPR Human Resources Policies and Procedures Manual, specifically the Required Certifications and Background Check Policy, all employees and leaders must maintain current required certifications and documentation, including Criminal Record Certificate, Health Certificate, Law 300 Certificate, Educational Credentials, and Fingerprint Verification, and must successfully complete applicable background checks before perform their duties. Failure to comply with these requirements may result in restrictions from performing job responsibilities and may affect continued employment. Context: We found that two (2) of the four (4) sample employees lacked documentation, evidencing compliance with BGCPR's required background check procedures. Cause: For two (2) payroll-related items, the personnel files did not contain evidence demonstrating that required background checks had been completed in accordance with the BGCPR's hiring policies. For one employee, the background check was performed after the employee's recruitment date. For the second employee, the required background check documentation was not available in the personnel file at the time of the audit. Although management subsequently provided the documentation after the exception was identified, the evidence indicated that the background check report was printed in July 2026. Accordingly, the personnel files did not contain sufficient documentation to support compliance with the BGCPR's background check requirements during the audited period. Questioned cost: Amount is below the threshold to be considered a questioned cost. Effect or potential effect: As a result, BGCPR could not demonstrate that the employees were hired in accordance with established hiring requirements or that compensation costs charged to the Federal award were supported by adequate documentation. Recommendation: Ensure personnel records are complete, accurate, and maintained in accordance with established policies and procedures Views of officials responsible: BGCPR will provide additional training and guidance to Human Resources personnel to ensure consistent adherence to the internal procedures established. Anticipated completion date: September 30, 2026
Federal Program: ALN 10.536 CACFP Training Grants Category: Compliance/internal control significant deficiency Compliance requirements: Allowable costs / cost principles/procurement Record retention Condition: The procurement process was not adequately documented to demonstrate compliance with BGCPR's procurement policy. Criteria: 2 CFR § 200.318(a) requires recipients and subrecipients to maintain and use documented procurement procedures for procurement transactions under a Federal award or subaward, including the acquisition of property or services. These procedures must be consistent with applicable State, local, and tribal laws and regulations and the Federal procurement standards. 2 CFR § 200.318 (e) established that when appropriate for the procurement or use of common or shared goods and services, recipients and subrecipients are encouraged to enter into State and local intergovernmental agreements or inter-entity agreements for procurement transactions. These or similar procurement arrangements using strategic sourcing may foster greater economy and efficiency. Documented procurement actions of this type (using strategic sourcing, shared services, and other similar procurement arrangements) will meet the competition requirements of this part. 2 CFR § 200.318 (i) established that the recipient or subrecipient must maintain records sufficient to detail the history of each procurement transaction. These records must include the rationale for the procurement method, contract type selection, contractor selection or rejection, and the basis for the contract price. According to VI. Purchasing and Procurement of the BGCPR’s Fiscal Policies and Procedures, all requisitions, purchase orders, and invoices must be approved prior to the purchase commitment. For purchases between up to $1,000, quotations are not required; however, the Purchasing Department must obtain price information from the supplier. Every transaction should have a formal purchase order from BGCPR’s system. Further, 2 CFR §200.403(g) requires costs charged to Federal awards to be adequately documented. Moreover, pursuant to 2 CFR §200.334, recipients and subrecipients must retain all Federal award records, including financial records, supporting documentation, and statistical records, for a minimum of three years from the date of submission of the final financial report. If litigation, claims, or audit findings are initiated before the expiration of the retention period, the records must be retained until all such matters are resolved and final action has been taken. Context: For 2 samples tested, purchases were made without a formal purchase order generated from the system. In addition, 1 sample included merchandise received and paid in excess of the amount authorized in the purchase order. The purchase order was not amended. Cause: Program procurement personnel relied on the pass-through entity's procurement process and did not consistently maintain documentation required under BGCPR's internal procurement policy. Questioned cost: Amount is below the threshold to be considered a questioned cost. Effect or potential effect: Failure to consistently follow the entity’s procurement policy may result in unsupported or unauthorized purchases, payments exceeding approved amounts, and questioned costs if the expenditures are not properly authorized, documented, or determined to be allowable. Recommendation: Management should strengthen oversight of procurement activities and ensure that all procurement transactions are supported by documentation demonstrating compliance with BGCPR's procurement policies, including the use of formal purchase orders and adherence to authorized purchasing limits. Views of officials responsible: In order to avoid this situation happening in the future, instruction will be provided to all personnel emphasizing that every purchase should be made through a purchase order. This will ensure that we follow the BGCPR formal procedure and ensure better internal control is being followed. In addition, we will emphasize that no shipment should be received if such purchase is not in accordance with the specification disclosed in the purchase order. Anticipated Completion Date: September 30, 2026
FA 2025-001 Strengthen Controls over Expenditures Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Internal Control Impact: Material Weakness Compliance Impact: Material Noncompliance Federal Awarding Agency: U.S. Department of Education Pass-Through Entity: Georgia Department of Education AL Number and Title: 84.010 – Title I Grants to Local Educational Agencies Federal Award Numbers: S010A240010 (Year: 2025), S010A230010 (Year: 2024) Questioned Costs: $127,026 Repeat of Prior Year Findings: FA 2024-001, FA 2023-001, FA 2022-001 Description: The policies and procedures of the School District were insufficient to provide adequate internal controls over expenditures as it related to the Title I Grants to Local Educational Agencies program. Background Information: The Title I Grants to Local Educational Agencies (Title I) program is authorized under the Elementary and Secondary Education Act of 1965 to help local educational agencies (LEAs) improve teaching and learning in highpoverty schools in particular for children failing or most at-risk of failing, to meet challenging state academic standards. LEAs may operate targeted assistance programs in which children who are failing or most at-risk of failing may be served or schoolwide programs in which all children in eligible schools may be served. Title I funding is granted to the Georgia Department of Education (GaDOE) by the U.S. Department of Education (ED), and GaDOE is responsible for distributing funds to LEAs and overseeing the expenditure of funds by LEAs. Title I funds totaling $621,294 were expended and reported on the Talbot County Board of Education’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2025. Criteria: As a recipient of federal awards, the School District is required to establish, document, and maintain effective internal control over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Section 200.303 – Internal Controls. Additionally, provisions included in the Uniform Guidance, Section 200.403 – Factors Affecting Allowability of Costs state that “costs must meet the following criteria to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the recipient or subrecipient… (g) Be adequately documented…” Furthermore, provisions included in the Uniform Guidance, Section 200.430 – Compensation-Personal Services prescribe standards for documentation of personnel expenses and state, in part, that “(a) …Costs for compensation are allowable to the extent that they satisfy… specific requirements…, and that the total compensation for individual employees: (1) is reasonable for the services rendered and conforms to the established written policy of the non-Federal entity consistently applied to both Federal and non-Federal activities; (2) Follows an appointment made in accordance with a non-Federal entity’s laws and/or rules or written policies and meets the requirements of Federal statute, where applicable; and (3) Is determined and supported as provided in paragraph (i)…, [as follows:] (i) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity…” Condition: A sample of ten nonpersonal expenditures was randomly selected for testing using a nonstatistical sampling approach. These expenditures were reviewed to determine if appropriate internal controls were implemented and applicable compliance requirements were met. The following deficiencies were noted: • For three expenditures, evidence of review and approval was not reflected within the voucher package totaling $3,597. • For one expenditure, the amount recorded on the general ledger did not agree to supporting documentation resulting in a difference of $112. In addition, a sample of eleven employees was randomly selected for testing using a nonstatistical sampling approach. These employees were reviewed to determine if appropriate internal controls were implemented and applicable compliance requirements were met. The following deficiencies were noted: • For two employees, supporting documentation could not be provided to support payments totaling $126,674. • For one employee, the amount paid did not agree to the supporting documentation provided and resulted in an overpayment of $240. Questioned Costs: Upon testing a sample of $16,775 in nonpersonal services expenditures, known questioned costs of $112 were identified for expenditures not supported by adequate documentation. Using the total nonpersonal services expenditures population of $101,353, we project the likely questioned costs to be approximately $678. Upon testing a sample of $136,554 in personal services expenditures, known questioned costs of $126,914 were identified for expenditures not supported by adequate documentation. Using the total personal services expenditures population of $356,564, we project the likely questioned costs to be approximately $331,393. Cause: In discussing the deficiencies with the School District, they believe that these items are primarily due to improper documentation retention and oversight of approval processes. Effect: The School District was not in compliance with the Uniform Guidance and GaDOE guidance. Failure to ensure that expenditures and employee compensation payments associated with the Title I program are made for the appropriate amount and supported by appropriate documentation could result in the expenditure of funds for unallowable purposes. This may also expose the School District to unnecessary financial strains and shortages within the Title I program fund as GaDOE may require the School District to return funds associated with improperly documented expenditures. Recommendation: The School District should evaluate their internal control processes regarding the retention of documentation to support expenditures and employee compensation payments. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that expenditures are appropriately documented and to ensure that Title I program employees are paid appropriately. Furthermore, management should develop and implement a monitoring process to ensure that these procedures are functioning properly. Views of Responsible Officials: We concur with this finding.
FA 2025-002 Strengthen Controls over Expenditures Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Internal Control Impact: Material Weakness Compliance Impact: Material Noncompliance Federal Awarding Agency: U.S. Department of Education Pass-Through Entity: Georgia Department of Education AL Number and Title: COVID-19 – 84.425U – American Rescue Plan Elementary and Secondary School Emergency Relief Fund Federal Award Number: S425U210012 (Year: 2024) Questioned Costs: $20,040 Repeat of Prior Year Findings: FA 2024-002, FA 2023-002, FA 2022-002 Description: A review of expenditures charged to the Elementary and Secondary School Emergency Relief Fund Program revealed that the School District’s internal control procedures were not operating to ensure that expenditures were appropriately documented to support allowability. Background Information: On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law. The CARES Act was designed to mitigate the economic effects of the COVID-19 pandemic in a variety of ways, including providing additional funding for local educational agencies (LEAs) navigating the impact of the COVID- 19 outbreak. Provisions included in Title VIII of the CARES Act created the Education Stabilization Fund to provide financial resources to educational entities to prevent, prepare for, and respond to the coronavirus. The CARES Act allocated $30.75 billion, the Coronavirus Response and Relief Supplemental Appropriations Act allocated an additional $81.9 billion, and the American Rescue Plan Act added $165.1 billion in funding to the Education Stabilization Fund. Multiple Education Stabilization Fund subprograms were created and allotted funding through the various COVID-19-related legislation. Of these programs, the Elementary and Secondary School Emergency Relief (ESSER) Fund was created to address the impact that COVID-19 has had, and continues to have, on elementary and secondary schools across the nation. ESSER funding was granted to the Georgia Department of Education (GaDOE) by the U.S. Department of Education (ED). GaDOE is responsible for distributing funds to LEAs and overseeing the expenditure of funds by LEAs. ESSER funds totaling $1,052,459 were expended and reported on the Talbot County School District’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2025. Criteria: As a recipient of federal awards, the School District is required to establish, document, and maintain effective internal control over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Section 200.303 – Internal Controls. Provisions included in the Uniform Guidance, Section 200.403 – Factors Affecting Allowability of Costs state that “costs must meet the following criteria to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the recipient or subrecipient… (g) Be adequately documented…” Furthermore, provisions included in the Uniform Guidance, Section 200.430 – Compensation–Personal Services prescribe standards for documentation of personnel expenses and state, in part, that “(a) … Costs for compensation are allowable to the extent that they satisfy… specific requirements… and that the total compensation for individual employees: (1) Is reasonable for the services rendered and conforms to the established written policy of the recipient or subrecipient consistently applied to both Federal and non-Federal activities; (2) Follows an appointment made in accordance with a recipient’s or subrecipient’s laws, rules or written policies and meets the requirements of Federal statute, where applicable; and (3) Is determined and supported as provided in paragraph (g)…, [as follows:] (g) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the recipient or subrecipient…” Condition: All journal entries and general ledger adjustments impacting program expenditures were selected for testing. The following deficiencies were noted: • For one of the four items tested, appropriate evidence of review and approval was not maintained. • Sufficient supporting documentation was not provided for one journal entry posted to reverse expenditure activity. • For one journal entry used to record expenditures totaling $7,046 in the ESSER fund, sufficient supporting documentation could not be provided to determine the allowability of $889 of the expenditures moved to the program. In addition, a sample of eight employees was randomly selected for testing using a nonstatistical sampling approach. These employees were reviewed to determine if appropriate internal controls were implemented and applicable compliance requirements met. The following deficiencies were noted: • Evidence of properly designed and implemented controls over personal services expenditures could not be provided. • For seven employees, supporting documentation was not maintained to support salaries totaling $19,151. Questioned Costs: Upon testing a sample of $31,426 in personal services expenditures, known questioned costs of $19,151 were identified for expenditures not supported by adequate documentation. Using the total personal services expenditures population of $121,406, we project the likely questioned costs to be approximately $73,985. In addition, known questioned costs of $889 were identified for expenditures not supported by adequate journal entry documentation and were not tested as part of a sample; therefore, there are no related projected questioned costs. Cause: In discussing these deficiencies with the School District, they believe these issues are due to improper documentation retention and the need for updated policies and procedures. Effect: The School District was not in compliance with the Uniform Guidance and GaDOE guidance. Failure to ensure that documentation exists to support the allowability of payments from the ESSER program could result in the expenditure of funds for unallowable purposes. This may also expose the School District to unnecessary financial strains and shortages within the ESSER program fund as GaDOE may require the School District to return funds associated with improperly documented expenditures. Recommendation: The School District should evaluate their current internal control processes related to ESSER program expenditures. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that all expenditures reflect evidence of review and approval and are supported by appropriate documentation. Furthermore, management should develop and implement a monitoring process to ensure that these procedures are functioning properly.
Compliance Over Allowable Costs/Activities Allowed U.S. Department of Education Title I ALN 84.010 Criteria: 2 CFR 200.405, costs must be allocable to a federal award. A cost is allocable if it is assignable to the award in accordance with the relative benefits received. Costs that benefit another program or activity may not be charged to a federal award. Additionally, the award agreement governing Title I requires that reimbursement requests be supported by adequate documentation evidencing that costs claimed are allowable, allocable, and in compliance with the terms and conditions of the federal award. Per 2 CFR 200.403, costs must be adequately documented to be allowable under federal awards. Condition: During our testing of Allowable Costs and Activities Allowed for Title I, we selected a sample of 77 transactions from the program’s population of expenditures for the year ended June 30, 2025. Of the 77 transactions tested, 2 exceptions were identified. For one transaction selected, professional service costs totaling $6,400 were charged to Title I that were incurred for and should have been charged to a separate, unrelated federal program. These costs do not benefit Title I and are therefore unallowable charges to this award. For one transaction selected, the School Board was unable to provide a reimbursement request to support costs of $1,350 claimed under the program. Cause: The $6,400 cross-charge of professional services costs appears to result from an error in cost allocation or coding, in which expenditures incurred for another program were incorrectly assigned to Title I. This indicates a deficiency in the School Board’s controls over the allocation of costs across federal programs. The unsupported reimbursement request of $1,350 indicates a deficiency in controls over the retention of supporting documentation for costs charged to the program. Effect: The misallocation of $6,400 in professional services costs to Title I resulted in unallowable costs being charged to the award. These costs provided no benefit to Title I and may be subject to disallowance by the federal awarding agency. The unsupported reimbursement request of $1,350 similarly represents a cost for which compliance with award requirements cannot be demonstrated. In aggregate, the 2 exceptions represent $7,750 in known questioned costs. Projecting the identified error rate of 2.6% (2 exceptions out of 77 transactions tested) to the full program population results in approximately $80,900 in likely questioned costs. Recommendation: We recommend that management strengthen controls over the allocation of costs to federal award programs to ensure that expenditures are charged only to the award that received the benefit of those costs, consistent with 2 CFR 200.405. Specifically, management should implement a review process to verify the accuracy of program costs coding prior to submission of reimbursement requests. Management should also refund or reclassify the $6,400 in professional service costs that were incorrectly charged to Title I. Additionally, management should implement controls to ensure that all reimbursement requests are supported by adequate documentation retained and available for audit. Repeat Finding: No. View of Responsible Officials: Beginning with FY2026, a new Federal Programs Supervisor/Director was hired by the Board, and a Fiscal Administrator was appointed on August 27, 2025. These new designees will ensure that all federal programs operate within their allowable costs, activities, procurement, suspension and debarment guidelines. Approved budgets will be reviewed and complied with as purchases are made and reviewed monthly thereafter.
Compliance Over Allowable Costs/Activities Allowed U.S. Department of Education Education Stabilization Fund ALN 84.425 Criteria: The award agreement governing ESSER requires that the School Board submit reimbursement requests supported by adequate documentation evidencing that costs claimed are allowed, allocable, and in compliance with terms and conditions of the federal award. Per 2 CFR 200.403, costs must be adequately documented to be allowable under federal awards. Condition: During our testing of Allowable Costs and Activities Allowed, we selected a sample of 77 transactions from ESSER’s population of expenditures for the year ended June 30, 2025. Of the 77 transactions, 2 instances were identified in which the School Board was unable to provide reimbursement requests to support the costs claimed under the program. The total dollar value of the unsupported transactions is $21,000. Cause: The School Board did not maintain adequate controls over the retention and organization of reimbursement request documentation supporting costs charged to the program. As a result, documentation necessary to demonstrate compliance with the award agreement’s reimbursement request requirements could not be located or provided to the auditors upon request. Effect: Without adequate documentation supporting reimbursement requests, the School Board cannot demonstrate that costs charged to ESSER are allowable under the terms and conditions of the federal award. This creates a risk that unallowable costs have been or may be claimed for federal reimbursement. The 2 unsupported transactions represent $21,000 in known questioned costs. Projecting the identified error rate of 2.6% (2 exceptions out of 77 transactions tested) to full program population results in approximately $63,000 in likely questioned costs, which may be subject to disallowance by the federal awarding agency. Recommendation: We recommend that management implement controls to ensure that all reimbursement requests submitted under federal award programs are retained in an organized manner and made readily available for audit. Management should also review the two reimbursement requests that could not be provided and attempt to obtain copies from internal records, the grant portal, or the applicable grantor/passthrough agency. If the reimbursement requests cannot be located, management should evaluate whether additional communication with the grantor or passthrough agency is necessary. Repeat Finding: No. View of Responsible Officials: Beginning with FY2026, a new Federal Programs Supervisor/Director was hired by the Board, and a Fiscal Administrator was appointed on August 27, 2025. These new designees will ensure that all federal programs operate within their allowable costs, activities, procurement, suspension and debarment guidelines. Approved budgets will be reviewed and complie with as purchases are made and reviewed monthly thereafter.
Federal Agency: National Science Foundation Federal Program Name: Research and Development Cluster Assistance Listing Number: 47.076 Federal Award Identification Number and Year: R&D - 2025 Award Period: June 1, 2024 to May 31, 2025 Type of Finding: • Significant Deficiency in Internal Control over Compliance • Other Matters Criteria or specific requirement: The Code of Federal Regulations 2 CFR Part 200, Subpart E, requires that expenses be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principals (200.403(a)) and allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to the Federal award or cost objective in accordance with relative benefits received (200.405). Condition: We noted that one out of 8 items selected for period of performance was incorrectly coded to an R&D grant. Questioned costs: $100 Context: The University's review and internal controls over R&D grant charges did not identify an expense that had been incorrectly coded. Cause: The University’s processes and controls did not ensure that all expenses charged to R&D grants were valid R&D expenditures. Effect: An incorrect amount of R&D expenditures was drawn down. Repeat Finding: No Recommendation: We recommend that the University review its procedures around review and approval of R&D expenditures to ensure that only valid expenditures are reported. Views of responsible officials: There is no disagreement with the audit finding.
Federal Agency: National Science Foundation Federal Program Name: Research and Development Cluster Assistance Listing Number: 47.076 Federal Award Identification Number and Year: R&D - 2025 Award Period: June 1, 2024 to May 31, 2025 Type of Finding: • Significant Deficiency in Internal Control over Compliance • Other Matters Criteria or specific requirement: The Code of Federal Regulations 2 CFR Part 200, Subpart E, requires that expenses be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principals (200.403(a)) and allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to the Federal award or cost objective in accordance with relative benefits received (200.405). Condition: We noted that one out of 8 items selected for period of performance was incorrectly coded to an R&D grant. Questioned costs: $100 Context: The University's review and internal controls over R&D grant charges did not identify an expense that had been incorrectly coded. Cause: The University’s processes and controls did not ensure that all expenses charged to R&D grants were valid R&D expenditures. Effect: An incorrect amount of R&D expenditures was drawn down. Repeat Finding: No Recommendation: We recommend that the University review its procedures around review and approval of R&D expenditures to ensure that only valid expenditures are reported. Views of responsible officials: There is no disagreement with the audit finding.
Criteria: Federal regulations require non-federal entities to maintain records that adequately support allowable costs and program activities. Specifically, 2 CFR 200.302 requires financial management systems to provide accurate, current, and complete disclosure of financial results, and 2 CFR 200.403 requires that costs charged to federal awards be allowable, reasonable, and adequately documented. HRSA program requirements further require health centers to maintain patient-level documentation to support reported encounters and costs. Condition: During audit testing of patient eligibility and sliding fee scale application, supporting documentation of income was not available for 25 of 40 patients sampled. As a result, the health center was unable to demonstrate that the sliding fee discounts were appropriately determined in accordance with program requirements. Cause: Per HRSA and UDS requirements, FQHC’s must determine patient eligibility for the sliding fee discount based on income and family size, and retain documentation to support income verification for each patient applying for the discount. Effect: As a result, the health center is in noncompliance with HRSA sliding fee discount program requirements, which represents a material weakness in internal control over compliance and results in an increased risk that patients received sliding fee discounts for which they were not eligible or that eligible patients were improperly classified, and that Uniform Data System (UDS) data related to patient income levels and sliding fee discount utilization may be materially misstated. Questioned Costs: Questioned costs could not be determined due to the lack of supporting documentation for the affected patients. Recommendation: We recommend that management reinforce policies requiring documentation of income and family size before applying sliding fee discounts, implement periodic review of patient files to ensure compliance, provide staff training, and accountability measures for intake procedures, and consider adding monitoring on a quarterly basis to ensure ongoing adherence.
Finding 2025.003 – Period of Performance – Significant Deficiency and Noncompliance Assistance Listing Number 14.267 - Continuum of Care, U.S. Department of Housing and Urban Services, Pass-Through Entity: State of Connecticut Department of Housing, Award Number: 24DOH0901CX, Pass-Through Entity: United Way of Southeastern Connecticut, Award Number: 21DOH1001DA Criteria A non-federal entity may charge only allowable costs incurred during the approved budget period of a federal award's period of performance that was authorized by the federal awarding agency or pass-through entity (2 CFR sections, 200.308, 200.309 and 200.403(h)). Condition Certain expenses were charged to the grant that were not properly obligated prior to the end of the grant period. Purchase orders were issued without placing the actual order, or the item was ordered after the period of performance concluded. Cause The Council did not have adequate policies, procedures and controls in place to ensure compliance with the requirements regarding period of performance. Effect or Potential Effect Inadequate controls over period of performance led to expenses charged to the grant that were not incurred during the required period of performance. Questioned Costs $2,113 Context We selected 5 expenditures for testing over the period of performance requirement. Out of the 5 expenditures tested, we noted 2 instances where expenditures were not spent or obligated appropriately in the right grant period. Identification as a Repeat Finding This is not a repeat finding. Recommendation We recommend that management implement additional controls and policies over period of performance. Staff who purchase items with grant funds should have additional training on period of performance requirements. Views of Responsible Officials TVCCA recognizes the validity of this finding. TVCCA is strengthening its period-of-performance controls by training all staff with purchasing authority, and finance staff, on grant deadlines, obligation definitions, and allowable spend-down periods. Internal controls will be enhanced by incorporating quarterly cutoff testing into the month-end close checklist. Additionally, cutoff testing results will be monitored quarterly as part of the quarter-end review process.
2025-001 Misappropriation of Funds Material Weakness in Internal Control Condition: Subsequent to the close of the fiscal year, the Authority was notified by its banking institution of potentially fraudulent activity involving disbursements made to a company owned by an employee of the Authority. Upon investigation, management determined that the employee, who had access to the Authority’s check issuance process, directed $155,706 in payments to an entity they owned and controlled. These payments were not for legitimate goods or services. The disbursements were charged across multiple accounts, including both federal and non-federal program expenditures. The federal program expenditures were charged to the Public and Indian Housing program. Context: The fraudulent activity was identified by the Authority’s bank through transaction monitoring and reported to management. The employee was subsequently terminated, criminally charged, and has pled guilty. The Authority is seeking restitution; however, specific repayment terms have not yet been finalized as of the date of this report. Criteria: Under 2 CFR 200.303, the Authority must establish and maintain effective internal controls over federal awards that provide reasonable assurance of compliance with federal statutes, regulations, and the terms and conditions of the awards. 2 CFR 200.403 requires that costs charged to federal awards be necessary, reasonable, and allocable. Additionally, 24 CFR 990.108 limits Public Housing Operating Fund expenditures to eligible operating expenses necessary for the operation of public housing. Payments made to a company owned by an employee for which no goods or services were received do not meet these allowability requirements. Cause: The Authority did not maintain adequate segregation of duties or sufficient monitoring controls over the vendor setup, invoice processing, and check issuance functions. Specifically, one individual had authority to create vendors, approve invoices, and issue checks without independent review or secondary approval. At the time the fraud occurred, disbursement activity was not subject to an independent secondary review of the overall check run, including the listing of payees and amounts, which could have identified payments issued to an unauthorized or fictitious vendor. Effect: Unauthorized payments totaling $155,706 were made over the nineteen-month period, resulting in a misstatement of both federal and non-federal expenditures. As a result, certain federal program costs were unallowable under 2 CFR 200.403 and 24 CFR 990.108. These expenditures include $115,850 of questioned costs charged to the Public and Indian Housing program during the fiscal year. Auditor’s Recommendations: The Authority should strengthen internal controls over the accounts payable and disbursement process by segregating duties between vendor setup, invoice approval, and check issuance; implementing a dual-approval process for new vendors and all check disbursements; conduct independent reviews of payment reports; and review all expenditures charged to federal programs to identify and reimburse any unallowable costs. Management Response: See Corrective Action Plan.
Finding 2025-003: Allowable Activities and Costs – Internal Control and Compliance Deficiencies (Noncompliance and Significant Deficiency) Criteria: Per 2 CFR 200.303 and 2 CFR 200.403, non-federal entities must establish and maintain effective internal controls over federal awards and ensure that costs charged to federal programs are allowable, properly documented, and in accordance with the terms and conditions of the grant. Condition: During our testing of grant expenditures, we identified the following deficiencies related to allowable activities and costs: - None of the invoices and request forms tested had sign-offs showing review and approval before the grant packet was submitted to the state for reimbursement. - - Indirect costs are required to be calculated at 10% of each invoice per the grant agreement. However, invoice packets 15 and 23 did not have indirect costs calculated at the required rate. For payroll costs, proper supporting documentation was not provided. Cause: The deficiencies noted were due to a lack of established procedures to ensure all grant-related expenditures are properly reviewed, authorized, and supported prior to submission for reimbursement. In some cases, staff turnover and oversight contributed to the errors. Effect: Failure to maintain adequate internal controls and documentation over grant expenditures increases the risk of unallowable costs being charged to the grant, noncompliance with grant terms, and potential disallowance of costs by the granting agency. Recommendation: We recommend the entity implement procedures to ensure that all grant request packets are reviewed and approved by appropriate personnel prior to submission, that indirect costs are accurately calculated in accordance with grant terms, and that all payroll costs are supported by appropriate documentation such as timesheets. Additionally, all amounts billed should be reconciled to supporting documentation before submission. Management’s Response: We will establish and maintain effective internal controls over federal awards and ensure that costs charged to federal programs are allowable, properly documented, and in accordance with the terms and conditions of the grant.
2025-003 Period of Performance (repeat of finding 2024-005) Program Information Federal Organization U.S Department of Health and Human Services Assistance Listing Numbers 93.224 & 93.527 Health Center Program Cluster Award Numbers H80CS00513, H8FCS41684, H8GC48547, H8LCS51197 Criteria [X] Compliance Finding [ ] Significant Deficiency [X] Material Weakness Title 2 CFR 200.403(h) requires that costs be incurred in the approved budget period for the applicable awards and Title 2 CFR 200.403(e) requires that those costs be determined according to generally accepted accounting principles (GAAP). Condition The Organization’s federal expenditures include costs for goods and/or services outside of the approved budget periods for the awards. Cause The Organization’s internal controls over compliance did not include consideration of when the goods were received or services were performed compared to the budget periods for the awards. Lack of understanding of GAAP and the requirements of accrual basis accounting allowed expenditures outside of the applicable budget periods to be claimed as current federal expenditures. Effect The Organization may allocate unallowable costs to the federal awards. Questioned Costs $194,142 (of which $61,155 was previously reported in finding 2025-002 above). Context In a sample of forty transactions, we noted five included expenditures for goods or services that were not provided in the current period. $117,887 of expenditures charged to the program were for goods or services related to future periods. $76,255 of expenditures charged to the program were for goods or services related to previous periods. Recommendation We recommend management personnel authorized to approve expenditures of federal awards be limited to those who have a basic understanding of GAAP and the relationship between the accrual basis of accounting and the period of performance requirements. Views of responsible officials and planned corrective action Management is in agreement with this finding and will take corrective action as outlined below.
2025-003 Period of Performance (repeat of finding 2024-005) Program Information Federal Organization U.S Department of Health and Human Services Assistance Listing Numbers 93.224 & 93.527 Health Center Program Cluster Award Numbers H80CS00513, H8FCS41684, H8GC48547, H8LCS51197 Criteria [X] Compliance Finding [ ] Significant Deficiency [X] Material Weakness Title 2 CFR 200.403(h) requires that costs be incurred in the approved budget period for the applicable awards and Title 2 CFR 200.403(e) requires that those costs be determined according to generally accepted accounting principles (GAAP). Condition The Organization’s federal expenditures include costs for goods and/or services outside of the approved budget periods for the awards. Cause The Organization’s internal controls over compliance did not include consideration of when the goods were received or services were performed compared to the budget periods for the awards. Lack of understanding of GAAP and the requirements of accrual basis accounting allowed expenditures outside of the applicable budget periods to be claimed as current federal expenditures. Effect The Organization may allocate unallowable costs to the federal awards. Questioned Costs $194,142 (of which $61,155 was previously reported in finding 2025-002 above). Context In a sample of forty transactions, we noted five included expenditures for goods or services that were not provided in the current period. $117,887 of expenditures charged to the program were for goods or services related to future periods. $76,255 of expenditures charged to the program were for goods or services related to previous periods. Recommendation We recommend management personnel authorized to approve expenditures of federal awards be limited to those who have a basic understanding of GAAP and the relationship between the accrual basis of accounting and the period of performance requirements. Views of responsible officials and planned corrective action Management is in agreement with this finding and will take corrective action as outlined below.
2024-001 Federal Program: COVID-19 - Emergency Rental Assistance (ERA) Assistance Listing Number: 21.023 Federal Awarding Agency: United States Department of the Treasury Compliance Requirement: Allowable Costs Criteria: 2 CFR 200.403 establishes standards for determining costs allowable for federal awards. Management is responsible for ensuring that recipients of Emergency Rental Assistance funds are eligible, and that their benefit amounts are calculated accurately. Condition: For one payment selected for testing, the Authority calculated the eligible benefit amount incorrectly. Cause: A secondary review was performed of the benefit calculation, but the review did not detect the error. Effect: One beneficiary received more from ERA funds than they were eligible to receive. Questioned costs: The overpayment identified was $350. Context: We tested a sample of 40 individuals that received payments under the program totaling $170,416 of disbursements out of 15,335 total recipients, with total payments of $75,066,010 during 2024. In our testing we identified that one individual selected in our sample was paid $350 more than their documented eligible rent and utility expenses under the program, due to an error in the calculation of the eligible benefit amount. Our sampling methodology is not considered statistically valid. Recommendations: We recommend that the Authority implement additional procedures to ensure that errors in benefit calculations are detected and corrected in a timely manner. Authority’s Response: We agree that the amount paid was an error. As the ERA program ends in 2025, we are working to review all activity, identify errors, and recover amounts paid in error where possible.
Condition: During our audit of federal award expenditures for the fiscal year ended December 31, 2024, we identified certain instances where costs incurred in prior periods were improperly charged to the current year's federal awards. Criteria: 2 CFR 200.403(g) requires that costs must be "determined in accordance with generally accepted accounting principles (“GAAP”).” Additionally, 2 CFR 200.309 states that "a non-Federal entity may charge to the Federal award only allowable costs incurred during the period of performance." Cause: Management indicated that year-end processing procedures did not adequately identify and properly allocate expenses to the appropriate period. Effect: Improper period allocation of costs resulted in inaccurate financial reporting of federal award expenditures and potential violation of period of performance requirements. Repeat Finding: No Recommendation: It is recommended that management implement enhanced review procedures for period-end expenses to ensure a proper cutoff, develop a monitoring system to track expenses by period of performance, and a establish a forma process for review and approval of payments made near the end of a reporting period. Views of responsible officials: Management of the Organization concurs with the finding and has implemented a corrective action plan to address the identified deficiency.
Condition: During our audit of federal award expenditures for the fiscal year ended December 31, 2024, we identified certain instances where costs incurred in prior periods were improperly charged to the current year's federal awards. Criteria: 2 CFR 200.403(g) requires that costs must be "determined in accordance with generally accepted accounting principles (“GAAP”).” Additionally, 2 CFR 200.309 states that "a non-Federal entity may charge to the Federal award only allowable costs incurred during the period of performance." Cause: Management indicated that year-end processing procedures did not adequately identify and properly allocate expenses to the appropriate period. Effect: Improper period allocation of costs resulted in inaccurate financial reporting of federal award expenditures and potential violation of period of performance requirements. Repeat Finding: No Recommendation: It is recommended that management implement enhanced review procedures for period-end expenses to ensure a proper cutoff, develop a monitoring system to track expenses by period of performance, and a establish a forma process for review and approval of payments made near the end of a reporting period. Views of responsible officials: Management of the Organization concurs with the finding and has implemented a corrective action plan to address the identified deficiency.
Condition: During our audit of federal award expenditures for the fiscal year ended December 31, 2024, we identified certain instances where costs incurred in prior periods were improperly charged to the current year's federal awards. Criteria: 2 CFR 200.403(g) requires that costs must be "determined in accordance with generally accepted accounting principles (“GAAP”).” Additionally, 2 CFR 200.309 states that "a non-Federal entity may charge to the Federal award only allowable costs incurred during the period of performance." Cause: Management indicated that year-end processing procedures did not adequately identify and properly allocate expenses to the appropriate period. Effect: Improper period allocation of costs resulted in inaccurate financial reporting of federal award expenditures and potential violation of period of performance requirements. Repeat Finding: No Recommendation: It is recommended that management implement enhanced review procedures for period-end expenses to ensure a proper cutoff, develop a monitoring system to track expenses by period of performance, and a establish a forma process for review and approval of payments made near the end of a reporting period. Views of responsible officials: Management of the Organization concurs with the finding and has implemented a corrective action plan to address the identified deficiency.
Criteria or Specific Requirement: Federal regulations (45 CFR 1635.4(a) and 2 CFR 200.430), state that federal award recipients must base allocations of salaries and wages costs to grants on records that accurately reflect the work performed. Federal regulations (45 CFR 1630.5 and 2 CFR 200.403) state that expenditures are allowable under an LSC (or federal) grant or contract only if the recipient can demonstrate that the cost was consistent with accounting policies and procedures that apply uniformly to both LSC (or, federal)-funded and non-LSC (of, federal) -funded activities. Condition: During our testing we noted: Payroll transactions: Eleven instances of errors totaling a net amount of $2,009 (an absolute value amount of $2,009) where the incorrect percentages were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee’s pay, and Payroll transactions: Seven instances of errors totaling a net amount of $109 (an absolute value amount of $4,405) where an unsupported allocation percentage was used to allocate the employee's pay to the grant - typically, employee salaries are allocated to LSC and two other private grants using an allocation base of a LSC cost driver for the period divided by the total cost driver coded to the Organization’s general fund. Fringe-benefit transactions: Two instances of an error totaling $91 where an unsupported allocation percentage was used to allocate employer-paid employee insurance costs to the grant - typically, costs are allocated to LSC and two other private grants using an allocation base of a LSC cost driver for the period divided by the total cost driver coded to the Organization’s general fund. Fringe-benefit transactions: Two instances of errors totaling $275 where employer-paid employee insurance and HSA contribution deductions per the employee's pay stub were allocated to the grant at a rate of 100%. Non-payroll and fringe transactions: one instance of an error totaling $884 where an unsupported allocation percentage was used to allocate general costs to the grant - typically, costs are allocated to LSC and two other private grants using an allocation base of a LSC cost driver for the period divided by the total cost driver coded to the Organization’s general fund. Additionally, we noted inconsistency in the general fund (LSC and two other private grants) allocation basis used during the year - grant hours and projected revenue were both utilized at different times during the year. Additionally, we noted that allocations in the general fund are done using projected revenue. However as revenue was recognized as expenses were incurred for the general fund the allocation based on revenue approximated an allocation method based on costs. As such, the costs mentioned above were allocated in an inconsistent manner to other grant costs and were not fully representative of the employees’ time and effort. However, we noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit. 2024 – 002: Cost Allocation of Expenses to LSC Grants (Continued) Questioned Costs: A net amount of $3,150 of allocated salary expense described above, which is related to Assistance Listing Number 09.706060. Context: These 23 instances were noting during testing of 55 disbursements. Cause: The Organization’s cost allocation methodology is primarily based on time and effort records, and periodic calculations of a LSC cost driver for the period divided by the total cost driver coded to the Organization’s general fund, but it often includes manual adjustments based on review of individual time records, expense and other data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments in the Organization’s cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities and in a manner where costs are not applied uniformly to both LSC (or, federally)-funded and non-LSC (of, federally) -funded activities. Repeat Finding: The finding is a repeat of findings in the immediately prior year. The prior year finding numbers were 2023-003 and 2023-004. Recommendation: We recommend that the Organization consider updating its cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations that are calculated in a consistent manner that ensure costs are applied uniformly to respective benefited activities, and that are reflective on employees’ time and effort records Views of responsible officials: Management partially agrees with this finding. First, 45 CFR Part 1635 codifies the timekeeping requirement. CLS keeps track of every case and time dedicated by staff in strict compliance with this requirement. Additionally, the distribution of expenses in the general fund, which includes LSC and two other funding sources, represents a fair method and allocation. Regarding the questioned costs, CLS disagrees with the finding of material weakness given the extremely low total dollar value. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Federal regulations state that expenditures are allowable under an LSC (or federal) grant or contract only if the recipient can demonstrate that the cost was consistent with accounting policies and procedures that apply uniformly to both LSC (or, federal)-funded and non-LSC (of, federal) -funded activities.
Criteria or Specific Requirement: Federal regulations (45 CFR 1635.4(a) and 2 CFR 200.430), state that federal award recipients must base allocations of salaries and wages costs to grants on records that accurately reflect the work performed. Federal regulations (45 CFR 1630.5 and 2 CFR 200.403) state that expenditures are allowable under an LSC (or federal) grant or contract only if the recipient can demonstrate that the cost was consistent with accounting policies and procedures that apply uniformly to both LSC (or, federal)-funded and non-LSC (of, federal) -funded activities. Condition: During our testing we noted: Payroll transactions: Eleven instances of errors totaling a net amount of $2,009 (an absolute value amount of $2,009) where the incorrect percentages were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee’s pay, and Payroll transactions: Seven instances of errors totaling a net amount of $109 (an absolute value amount of $4,405) where an unsupported allocation percentage was used to allocate the employee's pay to the grant - typically, employee salaries are allocated to LSC and two other private grants using an allocation base of a LSC cost driver for the period divided by the total cost driver coded to the Organization’s general fund. Fringe-benefit transactions: Two instances of an error totaling $91 where an unsupported allocation percentage was used to allocate employer-paid employee insurance costs to the grant - typically, costs are allocated to LSC and two other private grants using an allocation base of a LSC cost driver for the period divided by the total cost driver coded to the Organization’s general fund. Fringe-benefit transactions: Two instances of errors totaling $275 where employer-paid employee insurance and HSA contribution deductions per the employee's pay stub were allocated to the grant at a rate of 100%. Non-payroll and fringe transactions: one instance of an error totaling $884 where an unsupported allocation percentage was used to allocate general costs to the grant - typically, costs are allocated to LSC and two other private grants using an allocation base of a LSC cost driver for the period divided by the total cost driver coded to the Organization’s general fund. Additionally, we noted inconsistency in the general fund (LSC and two other private grants) allocation basis used during the year - grant hours and projected revenue were both utilized at different times during the year. Additionally, we noted that allocations in the general fund are done using projected revenue. However as revenue was recognized as expenses were incurred for the general fund the allocation based on revenue approximated an allocation method based on costs. As such, the costs mentioned above were allocated in an inconsistent manner to other grant costs and were not fully representative of the employees’ time and effort. However, we noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit. 2024 – 002: Cost Allocation of Expenses to LSC Grants (Continued) Questioned Costs: A net amount of $3,150 of allocated salary expense described above, which is related to Assistance Listing Number 09.706060. Context: These 23 instances were noting during testing of 55 disbursements. Cause: The Organization’s cost allocation methodology is primarily based on time and effort records, and periodic calculations of a LSC cost driver for the period divided by the total cost driver coded to the Organization’s general fund, but it often includes manual adjustments based on review of individual time records, expense and other data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments in the Organization’s cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities and in a manner where costs are not applied uniformly to both LSC (or, federally)-funded and non-LSC (of, federally) -funded activities. Repeat Finding: The finding is a repeat of findings in the immediately prior year. The prior year finding numbers were 2023-003 and 2023-004. Recommendation: We recommend that the Organization consider updating its cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations that are calculated in a consistent manner that ensure costs are applied uniformly to respective benefited activities, and that are reflective on employees’ time and effort records Views of responsible officials: Management partially agrees with this finding. First, 45 CFR Part 1635 codifies the timekeeping requirement. CLS keeps track of every case and time dedicated by staff in strict compliance with this requirement. Additionally, the distribution of expenses in the general fund, which includes LSC and two other funding sources, represents a fair method and allocation. Regarding the questioned costs, CLS disagrees with the finding of material weakness given the extremely low total dollar value. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Federal regulations state that expenditures are allowable under an LSC (or federal) grant or contract only if the recipient can demonstrate that the cost was consistent with accounting policies and procedures that apply uniformly to both LSC (or, federal)-funded and non-LSC (of, federal) -funded activities.
Criteria or Specific Requirement: Federal regulations (45 CFR 1635.4(a) and 2 CFR 200.430), state that federal award recipients must base allocations of salaries and wages costs to grants on records that accurately reflect the work performed. Federal regulations (45 CFR 1630.5 and 2 CFR 200.403) state that expenditures are allowable under an LSC (or federal) grant or contract only if the recipient can demonstrate that the cost was consistent with accounting policies and procedures that apply uniformly to both LSC (or, federal)-funded and non-LSC (of, federal) -funded activities. Condition: During our testing we noted: Payroll transactions: Eleven instances of errors totaling a net amount of $2,009 (an absolute value amount of $2,009) where the incorrect percentages were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee’s pay, and Payroll transactions: Seven instances of errors totaling a net amount of $109 (an absolute value amount of $4,405) where an unsupported allocation percentage was used to allocate the employee's pay to the grant - typically, employee salaries are allocated to LSC and two other private grants using an allocation base of a LSC cost driver for the period divided by the total cost driver coded to the Organization’s general fund. Fringe-benefit transactions: Two instances of an error totaling $91 where an unsupported allocation percentage was used to allocate employer-paid employee insurance costs to the grant - typically, costs are allocated to LSC and two other private grants using an allocation base of a LSC cost driver for the period divided by the total cost driver coded to the Organization’s general fund. Fringe-benefit transactions: Two instances of errors totaling $275 where employer-paid employee insurance and HSA contribution deductions per the employee's pay stub were allocated to the grant at a rate of 100%. Non-payroll and fringe transactions: one instance of an error totaling $884 where an unsupported allocation percentage was used to allocate general costs to the grant - typically, costs are allocated to LSC and two other private grants using an allocation base of a LSC cost driver for the period divided by the total cost driver coded to the Organization’s general fund. Additionally, we noted inconsistency in the general fund (LSC and two other private grants) allocation basis used during the year - grant hours and projected revenue were both utilized at different times during the year. Additionally, we noted that allocations in the general fund are done using projected revenue. However as revenue was recognized as expenses were incurred for the general fund the allocation based on revenue approximated an allocation method based on costs. As such, the costs mentioned above were allocated in an inconsistent manner to other grant costs and were not fully representative of the employees’ time and effort. However, we noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit. 2024 – 002: Cost Allocation of Expenses to LSC Grants (Continued) Questioned Costs: A net amount of $3,150 of allocated salary expense described above, which is related to Assistance Listing Number 09.706060. Context: These 23 instances were noting during testing of 55 disbursements. Cause: The Organization’s cost allocation methodology is primarily based on time and effort records, and periodic calculations of a LSC cost driver for the period divided by the total cost driver coded to the Organization’s general fund, but it often includes manual adjustments based on review of individual time records, expense and other data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments in the Organization’s cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities and in a manner where costs are not applied uniformly to both LSC (or, federally)-funded and non-LSC (of, federally) -funded activities. Repeat Finding: The finding is a repeat of findings in the immediately prior year. The prior year finding numbers were 2023-003 and 2023-004. Recommendation: We recommend that the Organization consider updating its cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations that are calculated in a consistent manner that ensure costs are applied uniformly to respective benefited activities, and that are reflective on employees’ time and effort records Views of responsible officials: Management partially agrees with this finding. First, 45 CFR Part 1635 codifies the timekeeping requirement. CLS keeps track of every case and time dedicated by staff in strict compliance with this requirement. Additionally, the distribution of expenses in the general fund, which includes LSC and two other funding sources, represents a fair method and allocation. Regarding the questioned costs, CLS disagrees with the finding of material weakness given the extremely low total dollar value. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Federal regulations state that expenditures are allowable under an LSC (or federal) grant or contract only if the recipient can demonstrate that the cost was consistent with accounting policies and procedures that apply uniformly to both LSC (or, federal)-funded and non-LSC (of, federal) -funded activities.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay. As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit. Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044. Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements. Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments and varying allocation bases in the Organization’s salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations. Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay. As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit. Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044. Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements. Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments and varying allocation bases in the Organization’s salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations. Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay. As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit. Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044. Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements. Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments and varying allocation bases in the Organization’s salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations. Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay. As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit. Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044. Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements. Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments and varying allocation bases in the Organization’s salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations. Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay. As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit. Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044. Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements. Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments and varying allocation bases in the Organization’s salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations. Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay. As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit. Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044. Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements. Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments and varying allocation bases in the Organization’s salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations. Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay. As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit. Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044. Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements. Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments and varying allocation bases in the Organization’s salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations. Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay. As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit. Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044. Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements. Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments and varying allocation bases in the Organization’s salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations. Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay. As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit. Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044. Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements. Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments and varying allocation bases in the Organization’s salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations. Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay. As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit. Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044. Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements. Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments and varying allocation bases in the Organization’s salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations. Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay. As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit. Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044. Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements. Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments and varying allocation bases in the Organization’s salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations. Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay. As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit. Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044. Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements. Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments and varying allocation bases in the Organization’s salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations. Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.