Federal Agency: U.S. Department of the Interior - BOR Federal Program Name: Providing Water to At-Risk Natural Desert Terminal Lakes Assistance Listing Number: 15.508 Federal Award Identification Year: 2024 Pass-Through Agency: National Fish and Wildlife Foundation Award Period: 7/1/19-9/30/24 Type of Finding: Material Weakness in Internal Control over Compliance Criteria: 2 CFR 200.403(a) - When a non-federal entity enters into a covered transaction with an entity at a lower tier, the non-federal entity must verify that the entity, as defined in 2 CFR section 180.995 and agency adopting regulations, is not suspended or debarred or otherwise excluded from participating in the transaction. Condition: For eight procured vendors that were selected, verification of subrecipient's suspension or debarment status was not performed. Context: A nonstatistical sample of 21 out of 173 procured vendors were selected for testing for the above program. The condition noted above was identified during our procedures over WBC's procured vendors. Effect: WBC did not verify suspension or debarment status timely, which could result in procuring a vendor which is potentially suspended or debarred. Cause: WBC did not consistently ensure that Suspension or Debarment status was verified timely before naming procuring the vendor. Repeat Finding: The finding is not a repeat finding. Recommendation: We recommend that WBC strengthen its current policies and procedures to ensure that Suspension and Debarment Status is verified for each vendor subject to verification of suspension and debarment verification according to WBC's Procurement policy. Management’s Views: See separate corrective action plan.
Federal Agency: U.S. Department of the Interior - BOR Federal Program Name: Providing Water to At-Risk Natural Desert Terminal Lakes Assistance Listing Number: 15.508 Federal Award Identification Year: 2024 Pass-Through Agency: National Fish and Wildlife Foundation Award Period: 7/1/19-9/30/24 Type of Finding: Material Weakness in Internal Control over Compliance Criteria: 2 CFR 200.403(a) - When a non-federal entity enters into a covered transaction with an entity at a lower tier, the non-federal entity must verify that the entity, as defined in 2 CFR section 180.995 and agency adopting regulations, is not suspended or debarred or otherwise excluded from participating in the transaction. Condition: For eight procured vendors that were selected, verification of subrecipient's suspension or debarment status was not performed. Context: A nonstatistical sample of 21 out of 173 procured vendors were selected for testing for the above program. The condition noted above was identified during our procedures over WBC's procured vendors. Effect: WBC did not verify suspension or debarment status timely, which could result in procuring a vendor which is potentially suspended or debarred. Cause: WBC did not consistently ensure that Suspension or Debarment status was verified timely before naming procuring the vendor. Repeat Finding: The finding is not a repeat finding. Recommendation: We recommend that WBC strengthen its current policies and procedures to ensure that Suspension and Debarment Status is verified for each vendor subject to verification of suspension and debarment verification according to WBC's Procurement policy. Management’s Views: See separate corrective action plan.
Federal Agency: U.S. Department of the Interior - BOR Federal Program Name: Providing Water to At-Risk Natural Desert Terminal Lakes Assistance Listing Number: 15.508 Federal Award Identification Year: 2024 Pass-Through Agency: National Fish and Wildlife Foundation Award Period: 7/1/19-9/30/24 Type of Finding: Material Weakness in Internal Control over Compliance Criteria: 2 CFR 200.403(a) - When a non-federal entity enters into a covered transaction with an entity at a lower tier, the non-federal entity must verify that the entity, as defined in 2 CFR section 180.995 and agency adopting regulations, is not suspended or debarred or otherwise excluded from participating in the transaction. Condition: For eight procured vendors that were selected, verification of subrecipient's suspension or debarment status was not performed. Context: A nonstatistical sample of 21 out of 173 procured vendors were selected for testing for the above program. The condition noted above was identified during our procedures over WBC's procured vendors. Effect: WBC did not verify suspension or debarment status timely, which could result in procuring a vendor which is potentially suspended or debarred. Cause: WBC did not consistently ensure that Suspension or Debarment status was verified timely before naming procuring the vendor. Repeat Finding: The finding is not a repeat finding. Recommendation: We recommend that WBC strengthen its current policies and procedures to ensure that Suspension and Debarment Status is verified for each vendor subject to verification of suspension and debarment verification according to WBC's Procurement policy. Management’s Views: See separate corrective action plan.
Criteria or specific requirement: Per the 2024 OMB Compliance Supplement, "A non-federal entity may charge only allowable costs incurred during the approved budget period of a federal award’s period of performance and any costs incurred before the federal awarding agency or pass-through entity made the federal award that were authorized by the federal awarding agency or pass-through entity (2 CFR sections 200.308, 200.309, and 200.403(h))." Allowable costs must meet the standards set forth in 2 CFR Part 200, Subpart E. Condition: Costs were booked to incorrect program codes, resulting in unsupported charges being booked to the federal program. Both payroll and non-payroll expenditures were charged to the Federal program prior to the period of performance start date. Questioned costs: Known $1,098 Context: In period of performance testing, the majority of samples tested for beginning period of performance (31/40 samples) related to June 2024 payroll. In all of these tested samples, time was booked to the Federal program prior to the program start date of June 20, 2024. Similarly, there was no adjustments for other charges that are normally booked for the full month at a time, including: per diems (2/40 samples) and fuel (1/40 samples). One additional error was related to time booked to the Federal program when no time was coded to that program during the pay period tested. The final error was related to February amortization that was not processed in time and therefore mistakenly booked to the program. In payroll testing, 2/40 samples tested were booked to a charge code that was not reflected in the supporting timesheets. The amounts booked incorrectly to the major program are considered unallowable costs. Cause: MTI payroll is run monthly. Time should not have been coded to the Federal program in question until the program start date of June 20, 2024, however as most programs begin on the first of the month (not mid-month) this was overlooked by the supervisors and finance team who are supposed to review timesheets and make correction to ensure allocations are booked to the correct programs for the correct dates. Additional errors due to human error. Effect: Costs incurred outside of the Federal program's period of performance and costs that are not supported by underlying documentation are not allowable under the program. The organization may be required to submit reimbursements for these amounts. Repeat Finding: No Recommendation: Management should review its existing control structure and ensure that there are adequate processes and controls to ensure only expenditures incurred during the period of performance are booked to Federal programs and that the correct program codes are charged, based on the underlying supporting documentation. Views of responsible officials: There is no disagreement with the audit finding.
Criteria or specific requirement: Per the 2024 OMB Compliance Supplement, "A non-federal entity may charge only allowable costs incurred during the approved budget period of a federal award’s period of performance and any costs incurred before the federal awarding agency or pass-through entity made the federal award that were authorized by the federal awarding agency or pass-through entity (2 CFR sections 200.308, 200.309, and 200.403(h))." Allowable costs must meet the standards set forth in 2 CFR Part 200, Subpart E. Condition: Costs were booked to incorrect program codes, resulting in unsupported charges being booked to the federal program. Both payroll and non-payroll expenditures were charged to the Federal program prior to the period of performance start date. Questioned costs: Known $1,098 Context: In period of performance testing, the majority of samples tested for beginning period of performance (31/40 samples) related to June 2024 payroll. In all of these tested samples, time was booked to the Federal program prior to the program start date of June 20, 2024. Similarly, there was no adjustments for other charges that are normally booked for the full month at a time, including: per diems (2/40 samples) and fuel (1/40 samples). One additional error was related to time booked to the Federal program when no time was coded to that program during the pay period tested. The final error was related to February amortization that was not processed in time and therefore mistakenly booked to the program. In payroll testing, 2/40 samples tested were booked to a charge code that was not reflected in the supporting timesheets. The amounts booked incorrectly to the major program are considered unallowable costs. Cause: MTI payroll is run monthly. Time should not have been coded to the Federal program in question until the program start date of June 20, 2024, however as most programs begin on the first of the month (not mid-month) this was overlooked by the supervisors and finance team who are supposed to review timesheets and make correction to ensure allocations are booked to the correct programs for the correct dates. Additional errors due to human error. Effect: Costs incurred outside of the Federal program's period of performance and costs that are not supported by underlying documentation are not allowable under the program. The organization may be required to submit reimbursements for these amounts. Repeat Finding: No Recommendation: Management should review its existing control structure and ensure that there are adequate processes and controls to ensure only expenditures incurred during the period of performance are booked to Federal programs and that the correct program codes are charged, based on the underlying supporting documentation. Views of responsible officials: There is no disagreement with the audit finding.
Criteria or specific requirement: Per the 2024 OMB Compliance Supplement, "A non-federal entity may charge only allowable costs incurred during the approved budget period of a federal award’s period of performance and any costs incurred before the federal awarding agency or pass-through entity made the federal award that were authorized by the federal awarding agency or pass-through entity (2 CFR sections 200.308, 200.309, and 200.403(h))." Allowable costs must meet the standards set forth in 2 CFR Part 200, Subpart E. Condition: Costs were booked to incorrect program codes, resulting in unsupported charges being booked to the federal program. Both payroll and non-payroll expenditures were charged to the Federal program prior to the period of performance start date. Questioned costs: Known $1,098 Context: In period of performance testing, the majority of samples tested for beginning period of performance (31/40 samples) related to June 2024 payroll. In all of these tested samples, time was booked to the Federal program prior to the program start date of June 20, 2024. Similarly, there was no adjustments for other charges that are normally booked for the full month at a time, including: per diems (2/40 samples) and fuel (1/40 samples). One additional error was related to time booked to the Federal program when no time was coded to that program during the pay period tested. The final error was related to February amortization that was not processed in time and therefore mistakenly booked to the program. In payroll testing, 2/40 samples tested were booked to a charge code that was not reflected in the supporting timesheets. The amounts booked incorrectly to the major program are considered unallowable costs. Cause: MTI payroll is run monthly. Time should not have been coded to the Federal program in question until the program start date of June 20, 2024, however as most programs begin on the first of the month (not mid-month) this was overlooked by the supervisors and finance team who are supposed to review timesheets and make correction to ensure allocations are booked to the correct programs for the correct dates. Additional errors due to human error. Effect: Costs incurred outside of the Federal program's period of performance and costs that are not supported by underlying documentation are not allowable under the program. The organization may be required to submit reimbursements for these amounts. Repeat Finding: No Recommendation: Management should review its existing control structure and ensure that there are adequate processes and controls to ensure only expenditures incurred during the period of performance are booked to Federal programs and that the correct program codes are charged, based on the underlying supporting documentation. Views of responsible officials: There is no disagreement with the audit finding.
2024-009: Coronavirus State and Local Fiscal Recovery Funds (SLFRF) Information on Federal Program: United States Department of the Treasury. Federal Assistance Listing Number 21.027 – Coronavirus State and Local Fiscal Recovery Funds. Compliance Requirements: Allowable Costs/Cost Principles Criteria: Per 2 CFR § 200.403(g), costs must be adequately documented. Under 2 CFR § 200.403(a) and § 200.405(a), only costs that are necessary, reasonable, and allocable to the federal program may be charged. Condition: The County overpaid the vendor by $25,170. The full amount of the invoice, including the overpayment, was charged to the federal award. The overpayment was not identified during the normal processing and payment of the invoice. Cause: The overpayment was due to an oversight during invoice processing. Effect: Federal funds were used to pay an amount not allocable to the program, resulting in $25,170 of unallowable costs charged to the federal award. Questioned Costs: $25,170 in Coronavirus State and Local Fiscal Recovery Funds. Context: We randomly selected tested fifteen (15) expenditures charged to the SLFRF program in the amount of $1,241,980 from a population of $1,292,822 and found one (1) instance of noncompliance totaling $25,170. Recommendation: We recommend that the entity seek reimbursement for the $25,170 overpayment and make appropriate adjustments to the Schedule of Expenditures of Federal Awards (SEFA) and the accounting records, as needed. Management should ensure final payment amounts are fully supported by invoice documentation. Views of Responsible Officials and Planned Corrective Actions: We agree with the findings and recommendations. This was an isolated incident whereas the payment amount was mistakenly pulled from the wrong line on a contractor’s pay application. This overpayment was missed in the subject fiscal year as the program was still active. Once the overpayment was identified, the county sought reimbursement from the vendor for the overpayment and has since received the funds. The reimbursement will be included as program revenues in the next audit report. The County will reconcile contract values as each pay application is processed in lieu of awaiting program/project closeout in the future.
Finding 2024-043 - Use of Federal Funds to Satisfy Required Local Match Without Prior Approval Summary: The City of Batesville substituted federal Delta Regional Authority (ORA) and Appalachian Regional Commission (ARC) funds for required local match obligations under two federal grants-ARC (ALN 23.002) and CDBG (ALN 14.228)-without obtaining prior written approval from the awarding agencies. Although CDBG was not selected for audit testing, the questioned costs originally exceeded the $10,000 threshold and are reported in accordance with 2 CFR §200.516(a): Total questioned costs of $800,406 were initially allocated proportionally between the two programs; These costs have since been resolved through formal amendments to both grant agreements. Federal Programs 23.002 _; Appalachian Area Development (ARC) 14.228 - Community Development Block Grants/State's Program and Non-Entitlement Grants in Hawaii· (CDBG) Note: ALN 14.228 was not selected for audit testing under the Uniform Guidance compliance requirements. However, a finding is presented in accordance with 2 CFR §200.516(a) due to the materiality of the issue and its connection to ARC grant MS-20699. Award Numbers ARC: MS-20699 CDBG Subgrant: 1137 ~21-111-PF-01 Federal Agencies U.S. Department of the Treasury (via Appalachian Regional Commission) U.S. Department of Housing and Urban Development Compliance Requirements Matching - 2 CFR §200.306 Allowable Costs/Cost Principles - 2 CFR §200.403 Internal Controls -2 CFR §200.303 Audit Finding Threshold - 2 CFR §200.516(a) Type of Finding Internal Control over Compliance - Material Weakness Compliance - Noncompliance Questioned Costs Based on actual net expenditures and proportional match requirements: (TABLE) These questioned costs have been eliminated following receipt of amended contracts from ARC and CDBG approving the use of ORA and CDBG funds as match. Criteria The following federal regulations and grant conditions establish the requirements violated in this finding: 1. Matching Requirements - 2 CFR §200.306 Federal funds may not be used to meet a required cost share or match unless expressly authorized by the awarding agency. Matching contributions must: Be verifiable from the recipient's records Not be included as contributions for any other federal award Be necessary and reasonable for accomplishing program objectives Be allowable under the cost principles Not be paid by. the federal government under another award, unless authorized 2. Allowable Costs ... 2 CFR §200.403 Costs must be necessary, reasonable, allocable, and conform to limitations in the award terms. Costs must be adequately documented and consistent with policies that apply uniformly to both federally financed and other activities. 3. Internal Controls - 2 CFR §200.303 Recipients must establish and maintain effective internal controls to ensure compliance with feqeral statutes, regulations, and award terms. Controls should provide reasonable assurance that the organization is managing the award in compliance with applicable requirements. 4. Audit Finding Threshold-2 CFR §200.516(a) Auditors must report known questioned costs that exceed $10,000 for a federal program, even if the program was not selected for audit testing. Condition During the audit of ARC grant MS-20699 (ALN 23.002), we noted that the City of Batesville substituted $569,600 in federal ORA funds for the originally budgeted local match of $341,784. Additionally, for COBG grant ALN 14.228, the City substituted $569,600 in ORA funds and $553,000 in ARC grant funds for the originally budgeted local match of $901,784. These substitutions were made without prior written approval or executed amendments from the awarding agencies, as required under 2 CFR §200.306 and the respective grant agreements. Resolution Following the audit fieldwork, the City obtained formal amendments to both grant agreements: On October 24, 2025, ARC approved the substitution of ORA and COBG funds as match under ALN 23.002. On November 7, 2025, COBG approved the substitution of ORA and ARC funds as match under ALN 14.228. These approvals eliminate the previously identified questioned costs totaling $800,406. However, the lack of contemporaneous documentation and prior approval reflects a breakdown in internal controls and remains a material compliance issue. Cause The City lacked adequate internal controls to ensure changes to match sources were formally reviewed and approved by the awarding agencies prior to implementation. The substitution of federal funds for required local match was not documented or authorized at the time of expenditure. Effect Although questioned costs have been resolved, the City was in noncompliance with federal matching requirements and allowable cost principles at the time of expenditure. This reflects a broader control deficiency in the City's grant management process and increases the risk of future noncompliance. Recommendation We recommend the City strengthen its internal controls over grant compliance, including: Formal review and documentation of match sources prior to drawdown Written approval from awarding agencies before substituting federal funds for required match Staff training on federal match requirements and Uniform Guidance compliance Views of Responsible Officials Management concurs with the finding. The City acknowledges that federal ORA and ARC funds were applied toward required match obligations without prior approval or amendment to the respective grant agreements. ARC and CDBG representatives have since approved the substitutions through formal amendments. The City will implement procedures requiring written authorization for any future match substitutions and establish a formal review process to verify match sources prior to drawdown.
2024-042 - Misallocation of Expenditures Across Federal Awards Federal Program 14.228 - Community Development Block Grants Program 23.002 - Appalachian Area Development 90.210 - Delta Regional Authority (not subject to audit under Uniform Guidance) Award Numbers ARC-20698 ARC-20699 CDBG Subgrant: 1137-21-111-PF-01 Federal Agencies U.S. Department of Housing and Urban Development (HUD) U.S. Department of the Treasury (via Appalachian Regional Commission) Delta Regional Authority (DRA) Compliance Requirements Allowable Costs/Cost Principles - 2 CFR §200.403 and §200.405 Internal Controls - 2 CFR §200.303 Type of Finding Internal Control over Compliance - Significant Deficiency Compliance '- Noncompliance Questioned Costs (TABLE) Per 2 CFR §200.403, costs must be necessary, reasonable, and allocable to the federal award. Under §200.405, costs must be assigned to the federal award in accordance with the relative benefits received. Additionally, §200.303 requires the non-federal entity to maintain effective internal control over federal awards to ensure compliance. Condition During testing of 13 disbursements totaling $1,541,660 charged to the above federal programs, 11 invoices were not allocated in accordance with the approved budget percentages. This resulted in over-reimbursements across multiple federal awards. Known Over (Under) Reimbursements by Program and Fiscal Year (TABLE) *ALN 90.210 was not subject to audit under Uniform Guidance. Amounts shown are for context only. Cause The City did not consistently apply approved budget allocation percentages when charging expenditures to federal awards. This resulted in misclassification of costs and excess reimbursement from federal sources. Effect The City received federal reimbursements in excess of allowable amounts under ALNs 14.228 and 23.002. These errors may result in repayment obligations and indicate a broader weakness in internal controls over grant accounting and drawdown procedures. Recommendation We recommend the City strengthen its internal controls over grant accounting and reimbursement procedures. This should include: Formal review of allocation schedules prior to submission of reimbursement requests Periodic reconciliation of actual expenditures to approved budget allocations Staff training on federal cost principles and grant compliance requirements Views of Responsible Officials Management concurs with the finding. The City acknowledges that allocation errors occurred across multiple federal programs due to inconsistent application of approved budget percentages. To address this, the City will implement a formal review process for allocation schedules and establish reconciliation procedures to ensure expenditures align with approved budgets. Staff will receive training on federal cost principles and grant compliance requirements. The City will also evaluate prior reimbursements and consult with awarding agencies regarding any necessary adjustments.
2024-041 - Unsupported FEMA Reimbursements Federal Program 97.036 - FEMA Disaster Grants - Public Assistance (Presidentially Declared Disasters) Award Numbers PW No. 51 (0) and PW No. 34(0) Federal Agency Department of Homeland Security Compliance requirement Allowable Costs/Cost Principles - 2 CFR §200.403 and §200.405 Type of Finding Internal Control over Compliance - Significant Deficiency Compliance - Noncompliance Questioned Costs: $10,254 Criteria In accordance with 2 CFR §200.403 and §200.405, costs charged to federal awards must be necessary, reasonable, allocable, and adequately documented. Reimbursen,ents based on estimated costs must be reconciled to actual expenditures, and any unsupported amounts must be excluded from final claims. Condition The City received FEMA reimbursements totaling $99,548 under PW No. 51 (0) and $5,704 under PW No. 34(0). These reimbursements were based on estimated costs submitted to FEMA. However, during the financial statement audit, the following discrepancies were noted: PW No. 51 (0): Claimed: Labor $1,048; Equipment $1.8,811; Materials $76,559; Contract $3;130 - Total $99,548 Documented: Labor $1,048; Equipment $8,874; Materials $78,966; Contract $3, 130-Total $92,018 Unsupported costs: $7,530 PW No. 34(0): Claimed: Labor $2,374; Equipment $3,330 -Total $5,704 Documented: Equipment $2,980 - Total $2,980 Unsupported costs: $2,724 Cause The City did not reconcile estimated FEMA reimbursements to actual expenditures incurred and failed to maintain adequate supporting documentation for all cost categories. Effect The City may have received federal funds in excess of actual eligible expenditures, resulting in potential noncompliance with federal cost principles and risk of disallowed costs. Recommendation The City should implement procedures to ensure all FEMA reimbursements are supported by actual, documented expenditures. Management should review the unsupported amounts and consult with FEMA regarding potential repayment or adjustments. Views of Responsible Officials Management concurs with the finding. The City acknowledges that FEMA reimbursements were based on estimated costs and that documentation for certain categories was incomplete. The City will strengthen its procedures for reconciling estimated reimbursements to actual expenditures and ensure that all future claims are supported by detailed documentation. Staff will receive training on FEMA cost principles and documentation standards, and the City will consult with FEMA regarding resolution of the questioned costs.
2024-001 – Internal Control over Compliance and Compliance with Activities Allowed or Unallowed and Allowable Costs/Cost Principles Information on Federal Program(s) - Department of Education Assistance Listing Number: 84.351 Assistance Listing Name: Arts in Education National Program Grant Award Number: S351A220007 Award Period: October 1, 2023 to September 30, 2024 Criteria or Specific Requirement – The Uniform Guidance in 2 CFR Section 200.303 requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. In addition, per 2 CFR Section 200.403, “Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity. (d) Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost. (e) Be determined in accordance with generally accepted accounting principles (GAAP). (f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally-financed program in either the current or a prior period. (g) Be adequately documented. (h) Cost must be incurred during the approved budget period. The Federal awarding agency is authorized, at its discretion, to waive prior written approvals to carry forward unobligated balances to subsequent budget periods pursuant to § 200.308(e)(3).” Condition – In evaluating the Center’s compliance with the requirements of Activities Allowed or Unallowed and Allowable Costs Cost Principles, our test work identified one instance out of a sample of sixty payroll transactions, totaling $66,904.92, in which an employee was not paid according to his (her) contract. For the one exception, the employee was underpaid a total of $0.24. Cause – The Center did not adhere to their internal process to ensure approved salary information was accurately applied. Effect or Potential Effect – Without adequate internal controls in place to ensure costs are properly verified and applied, the Center could inaccurately charge expenditures to the federal program. Questioned Costs – N/A Context – This is a condition based on testing of the Center’s compliance. Based on tested samples, we noted a total underpayment of $0.24. The prevalence of the finding is detailed in the condition section above. The samples were selected using a non-statistical method. Repeat Finding – This is a repeat finding from prior year. This was reported as finding 2023-001 in the 2023 report. Recommendation - We recommend management of the Center strengthen their internal process to ensure that employee salary information recorded in the payroll system is approved, supported by salary documentation in the personnel files, and accurately applied. Views of Responsible Officials – After performing a detailed analysis, the Center’s management identified that the likely net underpayment amounted to $1.32. The likely underpayment was determined by management through examination of the total salary charged to the federal program. The Center’s management agrees with the finding and will strengthen the internal process surrounding the activities allowed or unallowed and allowable costs and will ensure adequate documentation is in place and approved salary rates are consistently and properly applied. See the Center’s corrective action for more details.
2024-001 – Internal Control over Compliance and Compliance with Activities Allowed or Unallowed and Allowable Costs/Cost Principles Information on Federal Program(s) - Department of Education Assistance Listing Number: 84.351 Assistance Listing Name: Arts in Education National Program Grant Award Number: S351A220007 Award Period: October 1, 2023 to September 30, 2024 Criteria or Specific Requirement – The Uniform Guidance in 2 CFR Section 200.303 requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. In addition, per 2 CFR Section 200.403, “Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity. (d) Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost. (e) Be determined in accordance with generally accepted accounting principles (GAAP). (f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally-financed program in either the current or a prior period. (g) Be adequately documented. (h) Cost must be incurred during the approved budget period. The Federal awarding agency is authorized, at its discretion, to waive prior written approvals to carry forward unobligated balances to subsequent budget periods pursuant to § 200.308(e)(3).” Condition – In evaluating the Center’s compliance with the requirements of Activities Allowed or Unallowed and Allowable Costs Cost Principles, our test work identified one instance out of a sample of sixty payroll transactions, totaling $66,904.92, in which an employee was not paid according to his (her) contract. For the one exception, the employee was underpaid a total of $0.24. Cause – The Center did not adhere to their internal process to ensure approved salary information was accurately applied. Effect or Potential Effect – Without adequate internal controls in place to ensure costs are properly verified and applied, the Center could inaccurately charge expenditures to the federal program. Questioned Costs – N/A Context – This is a condition based on testing of the Center’s compliance. Based on tested samples, we noted a total underpayment of $0.24. The prevalence of the finding is detailed in the condition section above. The samples were selected using a non-statistical method. Repeat Finding – This is a repeat finding from prior year. This was reported as finding 2023-001 in the 2023 report. Recommendation - We recommend management of the Center strengthen their internal process to ensure that employee salary information recorded in the payroll system is approved, supported by salary documentation in the personnel files, and accurately applied. Views of Responsible Officials – After performing a detailed analysis, the Center’s management identified that the likely net underpayment amounted to $1.32. The likely underpayment was determined by management through examination of the total salary charged to the federal program. The Center’s management agrees with the finding and will strengthen the internal process surrounding the activities allowed or unallowed and allowable costs and will ensure adequate documentation is in place and approved salary rates are consistently and properly applied. See the Center’s corrective action for more details.
Period of Performance Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Social Services Block Grant Block Grants for Community Mental Health Services ALN: 93.667 93.958 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: Social Services Block Grant 2401TXSOSR October 1, 2023 – September 30, 2025 Block Grants for Community Mental Health Services 1B09SM085994, 6B09SM085994 October 1, 2021 – September 30, 2023 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or specific requirement: Per 2 CFR 200.303(a), Health and Human Services Commission (HHSC) must establish and maintain effective internal control over the Federal award that provides reasonable assurance that it 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 the “Internal Control Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per 2 CFR 200.403(h) cost must be incurred during the approved budget period. The Federal awarding agency is authorized, at its discretion, to waive prior written approvals to carry forward unobligated balances to subsequent budget periods pursuant to § 200.308(e)(3). Condition: For awards with period of performance beginning dates during the fiscal year, audit procedures included testing transactions posted to the general ledger during the first month of the award. For awards with period of performance end dates during the fiscal year, audit procedures included testing transactions posted to the general ledger during the last month and after the period of performance end date. We noted the following instances of noncompliance: Social Services Block Grant (SSBG) – Audit procedures included testing 40 sampled transactions from projects with period of performance beginning dates during the fiscal year totaling $5,034. Two of the expenditures, totaling $486, were related to costs incurred prior to the period of performance begin date. The Project Period Start Date per the grant award was October 1, 2023, however costs were incurred on September 6, 2023 and September 11, 2023. Block Grants for Community Mental Health Services (MHBG) – Audit procedures included testing 40 sampled transactions, totaling $1,695,512, from projects with period of performance end dates during the fiscal year for which the obligation had not been paid as of the end of the period of performance. Twelve of the expenditures, totaling $312,929, were not paid within 120 days of the period of performance end date, which is the allowed time period to liquidate obligations. The required liquidation date was December 29, 2023; however, these obligations were paid between January 2, 2024 and April 11, 2024. Questioned costs: Social Services Block Grant: $486 Block Grants for Community Mental Health Services: $312,929 Context: See “Condition.” Cause: The two exceptions for SSBG were related to travel costs where the employee’s supervisor approved the transaction, which was coded to the incorrect grant. For the exceptions noted in the liquidation period testing for MHBG, the late payments are due to the HHSC’s reconciliation and closeout process not being performed in a timely manner. Effect: Ineffective internal controls may result in questioned costs and noncompliance with the terms of the grant. In addition, costs paid with non-federal sources remain in the population which is being included on the schedule of federal expenditures (SEFA) for the current fiscal year. Repeat Finding: 2023-016 Recommendation: HHSC should provide additional training over its review process to ensure that reviewers are verifying that transactions are posted to the proper grant. Additionally, HHSC should verify that all obligations incurred are liquidated during the closeout process and adjustments are not made subsequent to closeout. Views of responsible officials: HHSC concurs with the finding.
Period of Performance Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Social Services Block Grant Block Grants for Community Mental Health Services ALN: 93.667 93.958 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: Social Services Block Grant 2401TXSOSR October 1, 2023 – September 30, 2025 Block Grants for Community Mental Health Services 1B09SM085994, 6B09SM085994 October 1, 2021 – September 30, 2023 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or specific requirement: Per 2 CFR 200.303(a), Health and Human Services Commission (HHSC) must establish and maintain effective internal control over the Federal award that provides reasonable assurance that it 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 the “Internal Control Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per 2 CFR 200.403(h) cost must be incurred during the approved budget period. The Federal awarding agency is authorized, at its discretion, to waive prior written approvals to carry forward unobligated balances to subsequent budget periods pursuant to § 200.308(e)(3). Condition: For awards with period of performance beginning dates during the fiscal year, audit procedures included testing transactions posted to the general ledger during the first month of the award. For awards with period of performance end dates during the fiscal year, audit procedures included testing transactions posted to the general ledger during the last month and after the period of performance end date. We noted the following instances of noncompliance: Social Services Block Grant (SSBG) – Audit procedures included testing 40 sampled transactions from projects with period of performance beginning dates during the fiscal year totaling $5,034. Two of the expenditures, totaling $486, were related to costs incurred prior to the period of performance begin date. The Project Period Start Date per the grant award was October 1, 2023, however costs were incurred on September 6, 2023 and September 11, 2023. Block Grants for Community Mental Health Services (MHBG) – Audit procedures included testing 40 sampled transactions, totaling $1,695,512, from projects with period of performance end dates during the fiscal year for which the obligation had not been paid as of the end of the period of performance. Twelve of the expenditures, totaling $312,929, were not paid within 120 days of the period of performance end date, which is the allowed time period to liquidate obligations. The required liquidation date was December 29, 2023; however, these obligations were paid between January 2, 2024 and April 11, 2024. Questioned costs: Social Services Block Grant: $486 Block Grants for Community Mental Health Services: $312,929 Context: See “Condition.” Cause: The two exceptions for SSBG were related to travel costs where the employee’s supervisor approved the transaction, which was coded to the incorrect grant. For the exceptions noted in the liquidation period testing for MHBG, the late payments are due to the HHSC’s reconciliation and closeout process not being performed in a timely manner. Effect: Ineffective internal controls may result in questioned costs and noncompliance with the terms of the grant. In addition, costs paid with non-federal sources remain in the population which is being included on the schedule of federal expenditures (SEFA) for the current fiscal year. Repeat Finding: 2023-016 Recommendation: HHSC should provide additional training over its review process to ensure that reviewers are verifying that transactions are posted to the proper grant. Additionally, HHSC should verify that all obligations incurred are liquidated during the closeout process and adjustments are not made subsequent to closeout. Views of responsible officials: HHSC concurs with the finding.
Period of Performance Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Social Services Block Grant Block Grants for Community Mental Health Services ALN: 93.667 93.958 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: Social Services Block Grant 2401TXSOSR October 1, 2023 – September 30, 2025 Block Grants for Community Mental Health Services 1B09SM085994, 6B09SM085994 October 1, 2021 – September 30, 2023 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or specific requirement: Per 2 CFR 200.303(a), Health and Human Services Commission (HHSC) must establish and maintain effective internal control over the Federal award that provides reasonable assurance that it 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 the “Internal Control Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per 2 CFR 200.403(h) cost must be incurred during the approved budget period. The Federal awarding agency is authorized, at its discretion, to waive prior written approvals to carry forward unobligated balances to subsequent budget periods pursuant to § 200.308(e)(3). Condition: For awards with period of performance beginning dates during the fiscal year, audit procedures included testing transactions posted to the general ledger during the first month of the award. For awards with period of performance end dates during the fiscal year, audit procedures included testing transactions posted to the general ledger during the last month and after the period of performance end date. We noted the following instances of noncompliance: Social Services Block Grant (SSBG) – Audit procedures included testing 40 sampled transactions from projects with period of performance beginning dates during the fiscal year totaling $5,034. Two of the expenditures, totaling $486, were related to costs incurred prior to the period of performance begin date. The Project Period Start Date per the grant award was October 1, 2023, however costs were incurred on September 6, 2023 and September 11, 2023. Block Grants for Community Mental Health Services (MHBG) – Audit procedures included testing 40 sampled transactions, totaling $1,695,512, from projects with period of performance end dates during the fiscal year for which the obligation had not been paid as of the end of the period of performance. Twelve of the expenditures, totaling $312,929, were not paid within 120 days of the period of performance end date, which is the allowed time period to liquidate obligations. The required liquidation date was December 29, 2023; however, these obligations were paid between January 2, 2024 and April 11, 2024. Questioned costs: Social Services Block Grant: $486 Block Grants for Community Mental Health Services: $312,929 Context: See “Condition.” Cause: The two exceptions for SSBG were related to travel costs where the employee’s supervisor approved the transaction, which was coded to the incorrect grant. For the exceptions noted in the liquidation period testing for MHBG, the late payments are due to the HHSC’s reconciliation and closeout process not being performed in a timely manner. Effect: Ineffective internal controls may result in questioned costs and noncompliance with the terms of the grant. In addition, costs paid with non-federal sources remain in the population which is being included on the schedule of federal expenditures (SEFA) for the current fiscal year. Repeat Finding: 2023-016 Recommendation: HHSC should provide additional training over its review process to ensure that reviewers are verifying that transactions are posted to the proper grant. Additionally, HHSC should verify that all obligations incurred are liquidated during the closeout process and adjustments are not made subsequent to closeout. Views of responsible officials: HHSC concurs with the finding.
Period of Performance Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Social Services Block Grant Block Grants for Community Mental Health Services ALN: 93.667 93.958 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: Social Services Block Grant 2401TXSOSR October 1, 2023 – September 30, 2025 Block Grants for Community Mental Health Services 1B09SM085994, 6B09SM085994 October 1, 2021 – September 30, 2023 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or specific requirement: Per 2 CFR 200.303(a), Health and Human Services Commission (HHSC) must establish and maintain effective internal control over the Federal award that provides reasonable assurance that it 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 the “Internal Control Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per 2 CFR 200.403(h) cost must be incurred during the approved budget period. The Federal awarding agency is authorized, at its discretion, to waive prior written approvals to carry forward unobligated balances to subsequent budget periods pursuant to § 200.308(e)(3). Condition: For awards with period of performance beginning dates during the fiscal year, audit procedures included testing transactions posted to the general ledger during the first month of the award. For awards with period of performance end dates during the fiscal year, audit procedures included testing transactions posted to the general ledger during the last month and after the period of performance end date. We noted the following instances of noncompliance: Social Services Block Grant (SSBG) – Audit procedures included testing 40 sampled transactions from projects with period of performance beginning dates during the fiscal year totaling $5,034. Two of the expenditures, totaling $486, were related to costs incurred prior to the period of performance begin date. The Project Period Start Date per the grant award was October 1, 2023, however costs were incurred on September 6, 2023 and September 11, 2023. Block Grants for Community Mental Health Services (MHBG) – Audit procedures included testing 40 sampled transactions, totaling $1,695,512, from projects with period of performance end dates during the fiscal year for which the obligation had not been paid as of the end of the period of performance. Twelve of the expenditures, totaling $312,929, were not paid within 120 days of the period of performance end date, which is the allowed time period to liquidate obligations. The required liquidation date was December 29, 2023; however, these obligations were paid between January 2, 2024 and April 11, 2024. Questioned costs: Social Services Block Grant: $486 Block Grants for Community Mental Health Services: $312,929 Context: See “Condition.” Cause: The two exceptions for SSBG were related to travel costs where the employee’s supervisor approved the transaction, which was coded to the incorrect grant. For the exceptions noted in the liquidation period testing for MHBG, the late payments are due to the HHSC’s reconciliation and closeout process not being performed in a timely manner. Effect: Ineffective internal controls may result in questioned costs and noncompliance with the terms of the grant. In addition, costs paid with non-federal sources remain in the population which is being included on the schedule of federal expenditures (SEFA) for the current fiscal year. Repeat Finding: 2023-016 Recommendation: HHSC should provide additional training over its review process to ensure that reviewers are verifying that transactions are posted to the proper grant. Additionally, HHSC should verify that all obligations incurred are liquidated during the closeout process and adjustments are not made subsequent to closeout. Views of responsible officials: HHSC concurs with the finding.
Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: U.S. Department of Transportation Federal Program Title: Airport Improvement Program ALN: 20.106 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: 3–48–SBGP–148–2022 September 14, 2022 – September 13, 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: Per 2 CFR section 200.303(a), Texas Department of Transportation (TxDOT) must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per 2 CFR 200.403, except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the recipient or subrecipient. (d) Be accorded consistent treatment. (e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for State and local governments and Indian Tribes only, as otherwise provided for in this part. (f) Not be included as a cost or used to meet cost sharing requirements of any other federally – financed program in either the current or a prior period. (g) Be adequately documented. Condition: Audit procedures included a sample of 40 expenditures, totaling $9,426,808, to test allowability with grant awards. We noted that for one of the 40 samples, TxDOT overpaid an invoice to a vendor by $70,000. Upon detection by the vendor, TxDOT corrected the overpayment by reducing a subsequent payment to the vendor by the $70,000. Questioned costs: None Context: See “Condition.” Cause: The amount requested to be reimbursed was manually entered incorrectly in eGrants. TxDOT did not detect the discrepancy during the review and approval process prior to the payment. Effect: Failure to thoroughly review invoices prior to payment may lead to overpayment or underpayment of funds to vendors and potential questioned costs. Repeat Finding: No Recommendation: We recommend that TxDOT provide additional training to individuals performing reviews of expenditures. We also recommend TxDOT establish internal controls to monitor that reviews of expenditures are being completed to the level of detail required by internal policies and procedures. Views of responsible officials: TxDOT AVN agrees with the finding.
Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: U.S. Department of Transportation Federal Program Title: Airport Improvement Program ALN: 20.106 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: 3–48–SBGP–148–2022 September 14, 2022 – September 13, 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: Per 2 CFR section 200.303(a), Texas Department of Transportation (TxDOT) must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per 2 CFR 200.403, except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the recipient or subrecipient. (d) Be accorded consistent treatment. (e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for State and local governments and Indian Tribes only, as otherwise provided for in this part. (f) Not be included as a cost or used to meet cost sharing requirements of any other federally – financed program in either the current or a prior period. (g) Be adequately documented. Condition: Audit procedures included a sample of 40 expenditures, totaling $9,426,808, to test allowability with grant awards. We noted that for one of the 40 samples, TxDOT overpaid an invoice to a vendor by $70,000. Upon detection by the vendor, TxDOT corrected the overpayment by reducing a subsequent payment to the vendor by the $70,000. Questioned costs: None Context: See “Condition.” Cause: The amount requested to be reimbursed was manually entered incorrectly in eGrants. TxDOT did not detect the discrepancy during the review and approval process prior to the payment. Effect: Failure to thoroughly review invoices prior to payment may lead to overpayment or underpayment of funds to vendors and potential questioned costs. Repeat Finding: No Recommendation: We recommend that TxDOT provide additional training to individuals performing reviews of expenditures. We also recommend TxDOT establish internal controls to monitor that reviews of expenditures are being completed to the level of detail required by internal policies and procedures. Views of responsible officials: TxDOT AVN agrees with the finding.
Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: U.S. Department of Transportation Federal Program Title: Airport Improvement Program ALN: 20.106 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: 3–48–SBGP–148–2022 September 14, 2022 – September 13, 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: Per 2 CFR section 200.303(a), Texas Department of Transportation (TxDOT) must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per 2 CFR 200.403, except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the recipient or subrecipient. (d) Be accorded consistent treatment. (e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for State and local governments and Indian Tribes only, as otherwise provided for in this part. (f) Not be included as a cost or used to meet cost sharing requirements of any other federally – financed program in either the current or a prior period. (g) Be adequately documented. Condition: Audit procedures included a sample of 40 expenditures, totaling $9,426,808, to test allowability with grant awards. We noted that for one of the 40 samples, TxDOT overpaid an invoice to a vendor by $70,000. Upon detection by the vendor, TxDOT corrected the overpayment by reducing a subsequent payment to the vendor by the $70,000. Questioned costs: None Context: See “Condition.” Cause: The amount requested to be reimbursed was manually entered incorrectly in eGrants. TxDOT did not detect the discrepancy during the review and approval process prior to the payment. Effect: Failure to thoroughly review invoices prior to payment may lead to overpayment or underpayment of funds to vendors and potential questioned costs. Repeat Finding: No Recommendation: We recommend that TxDOT provide additional training to individuals performing reviews of expenditures. We also recommend TxDOT establish internal controls to monitor that reviews of expenditures are being completed to the level of detail required by internal policies and procedures. Views of responsible officials: TxDOT AVN agrees with the finding.
Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: U.S. Department of Transportation Federal Program Title: Airport Improvement Program ALN: 20.106 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: 3–48–SBGP–148–2022 September 14, 2022 – September 13, 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: Per 2 CFR section 200.303(a), Texas Department of Transportation (TxDOT) must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per 2 CFR 200.403, except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the recipient or subrecipient. (d) Be accorded consistent treatment. (e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for State and local governments and Indian Tribes only, as otherwise provided for in this part. (f) Not be included as a cost or used to meet cost sharing requirements of any other federally – financed program in either the current or a prior period. (g) Be adequately documented. Condition: Audit procedures included a sample of 40 expenditures, totaling $9,426,808, to test allowability with grant awards. We noted that for one of the 40 samples, TxDOT overpaid an invoice to a vendor by $70,000. Upon detection by the vendor, TxDOT corrected the overpayment by reducing a subsequent payment to the vendor by the $70,000. Questioned costs: None Context: See “Condition.” Cause: The amount requested to be reimbursed was manually entered incorrectly in eGrants. TxDOT did not detect the discrepancy during the review and approval process prior to the payment. Effect: Failure to thoroughly review invoices prior to payment may lead to overpayment or underpayment of funds to vendors and potential questioned costs. Repeat Finding: No Recommendation: We recommend that TxDOT provide additional training to individuals performing reviews of expenditures. We also recommend TxDOT establish internal controls to monitor that reviews of expenditures are being completed to the level of detail required by internal policies and procedures. Views of responsible officials: TxDOT AVN agrees with the finding.
Activities Allowed and Unallowed, Allowable Costs/Cost Principles – Indirect Costs Federal Agency: U.S. Department of Labor Federal Program Title: Employment Service Cluster ALN: 17.207, 17.801 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: 23555DV000036 – 01, 24555DV000076 – 01 October 1, 2022 – December 31, 2024, October 1, 2023 – December 31, 2025 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or specific requirement: Per 2 CFR section 200.303(a), Texas Veterans Commission (TVC) must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per 2 CFR section 200.403, except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the recipient or subrecipient. (d) Be accorded consistent treatment. (e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for State and local governments and Indian Tribes only, as otherwise provided for in this part. (f) Not be included as a cost or used to meet cost sharing requirements of any other federally – financed program in either the current or a prior period. (g) Be adequately documented. Condition: Audit procedures included a sample of five indirect cost expenditures, totaling $1,248,175, incurred during the fiscal year to verify that the rates used were in accordance with the terms and conditions of the award and the amounts claimed were applied to the appropriate base. During our testing, we noted one sample in which an incorrect rate was applied to the base, resulting in $69,481 of unallowed indirect costs. In addition, there was no evidence of review and approval for three of the five expenditures selected for testing, including the expenditure noted in the preceding paragraph. Questioned costs: $69,481 Context: See “Condition.” Cause: Management failed to retain documentation that would support the review and approval of the indirect cost amounts. The exceptions were caused due to high turnover within the agency. Employees who were responsible for the approvals are no longer employed through TVC. Effect: Lack of formal documentation of reviews may result in questioned costs. In addition, failure to maintain adequate documentation pertinent to a federal award may result in noncompliance with grant terms and conditions. Repeat Finding: No Recommendation: We recommend TVC enforce establish document retention processes to ensure it has access to documentation for review in the event of management turnover. In addition, we recommend TVC strengthen its controls over the review of the indirect cost calculations to ensure accuracy of costs being calculated. Views of responsible officials: TVC agrees to the recommendation of improved record retention in the event of management turnover. TVC also agrees to the recommendation of strengthening its internal controls over the review of VES’s grant costs associated with the indirect revenues being calculated.
Activities Allowed and Unallowed, Allowable Costs/Cost Principles – Indirect Costs Federal Agency: U.S. Department of Labor Federal Program Title: Employment Service Cluster ALN: 17.207, 17.801 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: 23555DV000036 – 01, 24555DV000076 – 01 October 1, 2022 – December 31, 2024, October 1, 2023 – December 31, 2025 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or specific requirement: Per 2 CFR section 200.303(a), Texas Veterans Commission (TVC) must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per 2 CFR section 200.403, except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the recipient or subrecipient. (d) Be accorded consistent treatment. (e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for State and local governments and Indian Tribes only, as otherwise provided for in this part. (f) Not be included as a cost or used to meet cost sharing requirements of any other federally – financed program in either the current or a prior period. (g) Be adequately documented. Condition: Audit procedures included a sample of five indirect cost expenditures, totaling $1,248,175, incurred during the fiscal year to verify that the rates used were in accordance with the terms and conditions of the award and the amounts claimed were applied to the appropriate base. During our testing, we noted one sample in which an incorrect rate was applied to the base, resulting in $69,481 of unallowed indirect costs. In addition, there was no evidence of review and approval for three of the five expenditures selected for testing, including the expenditure noted in the preceding paragraph. Questioned costs: $69,481 Context: See “Condition.” Cause: Management failed to retain documentation that would support the review and approval of the indirect cost amounts. The exceptions were caused due to high turnover within the agency. Employees who were responsible for the approvals are no longer employed through TVC. Effect: Lack of formal documentation of reviews may result in questioned costs. In addition, failure to maintain adequate documentation pertinent to a federal award may result in noncompliance with grant terms and conditions. Repeat Finding: No Recommendation: We recommend TVC enforce establish document retention processes to ensure it has access to documentation for review in the event of management turnover. In addition, we recommend TVC strengthen its controls over the review of the indirect cost calculations to ensure accuracy of costs being calculated. Views of responsible officials: TVC agrees to the recommendation of improved record retention in the event of management turnover. TVC also agrees to the recommendation of strengthening its internal controls over the review of VES’s grant costs associated with the indirect revenues being calculated.
Finding 2024-005: Reportable finding considered a significant deficiency - Inadequate Controls over Identification of Unallowable Costs in the Indirect Cost Pool Program name: Applies to all federal program utilizing indirect cost rates Assistance Listing: All Federal awarding agency: All Pass-through Entity: All Criteria: In accordance with 2 CFR 200.403 and 2 CFR 200.412–415, costs charged to federal awards, whether direct or indirect, must be allowable under the cost principles of Subpart E. Organizations must have adequate internal controls to identify, segregate, and exclude unallowable costs from charges to federal programs. In particular, indirect cost pools used to calculate rates billed to federal awards must not include unallowable costs such as fundraising, entertainment, or other expressly unallowable expenses. Condition: During our audit procedures, we noted that the Organization does not identify or code unallowable costs (e.g., fundraising event expenses) within its accounting system at the time of transaction entry. As part of our review of the General and Administrative (G&A) cost pool used for indirect cost rate calculations, we identified unallowable costs included in the detailed listing. Per discussion with management, these costs are not intended to be charged to federal awards. Management explained that federal drawdowns are based on a provisional rate and unallowable costs are manually excluded during the closing and cost submission process. Cause: The Organization lacks system-based controls and procedures to flag or segregate unallowable costs during transaction coding. The current process relies heavily on manual review and adjustments at year-end, which increases the risk of unallowable costs being inadvertently included in rates charged to federal programs. Effect: Including unallowable costs in the indirect cost pool—whether or not ultimately billed—represents a significant deficiency in internal control over compliance. Although management asserts that such costs are removed prior to federal reimbursement claims, the absence of preventive controls increases the risk of noncompliance, incorrect cost submissions, and potential disallowed costs during future oversight or audits. Repeat finding: This is not a repeat finding. Questioned costs: None identified as costs were reportedly removed prior to billing; however, the issue represents a control weakness. Perspective: This control deficiency affects the Organization’s system-wide treatment of indirect costs across all federal programs using the provisional rate. Recommendation: We recommend that the Organization: • Implement accounting system enhancements or protocols to flag unallowable costs at the point of entry to ensure proper coding and segregation. • Establish written procedures and staff training to reinforce cost allowability standards under Uniform Guidance. • Consider performing interim reviews of indirect cost pool activity to ensure early identification and removal of unallowable expenses. Management’s response and corrective action plan (unaudited): See corrective action plan.
Finding 2024-005: Reportable finding considered a significant deficiency - Inadequate Controls over Identification of Unallowable Costs in the Indirect Cost Pool Program name: Applies to all federal program utilizing indirect cost rates Assistance Listing: All Federal awarding agency: All Pass-through Entity: All Criteria: In accordance with 2 CFR 200.403 and 2 CFR 200.412–415, costs charged to federal awards, whether direct or indirect, must be allowable under the cost principles of Subpart E. Organizations must have adequate internal controls to identify, segregate, and exclude unallowable costs from charges to federal programs. In particular, indirect cost pools used to calculate rates billed to federal awards must not include unallowable costs such as fundraising, entertainment, or other expressly unallowable expenses. Condition: During our audit procedures, we noted that the Organization does not identify or code unallowable costs (e.g., fundraising event expenses) within its accounting system at the time of transaction entry. As part of our review of the General and Administrative (G&A) cost pool used for indirect cost rate calculations, we identified unallowable costs included in the detailed listing. Per discussion with management, these costs are not intended to be charged to federal awards. Management explained that federal drawdowns are based on a provisional rate and unallowable costs are manually excluded during the closing and cost submission process. Cause: The Organization lacks system-based controls and procedures to flag or segregate unallowable costs during transaction coding. The current process relies heavily on manual review and adjustments at year-end, which increases the risk of unallowable costs being inadvertently included in rates charged to federal programs. Effect: Including unallowable costs in the indirect cost pool—whether or not ultimately billed—represents a significant deficiency in internal control over compliance. Although management asserts that such costs are removed prior to federal reimbursement claims, the absence of preventive controls increases the risk of noncompliance, incorrect cost submissions, and potential disallowed costs during future oversight or audits. Repeat finding: This is not a repeat finding. Questioned costs: None identified as costs were reportedly removed prior to billing; however, the issue represents a control weakness. Perspective: This control deficiency affects the Organization’s system-wide treatment of indirect costs across all federal programs using the provisional rate. Recommendation: We recommend that the Organization: • Implement accounting system enhancements or protocols to flag unallowable costs at the point of entry to ensure proper coding and segregation. • Establish written procedures and staff training to reinforce cost allowability standards under Uniform Guidance. • Consider performing interim reviews of indirect cost pool activity to ensure early identification and removal of unallowable expenses. Management’s response and corrective action plan (unaudited): See corrective action plan.
Finding 2024-005: Reportable finding considered a significant deficiency - Inadequate Controls over Identification of Unallowable Costs in the Indirect Cost Pool Program name: Applies to all federal program utilizing indirect cost rates Assistance Listing: All Federal awarding agency: All Pass-through Entity: All Criteria: In accordance with 2 CFR 200.403 and 2 CFR 200.412–415, costs charged to federal awards, whether direct or indirect, must be allowable under the cost principles of Subpart E. Organizations must have adequate internal controls to identify, segregate, and exclude unallowable costs from charges to federal programs. In particular, indirect cost pools used to calculate rates billed to federal awards must not include unallowable costs such as fundraising, entertainment, or other expressly unallowable expenses. Condition: During our audit procedures, we noted that the Organization does not identify or code unallowable costs (e.g., fundraising event expenses) within its accounting system at the time of transaction entry. As part of our review of the General and Administrative (G&A) cost pool used for indirect cost rate calculations, we identified unallowable costs included in the detailed listing. Per discussion with management, these costs are not intended to be charged to federal awards. Management explained that federal drawdowns are based on a provisional rate and unallowable costs are manually excluded during the closing and cost submission process. Cause: The Organization lacks system-based controls and procedures to flag or segregate unallowable costs during transaction coding. The current process relies heavily on manual review and adjustments at year-end, which increases the risk of unallowable costs being inadvertently included in rates charged to federal programs. Effect: Including unallowable costs in the indirect cost pool—whether or not ultimately billed—represents a significant deficiency in internal control over compliance. Although management asserts that such costs are removed prior to federal reimbursement claims, the absence of preventive controls increases the risk of noncompliance, incorrect cost submissions, and potential disallowed costs during future oversight or audits. Repeat finding: This is not a repeat finding. Questioned costs: None identified as costs were reportedly removed prior to billing; however, the issue represents a control weakness. Perspective: This control deficiency affects the Organization’s system-wide treatment of indirect costs across all federal programs using the provisional rate. Recommendation: We recommend that the Organization: • Implement accounting system enhancements or protocols to flag unallowable costs at the point of entry to ensure proper coding and segregation. • Establish written procedures and staff training to reinforce cost allowability standards under Uniform Guidance. • Consider performing interim reviews of indirect cost pool activity to ensure early identification and removal of unallowable expenses. Management’s response and corrective action plan (unaudited): See corrective action plan.
Finding 2024-005: Reportable finding considered a significant deficiency - Inadequate Controls over Identification of Unallowable Costs in the Indirect Cost Pool Program name: Applies to all federal program utilizing indirect cost rates Assistance Listing: All Federal awarding agency: All Pass-through Entity: All Criteria: In accordance with 2 CFR 200.403 and 2 CFR 200.412–415, costs charged to federal awards, whether direct or indirect, must be allowable under the cost principles of Subpart E. Organizations must have adequate internal controls to identify, segregate, and exclude unallowable costs from charges to federal programs. In particular, indirect cost pools used to calculate rates billed to federal awards must not include unallowable costs such as fundraising, entertainment, or other expressly unallowable expenses. Condition: During our audit procedures, we noted that the Organization does not identify or code unallowable costs (e.g., fundraising event expenses) within its accounting system at the time of transaction entry. As part of our review of the General and Administrative (G&A) cost pool used for indirect cost rate calculations, we identified unallowable costs included in the detailed listing. Per discussion with management, these costs are not intended to be charged to federal awards. Management explained that federal drawdowns are based on a provisional rate and unallowable costs are manually excluded during the closing and cost submission process. Cause: The Organization lacks system-based controls and procedures to flag or segregate unallowable costs during transaction coding. The current process relies heavily on manual review and adjustments at year-end, which increases the risk of unallowable costs being inadvertently included in rates charged to federal programs. Effect: Including unallowable costs in the indirect cost pool—whether or not ultimately billed—represents a significant deficiency in internal control over compliance. Although management asserts that such costs are removed prior to federal reimbursement claims, the absence of preventive controls increases the risk of noncompliance, incorrect cost submissions, and potential disallowed costs during future oversight or audits. Repeat finding: This is not a repeat finding. Questioned costs: None identified as costs were reportedly removed prior to billing; however, the issue represents a control weakness. Perspective: This control deficiency affects the Organization’s system-wide treatment of indirect costs across all federal programs using the provisional rate. Recommendation: We recommend that the Organization: • Implement accounting system enhancements or protocols to flag unallowable costs at the point of entry to ensure proper coding and segregation. • Establish written procedures and staff training to reinforce cost allowability standards under Uniform Guidance. • Consider performing interim reviews of indirect cost pool activity to ensure early identification and removal of unallowable expenses. Management’s response and corrective action plan (unaudited): See corrective action plan.
Finding 2024-005: Reportable finding considered a significant deficiency - Inadequate Controls over Identification of Unallowable Costs in the Indirect Cost Pool Program name: Applies to all federal program utilizing indirect cost rates Assistance Listing: All Federal awarding agency: All Pass-through Entity: All Criteria: In accordance with 2 CFR 200.403 and 2 CFR 200.412–415, costs charged to federal awards, whether direct or indirect, must be allowable under the cost principles of Subpart E. Organizations must have adequate internal controls to identify, segregate, and exclude unallowable costs from charges to federal programs. In particular, indirect cost pools used to calculate rates billed to federal awards must not include unallowable costs such as fundraising, entertainment, or other expressly unallowable expenses. Condition: During our audit procedures, we noted that the Organization does not identify or code unallowable costs (e.g., fundraising event expenses) within its accounting system at the time of transaction entry. As part of our review of the General and Administrative (G&A) cost pool used for indirect cost rate calculations, we identified unallowable costs included in the detailed listing. Per discussion with management, these costs are not intended to be charged to federal awards. Management explained that federal drawdowns are based on a provisional rate and unallowable costs are manually excluded during the closing and cost submission process. Cause: The Organization lacks system-based controls and procedures to flag or segregate unallowable costs during transaction coding. The current process relies heavily on manual review and adjustments at year-end, which increases the risk of unallowable costs being inadvertently included in rates charged to federal programs. Effect: Including unallowable costs in the indirect cost pool—whether or not ultimately billed—represents a significant deficiency in internal control over compliance. Although management asserts that such costs are removed prior to federal reimbursement claims, the absence of preventive controls increases the risk of noncompliance, incorrect cost submissions, and potential disallowed costs during future oversight or audits. Repeat finding: This is not a repeat finding. Questioned costs: None identified as costs were reportedly removed prior to billing; however, the issue represents a control weakness. Perspective: This control deficiency affects the Organization’s system-wide treatment of indirect costs across all federal programs using the provisional rate. Recommendation: We recommend that the Organization: • Implement accounting system enhancements or protocols to flag unallowable costs at the point of entry to ensure proper coding and segregation. • Establish written procedures and staff training to reinforce cost allowability standards under Uniform Guidance. • Consider performing interim reviews of indirect cost pool activity to ensure early identification and removal of unallowable expenses. Management’s response and corrective action plan (unaudited): See corrective action plan.
Period of Performance Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Social Services Block Grant Block Grants for Community Mental Health Services ALN: 93.667 93.958 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: Social Services Block Grant 2401TXSOSR October 1, 2023 – September 30, 2025 Block Grants for Community Mental Health Services 1B09SM085994, 6B09SM085994 October 1, 2021 – September 30, 2023 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or specific requirement: Per 2 CFR 200.303(a), Health and Human Services Commission (HHSC) must establish and maintain effective internal control over the Federal award that provides reasonable assurance that it 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 the “Internal Control Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per 2 CFR 200.403(h) cost must be incurred during the approved budget period. The Federal awarding agency is authorized, at its discretion, to waive prior written approvals to carry forward unobligated balances to subsequent budget periods pursuant to § 200.308(e)(3). Condition: For awards with period of performance beginning dates during the fiscal year, audit procedures included testing transactions posted to the general ledger during the first month of the award. For awards with period of performance end dates during the fiscal year, audit procedures included testing transactions posted to the general ledger during the last month and after the period of performance end date. We noted the following instances of noncompliance: Social Services Block Grant (SSBG) – Audit procedures included testing 40 sampled transactions from projects with period of performance beginning dates during the fiscal year totaling $5,034. Two of the expenditures, totaling $486, were related to costs incurred prior to the period of performance begin date. The Project Period Start Date per the grant award was October 1, 2023, however costs were incurred on September 6, 2023 and September 11, 2023. Block Grants for Community Mental Health Services (MHBG) – Audit procedures included testing 40 sampled transactions, totaling $1,695,512, from projects with period of performance end dates during the fiscal year for which the obligation had not been paid as of the end of the period of performance. Twelve of the expenditures, totaling $312,929, were not paid within 120 days of the period of performance end date, which is the allowed time period to liquidate obligations. The required liquidation date was December 29, 2023; however, these obligations were paid between January 2, 2024 and April 11, 2024. Questioned costs: Social Services Block Grant: $486 Block Grants for Community Mental Health Services: $312,929 Context: See “Condition.” Cause: The two exceptions for SSBG were related to travel costs where the employee’s supervisor approved the transaction, which was coded to the incorrect grant. For the exceptions noted in the liquidation period testing for MHBG, the late payments are due to the HHSC’s reconciliation and closeout process not being performed in a timely manner. Effect: Ineffective internal controls may result in questioned costs and noncompliance with the terms of the grant. In addition, costs paid with non-federal sources remain in the population which is being included on the schedule of federal expenditures (SEFA) for the current fiscal year. Repeat Finding: 2023-016 Recommendation: HHSC should provide additional training over its review process to ensure that reviewers are verifying that transactions are posted to the proper grant. Additionally, HHSC should verify that all obligations incurred are liquidated during the closeout process and adjustments are not made subsequent to closeout. Views of responsible officials: HHSC concurs with the finding.
Period of Performance Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Social Services Block Grant Block Grants for Community Mental Health Services ALN: 93.667 93.958 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: Social Services Block Grant 2401TXSOSR October 1, 2023 – September 30, 2025 Block Grants for Community Mental Health Services 1B09SM085994, 6B09SM085994 October 1, 2021 – September 30, 2023 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or specific requirement: Per 2 CFR 200.303(a), Health and Human Services Commission (HHSC) must establish and maintain effective internal control over the Federal award that provides reasonable assurance that it 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 the “Internal Control Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per 2 CFR 200.403(h) cost must be incurred during the approved budget period. The Federal awarding agency is authorized, at its discretion, to waive prior written approvals to carry forward unobligated balances to subsequent budget periods pursuant to § 200.308(e)(3). Condition: For awards with period of performance beginning dates during the fiscal year, audit procedures included testing transactions posted to the general ledger during the first month of the award. For awards with period of performance end dates during the fiscal year, audit procedures included testing transactions posted to the general ledger during the last month and after the period of performance end date. We noted the following instances of noncompliance: Social Services Block Grant (SSBG) – Audit procedures included testing 40 sampled transactions from projects with period of performance beginning dates during the fiscal year totaling $5,034. Two of the expenditures, totaling $486, were related to costs incurred prior to the period of performance begin date. The Project Period Start Date per the grant award was October 1, 2023, however costs were incurred on September 6, 2023 and September 11, 2023. Block Grants for Community Mental Health Services (MHBG) – Audit procedures included testing 40 sampled transactions, totaling $1,695,512, from projects with period of performance end dates during the fiscal year for which the obligation had not been paid as of the end of the period of performance. Twelve of the expenditures, totaling $312,929, were not paid within 120 days of the period of performance end date, which is the allowed time period to liquidate obligations. The required liquidation date was December 29, 2023; however, these obligations were paid between January 2, 2024 and April 11, 2024. Questioned costs: Social Services Block Grant: $486 Block Grants for Community Mental Health Services: $312,929 Context: See “Condition.” Cause: The two exceptions for SSBG were related to travel costs where the employee’s supervisor approved the transaction, which was coded to the incorrect grant. For the exceptions noted in the liquidation period testing for MHBG, the late payments are due to the HHSC’s reconciliation and closeout process not being performed in a timely manner. Effect: Ineffective internal controls may result in questioned costs and noncompliance with the terms of the grant. In addition, costs paid with non-federal sources remain in the population which is being included on the schedule of federal expenditures (SEFA) for the current fiscal year. Repeat Finding: 2023-016 Recommendation: HHSC should provide additional training over its review process to ensure that reviewers are verifying that transactions are posted to the proper grant. Additionally, HHSC should verify that all obligations incurred are liquidated during the closeout process and adjustments are not made subsequent to closeout. Views of responsible officials: HHSC concurs with the finding.
Period of Performance Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Social Services Block Grant Block Grants for Community Mental Health Services ALN: 93.667 93.958 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: Social Services Block Grant 2401TXSOSR October 1, 2023 – September 30, 2025 Block Grants for Community Mental Health Services 1B09SM085994, 6B09SM085994 October 1, 2021 – September 30, 2023 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or specific requirement: Per 2 CFR 200.303(a), Health and Human Services Commission (HHSC) must establish and maintain effective internal control over the Federal award that provides reasonable assurance that it 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 the “Internal Control Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per 2 CFR 200.403(h) cost must be incurred during the approved budget period. The Federal awarding agency is authorized, at its discretion, to waive prior written approvals to carry forward unobligated balances to subsequent budget periods pursuant to § 200.308(e)(3). Condition: For awards with period of performance beginning dates during the fiscal year, audit procedures included testing transactions posted to the general ledger during the first month of the award. For awards with period of performance end dates during the fiscal year, audit procedures included testing transactions posted to the general ledger during the last month and after the period of performance end date. We noted the following instances of noncompliance: Social Services Block Grant (SSBG) – Audit procedures included testing 40 sampled transactions from projects with period of performance beginning dates during the fiscal year totaling $5,034. Two of the expenditures, totaling $486, were related to costs incurred prior to the period of performance begin date. The Project Period Start Date per the grant award was October 1, 2023, however costs were incurred on September 6, 2023 and September 11, 2023. Block Grants for Community Mental Health Services (MHBG) – Audit procedures included testing 40 sampled transactions, totaling $1,695,512, from projects with period of performance end dates during the fiscal year for which the obligation had not been paid as of the end of the period of performance. Twelve of the expenditures, totaling $312,929, were not paid within 120 days of the period of performance end date, which is the allowed time period to liquidate obligations. The required liquidation date was December 29, 2023; however, these obligations were paid between January 2, 2024 and April 11, 2024. Questioned costs: Social Services Block Grant: $486 Block Grants for Community Mental Health Services: $312,929 Context: See “Condition.” Cause: The two exceptions for SSBG were related to travel costs where the employee’s supervisor approved the transaction, which was coded to the incorrect grant. For the exceptions noted in the liquidation period testing for MHBG, the late payments are due to the HHSC’s reconciliation and closeout process not being performed in a timely manner. Effect: Ineffective internal controls may result in questioned costs and noncompliance with the terms of the grant. In addition, costs paid with non-federal sources remain in the population which is being included on the schedule of federal expenditures (SEFA) for the current fiscal year. Repeat Finding: 2023-016 Recommendation: HHSC should provide additional training over its review process to ensure that reviewers are verifying that transactions are posted to the proper grant. Additionally, HHSC should verify that all obligations incurred are liquidated during the closeout process and adjustments are not made subsequent to closeout. Views of responsible officials: HHSC concurs with the finding.
Period of Performance Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Social Services Block Grant Block Grants for Community Mental Health Services ALN: 93.667 93.958 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: Social Services Block Grant 2401TXSOSR October 1, 2023 – September 30, 2025 Block Grants for Community Mental Health Services 1B09SM085994, 6B09SM085994 October 1, 2021 – September 30, 2023 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or specific requirement: Per 2 CFR 200.303(a), Health and Human Services Commission (HHSC) must establish and maintain effective internal control over the Federal award that provides reasonable assurance that it 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 the “Internal Control Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per 2 CFR 200.403(h) cost must be incurred during the approved budget period. The Federal awarding agency is authorized, at its discretion, to waive prior written approvals to carry forward unobligated balances to subsequent budget periods pursuant to § 200.308(e)(3). Condition: For awards with period of performance beginning dates during the fiscal year, audit procedures included testing transactions posted to the general ledger during the first month of the award. For awards with period of performance end dates during the fiscal year, audit procedures included testing transactions posted to the general ledger during the last month and after the period of performance end date. We noted the following instances of noncompliance: Social Services Block Grant (SSBG) – Audit procedures included testing 40 sampled transactions from projects with period of performance beginning dates during the fiscal year totaling $5,034. Two of the expenditures, totaling $486, were related to costs incurred prior to the period of performance begin date. The Project Period Start Date per the grant award was October 1, 2023, however costs were incurred on September 6, 2023 and September 11, 2023. Block Grants for Community Mental Health Services (MHBG) – Audit procedures included testing 40 sampled transactions, totaling $1,695,512, from projects with period of performance end dates during the fiscal year for which the obligation had not been paid as of the end of the period of performance. Twelve of the expenditures, totaling $312,929, were not paid within 120 days of the period of performance end date, which is the allowed time period to liquidate obligations. The required liquidation date was December 29, 2023; however, these obligations were paid between January 2, 2024 and April 11, 2024. Questioned costs: Social Services Block Grant: $486 Block Grants for Community Mental Health Services: $312,929 Context: See “Condition.” Cause: The two exceptions for SSBG were related to travel costs where the employee’s supervisor approved the transaction, which was coded to the incorrect grant. For the exceptions noted in the liquidation period testing for MHBG, the late payments are due to the HHSC’s reconciliation and closeout process not being performed in a timely manner. Effect: Ineffective internal controls may result in questioned costs and noncompliance with the terms of the grant. In addition, costs paid with non-federal sources remain in the population which is being included on the schedule of federal expenditures (SEFA) for the current fiscal year. Repeat Finding: 2023-016 Recommendation: HHSC should provide additional training over its review process to ensure that reviewers are verifying that transactions are posted to the proper grant. Additionally, HHSC should verify that all obligations incurred are liquidated during the closeout process and adjustments are not made subsequent to closeout. Views of responsible officials: HHSC concurs with the finding.
Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: U.S. Department of Transportation Federal Program Title: Airport Improvement Program ALN: 20.106 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: 3–48–SBGP–148–2022 September 14, 2022 – September 13, 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: Per 2 CFR section 200.303(a), Texas Department of Transportation (TxDOT) must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per 2 CFR 200.403, except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the recipient or subrecipient. (d) Be accorded consistent treatment. (e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for State and local governments and Indian Tribes only, as otherwise provided for in this part. (f) Not be included as a cost or used to meet cost sharing requirements of any other federally – financed program in either the current or a prior period. (g) Be adequately documented. Condition: Audit procedures included a sample of 40 expenditures, totaling $9,426,808, to test allowability with grant awards. We noted that for one of the 40 samples, TxDOT overpaid an invoice to a vendor by $70,000. Upon detection by the vendor, TxDOT corrected the overpayment by reducing a subsequent payment to the vendor by the $70,000. Questioned costs: None Context: See “Condition.” Cause: The amount requested to be reimbursed was manually entered incorrectly in eGrants. TxDOT did not detect the discrepancy during the review and approval process prior to the payment. Effect: Failure to thoroughly review invoices prior to payment may lead to overpayment or underpayment of funds to vendors and potential questioned costs. Repeat Finding: No Recommendation: We recommend that TxDOT provide additional training to individuals performing reviews of expenditures. We also recommend TxDOT establish internal controls to monitor that reviews of expenditures are being completed to the level of detail required by internal policies and procedures. Views of responsible officials: TxDOT AVN agrees with the finding.
Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: U.S. Department of Transportation Federal Program Title: Airport Improvement Program ALN: 20.106 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: 3–48–SBGP–148–2022 September 14, 2022 – September 13, 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: Per 2 CFR section 200.303(a), Texas Department of Transportation (TxDOT) must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per 2 CFR 200.403, except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the recipient or subrecipient. (d) Be accorded consistent treatment. (e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for State and local governments and Indian Tribes only, as otherwise provided for in this part. (f) Not be included as a cost or used to meet cost sharing requirements of any other federally – financed program in either the current or a prior period. (g) Be adequately documented. Condition: Audit procedures included a sample of 40 expenditures, totaling $9,426,808, to test allowability with grant awards. We noted that for one of the 40 samples, TxDOT overpaid an invoice to a vendor by $70,000. Upon detection by the vendor, TxDOT corrected the overpayment by reducing a subsequent payment to the vendor by the $70,000. Questioned costs: None Context: See “Condition.” Cause: The amount requested to be reimbursed was manually entered incorrectly in eGrants. TxDOT did not detect the discrepancy during the review and approval process prior to the payment. Effect: Failure to thoroughly review invoices prior to payment may lead to overpayment or underpayment of funds to vendors and potential questioned costs. Repeat Finding: No Recommendation: We recommend that TxDOT provide additional training to individuals performing reviews of expenditures. We also recommend TxDOT establish internal controls to monitor that reviews of expenditures are being completed to the level of detail required by internal policies and procedures. Views of responsible officials: TxDOT AVN agrees with the finding.
Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: U.S. Department of Transportation Federal Program Title: Airport Improvement Program ALN: 20.106 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: 3–48–SBGP–148–2022 September 14, 2022 – September 13, 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: Per 2 CFR section 200.303(a), Texas Department of Transportation (TxDOT) must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per 2 CFR 200.403, except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the recipient or subrecipient. (d) Be accorded consistent treatment. (e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for State and local governments and Indian Tribes only, as otherwise provided for in this part. (f) Not be included as a cost or used to meet cost sharing requirements of any other federally – financed program in either the current or a prior period. (g) Be adequately documented. Condition: Audit procedures included a sample of 40 expenditures, totaling $9,426,808, to test allowability with grant awards. We noted that for one of the 40 samples, TxDOT overpaid an invoice to a vendor by $70,000. Upon detection by the vendor, TxDOT corrected the overpayment by reducing a subsequent payment to the vendor by the $70,000. Questioned costs: None Context: See “Condition.” Cause: The amount requested to be reimbursed was manually entered incorrectly in eGrants. TxDOT did not detect the discrepancy during the review and approval process prior to the payment. Effect: Failure to thoroughly review invoices prior to payment may lead to overpayment or underpayment of funds to vendors and potential questioned costs. Repeat Finding: No Recommendation: We recommend that TxDOT provide additional training to individuals performing reviews of expenditures. We also recommend TxDOT establish internal controls to monitor that reviews of expenditures are being completed to the level of detail required by internal policies and procedures. Views of responsible officials: TxDOT AVN agrees with the finding.
Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: U.S. Department of Transportation Federal Program Title: Airport Improvement Program ALN: 20.106 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: 3–48–SBGP–148–2022 September 14, 2022 – September 13, 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: Per 2 CFR section 200.303(a), Texas Department of Transportation (TxDOT) must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per 2 CFR 200.403, except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the recipient or subrecipient. (d) Be accorded consistent treatment. (e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for State and local governments and Indian Tribes only, as otherwise provided for in this part. (f) Not be included as a cost or used to meet cost sharing requirements of any other federally – financed program in either the current or a prior period. (g) Be adequately documented. Condition: Audit procedures included a sample of 40 expenditures, totaling $9,426,808, to test allowability with grant awards. We noted that for one of the 40 samples, TxDOT overpaid an invoice to a vendor by $70,000. Upon detection by the vendor, TxDOT corrected the overpayment by reducing a subsequent payment to the vendor by the $70,000. Questioned costs: None Context: See “Condition.” Cause: The amount requested to be reimbursed was manually entered incorrectly in eGrants. TxDOT did not detect the discrepancy during the review and approval process prior to the payment. Effect: Failure to thoroughly review invoices prior to payment may lead to overpayment or underpayment of funds to vendors and potential questioned costs. Repeat Finding: No Recommendation: We recommend that TxDOT provide additional training to individuals performing reviews of expenditures. We also recommend TxDOT establish internal controls to monitor that reviews of expenditures are being completed to the level of detail required by internal policies and procedures. Views of responsible officials: TxDOT AVN agrees with the finding.
Activities Allowed and Unallowed, Allowable Costs/Cost Principles – Indirect Costs Federal Agency: U.S. Department of Labor Federal Program Title: Employment Service Cluster ALN: 17.207, 17.801 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: 23555DV000036 – 01, 24555DV000076 – 01 October 1, 2022 – December 31, 2024, October 1, 2023 – December 31, 2025 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or specific requirement: Per 2 CFR section 200.303(a), Texas Veterans Commission (TVC) must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per 2 CFR section 200.403, except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the recipient or subrecipient. (d) Be accorded consistent treatment. (e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for State and local governments and Indian Tribes only, as otherwise provided for in this part. (f) Not be included as a cost or used to meet cost sharing requirements of any other federally – financed program in either the current or a prior period. (g) Be adequately documented. Condition: Audit procedures included a sample of five indirect cost expenditures, totaling $1,248,175, incurred during the fiscal year to verify that the rates used were in accordance with the terms and conditions of the award and the amounts claimed were applied to the appropriate base. During our testing, we noted one sample in which an incorrect rate was applied to the base, resulting in $69,481 of unallowed indirect costs. In addition, there was no evidence of review and approval for three of the five expenditures selected for testing, including the expenditure noted in the preceding paragraph. Questioned costs: $69,481 Context: See “Condition.” Cause: Management failed to retain documentation that would support the review and approval of the indirect cost amounts. The exceptions were caused due to high turnover within the agency. Employees who were responsible for the approvals are no longer employed through TVC. Effect: Lack of formal documentation of reviews may result in questioned costs. In addition, failure to maintain adequate documentation pertinent to a federal award may result in noncompliance with grant terms and conditions. Repeat Finding: No Recommendation: We recommend TVC enforce establish document retention processes to ensure it has access to documentation for review in the event of management turnover. In addition, we recommend TVC strengthen its controls over the review of the indirect cost calculations to ensure accuracy of costs being calculated. Views of responsible officials: TVC agrees to the recommendation of improved record retention in the event of management turnover. TVC also agrees to the recommendation of strengthening its internal controls over the review of VES’s grant costs associated with the indirect revenues being calculated.
Activities Allowed and Unallowed, Allowable Costs/Cost Principles – Indirect Costs Federal Agency: U.S. Department of Labor Federal Program Title: Employment Service Cluster ALN: 17.207, 17.801 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: 23555DV000036 – 01, 24555DV000076 – 01 October 1, 2022 – December 31, 2024, October 1, 2023 – December 31, 2025 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or specific requirement: Per 2 CFR section 200.303(a), Texas Veterans Commission (TVC) must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per 2 CFR section 200.403, except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the recipient or subrecipient. (d) Be accorded consistent treatment. (e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for State and local governments and Indian Tribes only, as otherwise provided for in this part. (f) Not be included as a cost or used to meet cost sharing requirements of any other federally – financed program in either the current or a prior period. (g) Be adequately documented. Condition: Audit procedures included a sample of five indirect cost expenditures, totaling $1,248,175, incurred during the fiscal year to verify that the rates used were in accordance with the terms and conditions of the award and the amounts claimed were applied to the appropriate base. During our testing, we noted one sample in which an incorrect rate was applied to the base, resulting in $69,481 of unallowed indirect costs. In addition, there was no evidence of review and approval for three of the five expenditures selected for testing, including the expenditure noted in the preceding paragraph. Questioned costs: $69,481 Context: See “Condition.” Cause: Management failed to retain documentation that would support the review and approval of the indirect cost amounts. The exceptions were caused due to high turnover within the agency. Employees who were responsible for the approvals are no longer employed through TVC. Effect: Lack of formal documentation of reviews may result in questioned costs. In addition, failure to maintain adequate documentation pertinent to a federal award may result in noncompliance with grant terms and conditions. Repeat Finding: No Recommendation: We recommend TVC enforce establish document retention processes to ensure it has access to documentation for review in the event of management turnover. In addition, we recommend TVC strengthen its controls over the review of the indirect cost calculations to ensure accuracy of costs being calculated. Views of responsible officials: TVC agrees to the recommendation of improved record retention in the event of management turnover. TVC also agrees to the recommendation of strengthening its internal controls over the review of VES’s grant costs associated with the indirect revenues being calculated.
Finding 2024-005: Reportable finding considered a significant deficiency - Inadequate Controls over Identification of Unallowable Costs in the Indirect Cost Pool Program name: Applies to all federal program utilizing indirect cost rates Assistance Listing: All Federal awarding agency: All Pass-through Entity: All Criteria: In accordance with 2 CFR 200.403 and 2 CFR 200.412–415, costs charged to federal awards, whether direct or indirect, must be allowable under the cost principles of Subpart E. Organizations must have adequate internal controls to identify, segregate, and exclude unallowable costs from charges to federal programs. In particular, indirect cost pools used to calculate rates billed to federal awards must not include unallowable costs such as fundraising, entertainment, or other expressly unallowable expenses. Condition: During our audit procedures, we noted that the Organization does not identify or code unallowable costs (e.g., fundraising event expenses) within its accounting system at the time of transaction entry. As part of our review of the General and Administrative (G&A) cost pool used for indirect cost rate calculations, we identified unallowable costs included in the detailed listing. Per discussion with management, these costs are not intended to be charged to federal awards. Management explained that federal drawdowns are based on a provisional rate and unallowable costs are manually excluded during the closing and cost submission process. Cause: The Organization lacks system-based controls and procedures to flag or segregate unallowable costs during transaction coding. The current process relies heavily on manual review and adjustments at year-end, which increases the risk of unallowable costs being inadvertently included in rates charged to federal programs. Effect: Including unallowable costs in the indirect cost pool—whether or not ultimately billed—represents a significant deficiency in internal control over compliance. Although management asserts that such costs are removed prior to federal reimbursement claims, the absence of preventive controls increases the risk of noncompliance, incorrect cost submissions, and potential disallowed costs during future oversight or audits. Repeat finding: This is not a repeat finding. Questioned costs: None identified as costs were reportedly removed prior to billing; however, the issue represents a control weakness. Perspective: This control deficiency affects the Organization’s system-wide treatment of indirect costs across all federal programs using the provisional rate. Recommendation: We recommend that the Organization: • Implement accounting system enhancements or protocols to flag unallowable costs at the point of entry to ensure proper coding and segregation. • Establish written procedures and staff training to reinforce cost allowability standards under Uniform Guidance. • Consider performing interim reviews of indirect cost pool activity to ensure early identification and removal of unallowable expenses. Management’s response and corrective action plan (unaudited): See corrective action plan.
Finding 2024-005: Reportable finding considered a significant deficiency - Inadequate Controls over Identification of Unallowable Costs in the Indirect Cost Pool Program name: Applies to all federal program utilizing indirect cost rates Assistance Listing: All Federal awarding agency: All Pass-through Entity: All Criteria: In accordance with 2 CFR 200.403 and 2 CFR 200.412–415, costs charged to federal awards, whether direct or indirect, must be allowable under the cost principles of Subpart E. Organizations must have adequate internal controls to identify, segregate, and exclude unallowable costs from charges to federal programs. In particular, indirect cost pools used to calculate rates billed to federal awards must not include unallowable costs such as fundraising, entertainment, or other expressly unallowable expenses. Condition: During our audit procedures, we noted that the Organization does not identify or code unallowable costs (e.g., fundraising event expenses) within its accounting system at the time of transaction entry. As part of our review of the General and Administrative (G&A) cost pool used for indirect cost rate calculations, we identified unallowable costs included in the detailed listing. Per discussion with management, these costs are not intended to be charged to federal awards. Management explained that federal drawdowns are based on a provisional rate and unallowable costs are manually excluded during the closing and cost submission process. Cause: The Organization lacks system-based controls and procedures to flag or segregate unallowable costs during transaction coding. The current process relies heavily on manual review and adjustments at year-end, which increases the risk of unallowable costs being inadvertently included in rates charged to federal programs. Effect: Including unallowable costs in the indirect cost pool—whether or not ultimately billed—represents a significant deficiency in internal control over compliance. Although management asserts that such costs are removed prior to federal reimbursement claims, the absence of preventive controls increases the risk of noncompliance, incorrect cost submissions, and potential disallowed costs during future oversight or audits. Repeat finding: This is not a repeat finding. Questioned costs: None identified as costs were reportedly removed prior to billing; however, the issue represents a control weakness. Perspective: This control deficiency affects the Organization’s system-wide treatment of indirect costs across all federal programs using the provisional rate. Recommendation: We recommend that the Organization: • Implement accounting system enhancements or protocols to flag unallowable costs at the point of entry to ensure proper coding and segregation. • Establish written procedures and staff training to reinforce cost allowability standards under Uniform Guidance. • Consider performing interim reviews of indirect cost pool activity to ensure early identification and removal of unallowable expenses. Management’s response and corrective action plan (unaudited): See corrective action plan.
Finding 2024-005: Reportable finding considered a significant deficiency - Inadequate Controls over Identification of Unallowable Costs in the Indirect Cost Pool Program name: Applies to all federal program utilizing indirect cost rates Assistance Listing: All Federal awarding agency: All Pass-through Entity: All Criteria: In accordance with 2 CFR 200.403 and 2 CFR 200.412–415, costs charged to federal awards, whether direct or indirect, must be allowable under the cost principles of Subpart E. Organizations must have adequate internal controls to identify, segregate, and exclude unallowable costs from charges to federal programs. In particular, indirect cost pools used to calculate rates billed to federal awards must not include unallowable costs such as fundraising, entertainment, or other expressly unallowable expenses. Condition: During our audit procedures, we noted that the Organization does not identify or code unallowable costs (e.g., fundraising event expenses) within its accounting system at the time of transaction entry. As part of our review of the General and Administrative (G&A) cost pool used for indirect cost rate calculations, we identified unallowable costs included in the detailed listing. Per discussion with management, these costs are not intended to be charged to federal awards. Management explained that federal drawdowns are based on a provisional rate and unallowable costs are manually excluded during the closing and cost submission process. Cause: The Organization lacks system-based controls and procedures to flag or segregate unallowable costs during transaction coding. The current process relies heavily on manual review and adjustments at year-end, which increases the risk of unallowable costs being inadvertently included in rates charged to federal programs. Effect: Including unallowable costs in the indirect cost pool—whether or not ultimately billed—represents a significant deficiency in internal control over compliance. Although management asserts that such costs are removed prior to federal reimbursement claims, the absence of preventive controls increases the risk of noncompliance, incorrect cost submissions, and potential disallowed costs during future oversight or audits. Repeat finding: This is not a repeat finding. Questioned costs: None identified as costs were reportedly removed prior to billing; however, the issue represents a control weakness. Perspective: This control deficiency affects the Organization’s system-wide treatment of indirect costs across all federal programs using the provisional rate. Recommendation: We recommend that the Organization: • Implement accounting system enhancements or protocols to flag unallowable costs at the point of entry to ensure proper coding and segregation. • Establish written procedures and staff training to reinforce cost allowability standards under Uniform Guidance. • Consider performing interim reviews of indirect cost pool activity to ensure early identification and removal of unallowable expenses. Management’s response and corrective action plan (unaudited): See corrective action plan.
Finding 2024-005: Reportable finding considered a significant deficiency - Inadequate Controls over Identification of Unallowable Costs in the Indirect Cost Pool Program name: Applies to all federal program utilizing indirect cost rates Assistance Listing: All Federal awarding agency: All Pass-through Entity: All Criteria: In accordance with 2 CFR 200.403 and 2 CFR 200.412–415, costs charged to federal awards, whether direct or indirect, must be allowable under the cost principles of Subpart E. Organizations must have adequate internal controls to identify, segregate, and exclude unallowable costs from charges to federal programs. In particular, indirect cost pools used to calculate rates billed to federal awards must not include unallowable costs such as fundraising, entertainment, or other expressly unallowable expenses. Condition: During our audit procedures, we noted that the Organization does not identify or code unallowable costs (e.g., fundraising event expenses) within its accounting system at the time of transaction entry. As part of our review of the General and Administrative (G&A) cost pool used for indirect cost rate calculations, we identified unallowable costs included in the detailed listing. Per discussion with management, these costs are not intended to be charged to federal awards. Management explained that federal drawdowns are based on a provisional rate and unallowable costs are manually excluded during the closing and cost submission process. Cause: The Organization lacks system-based controls and procedures to flag or segregate unallowable costs during transaction coding. The current process relies heavily on manual review and adjustments at year-end, which increases the risk of unallowable costs being inadvertently included in rates charged to federal programs. Effect: Including unallowable costs in the indirect cost pool—whether or not ultimately billed—represents a significant deficiency in internal control over compliance. Although management asserts that such costs are removed prior to federal reimbursement claims, the absence of preventive controls increases the risk of noncompliance, incorrect cost submissions, and potential disallowed costs during future oversight or audits. Repeat finding: This is not a repeat finding. Questioned costs: None identified as costs were reportedly removed prior to billing; however, the issue represents a control weakness. Perspective: This control deficiency affects the Organization’s system-wide treatment of indirect costs across all federal programs using the provisional rate. Recommendation: We recommend that the Organization: • Implement accounting system enhancements or protocols to flag unallowable costs at the point of entry to ensure proper coding and segregation. • Establish written procedures and staff training to reinforce cost allowability standards under Uniform Guidance. • Consider performing interim reviews of indirect cost pool activity to ensure early identification and removal of unallowable expenses. Management’s response and corrective action plan (unaudited): See corrective action plan.
Finding 2024-005: Reportable finding considered a significant deficiency - Inadequate Controls over Identification of Unallowable Costs in the Indirect Cost Pool Program name: Applies to all federal program utilizing indirect cost rates Assistance Listing: All Federal awarding agency: All Pass-through Entity: All Criteria: In accordance with 2 CFR 200.403 and 2 CFR 200.412–415, costs charged to federal awards, whether direct or indirect, must be allowable under the cost principles of Subpart E. Organizations must have adequate internal controls to identify, segregate, and exclude unallowable costs from charges to federal programs. In particular, indirect cost pools used to calculate rates billed to federal awards must not include unallowable costs such as fundraising, entertainment, or other expressly unallowable expenses. Condition: During our audit procedures, we noted that the Organization does not identify or code unallowable costs (e.g., fundraising event expenses) within its accounting system at the time of transaction entry. As part of our review of the General and Administrative (G&A) cost pool used for indirect cost rate calculations, we identified unallowable costs included in the detailed listing. Per discussion with management, these costs are not intended to be charged to federal awards. Management explained that federal drawdowns are based on a provisional rate and unallowable costs are manually excluded during the closing and cost submission process. Cause: The Organization lacks system-based controls and procedures to flag or segregate unallowable costs during transaction coding. The current process relies heavily on manual review and adjustments at year-end, which increases the risk of unallowable costs being inadvertently included in rates charged to federal programs. Effect: Including unallowable costs in the indirect cost pool—whether or not ultimately billed—represents a significant deficiency in internal control over compliance. Although management asserts that such costs are removed prior to federal reimbursement claims, the absence of preventive controls increases the risk of noncompliance, incorrect cost submissions, and potential disallowed costs during future oversight or audits. Repeat finding: This is not a repeat finding. Questioned costs: None identified as costs were reportedly removed prior to billing; however, the issue represents a control weakness. Perspective: This control deficiency affects the Organization’s system-wide treatment of indirect costs across all federal programs using the provisional rate. Recommendation: We recommend that the Organization: • Implement accounting system enhancements or protocols to flag unallowable costs at the point of entry to ensure proper coding and segregation. • Establish written procedures and staff training to reinforce cost allowability standards under Uniform Guidance. • Consider performing interim reviews of indirect cost pool activity to ensure early identification and removal of unallowable expenses. Management’s response and corrective action plan (unaudited): See corrective action plan.
U.S. Department of Housing and Urban Development #14.251 Economic Development Initiative, Community Project Funding, and Miscellaneous Grants 2024-005 Lack of Written Allocation Plan for Shared Costs (Significant Deficiency) Criteria: In accordance with 2 CFR §200.405(d), any cost allocated to a federal award must be allocable, reasonable, and based on a method that is supported and consistently applied. In addition, 2 CFR §200.403(g) requires that costs be adequately documented. A written allocation plan is essential to demonstrate that the allocation of shared costs is equitable and in compliance with Uniform Guidance. Condition: The Organization does not have a written cost allocation plan to document the basis for distributing shared costs such as salaries, occupancy, and administrative expenses among its programs and grants. Instead, management relies on grant budgets and staff judgment to determine which costs are charged to each grant. As a result, there is no consistent or documented methodology supporting the allocation of shared costs to benefiting programs. Cause: Management has not developed or implemented a written cost allocation plan. Cost allocations have historically been based on grant budgets or management's understanding of what each grant will support, rather than on a systematic and documented method. Effect: Without a written cost allocation plan, there is an increased risk that costs may not be allocated consistently or accurately among programs and grants. This could result in noncompliance with federal cost principles and potential questioned costs if expenses are not properly supported. Questioned Costs: None noted. Recommendation: We recommend that the Organization develop and implement a written cost allocation plan that outlines the basis for distributing shared costs, including the allocation methodology, the types of costs involved, and the programs affected. The plan should be reviewed periodically and updated as necessary to reflect changes in funding or operations. Supporting documentation for allocations should be maintained and readily available for audit purposes. Views of Responsible Officials and Planned Corrective Actions: Management agrees and recognizes the importance of consistent allocation methodologies. Corrective Action: Increase the Cost Allocation Plan defining allocation bases for shared expenses, supported by documentation and reviewed annually.
2024 – 001: Improper Payroll Calculation Federal Agency: U.S. Department of Energy Federal Program Name: Research & Development Cluster Assistance Listing Number: 81.049 Federal Award Identification Number: DE-SC0023385 Award Period: July 1, 2023 – June 30, 2024 Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Matters Criteria or specific requirement: Internal Control – Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should 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). Compliance – Per 2 CFR § 200.403, except where otherwise authorized by statute, costs must meet the following general criteria to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award to be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award regarding types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federally‐financed and other activities of the non‐Federal entity. (d) Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost. (e) Be determined in accordance with generally accepted accounting principles (GAAP), except for state and local governments and Indian tribes only, as otherwise provided for in this part. (f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally‐financed program in either the current or a prior period. (g) Be adequately documented. Condition: The University incorrectly calculated payroll costs charged to the grant after an employee was double paid for the same work hours. Questioned costs: $400. Context: This condition occurred for 1 out of 40 payroll costs selected for testing resulting in $400 being incorrectly charged to the program. Cause: An employee failed to accurately enter time worked into the university timekeeping system for the pay period 5/1/24 – 5/15/24. The employee reported the hours to their department contact on 5/29/24, which was after the pay period had closed and paychecks had already been processed. The department liaison contacted Kronos Support to have the hours added to the timecard retroactively. Kronos Support received confirmation from the employee that the missed hours could be added to the paycheck for 6/14/24. During payroll processing for 6/14/24, Kronos Support added the missed hours to the employee’s payline on 6/5/24. The department liaison also submitted a CU Special Pay for the same missed hours on 6/5/24. Due to the timing of each separate transaction, Kronos Support did not have visibility into the duplication of the hours. The department failed to identify the duplication during its review of payroll reports. Effect: Expenditures may be incorrectly charged to the program. Repeat Finding: No Recommendation: We recommend that the institution strengthen its internal controls to ensure that expenditures are reviewed and adjusted for, if necessary, in a timely manner. Views of responsible officials: Management acknowledges the finding.
2024-001 – Significant Deficiency in Internal Control over Major Federal Program and Noncompliance – Budget Allocation. Career and Technical Education – Basic Grants to the States, ALN # 84.048 and #84.048A, Award Numbers 233480 231400, 233480 231405, 233480 231410 and 243520 24124; and American Rescue Plan Act, Homeless Children and Youth II (COVID-19), ALN # 84.425W, Award Number 211012 2122 Federal Agency: U.S. Department of Education Criteria – Management is responsible for complying with the specific compliance requirements set forth by the Uniform Guidance, the U.S. Department of Education and the District’s pass-through entity Michigan Department of Education (MDE), as it relates to federally funded grants. Title 2 CFR 200.403 requires that costs be charged appropriately according to budget and that costs be necessary and reasonable for the performance of the grant. Condition- As a result of our audit procedures, we identified function and object codes misallocated in comparison to the grant budget approved by MDE. Neither grant misallocations were material to the grants. Cause and Effect – The District’s internal control over grant compliance, along with budgetary review, were not sufficient to detect and correct errors in a timely manner. The effect was that actual costs were not recorded accurately with the grant budget by either function or object codes. Questioned Costs – None. The grants were not overspent in total, nor would the grant expenditure tests have been considered unallowable if they had been correctly allocated with the budget. Career and Technical Education had five instances. American Rescue Plan Act, Homeless Children and Youth II had one instance which was adjusted and corrected. Recommendation – We recommend the School District expand its internal control over budgetary review of its grants, particularly in regard to reviewing MDE approved budgeted amounts to actual expenditures. View of Responsible Officials – The School District agrees with our finding and recommendation. Planned Corrective Actions – See corrective action plan, annexed.
2024-001 – Significant Deficiency in Internal Control over Major Federal Program and Noncompliance – Budget Allocation. Career and Technical Education – Basic Grants to the States, ALN # 84.048 and #84.048A, Award Numbers 233480 231400, 233480 231405, 233480 231410 and 243520 24124; and American Rescue Plan Act, Homeless Children and Youth II (COVID-19), ALN # 84.425W, Award Number 211012 2122 Federal Agency: U.S. Department of Education Criteria – Management is responsible for complying with the specific compliance requirements set forth by the Uniform Guidance, the U.S. Department of Education and the District’s pass-through entity Michigan Department of Education (MDE), as it relates to federally funded grants. Title 2 CFR 200.403 requires that costs be charged appropriately according to budget and that costs be necessary and reasonable for the performance of the grant. Condition- As a result of our audit procedures, we identified function and object codes misallocated in comparison to the grant budget approved by MDE. Neither grant misallocations were material to the grants. Cause and Effect – The District’s internal control over grant compliance, along with budgetary review, were not sufficient to detect and correct errors in a timely manner. The effect was that actual costs were not recorded accurately with the grant budget by either function or object codes. Questioned Costs – None. The grants were not overspent in total, nor would the grant expenditure tests have been considered unallowable if they had been correctly allocated with the budget. Career and Technical Education had five instances. American Rescue Plan Act, Homeless Children and Youth II had one instance which was adjusted and corrected. Recommendation – We recommend the School District expand its internal control over budgetary review of its grants, particularly in regard to reviewing MDE approved budgeted amounts to actual expenditures. View of Responsible Officials – The School District agrees with our finding and recommendation. Planned Corrective Actions – See corrective action plan, annexed.
2024-001 – Significant Deficiency in Internal Control over Major Federal Program and Noncompliance – Budget Allocation. Career and Technical Education – Basic Grants to the States, ALN # 84.048 and #84.048A, Award Numbers 233480 231400, 233480 231405, 233480 231410 and 243520 24124; and American Rescue Plan Act, Homeless Children and Youth II (COVID-19), ALN # 84.425W, Award Number 211012 2122 Federal Agency: U.S. Department of Education Criteria – Management is responsible for complying with the specific compliance requirements set forth by the Uniform Guidance, the U.S. Department of Education and the District’s pass-through entity Michigan Department of Education (MDE), as it relates to federally funded grants. Title 2 CFR 200.403 requires that costs be charged appropriately according to budget and that costs be necessary and reasonable for the performance of the grant. Condition- As a result of our audit procedures, we identified function and object codes misallocated in comparison to the grant budget approved by MDE. Neither grant misallocations were material to the grants. Cause and Effect – The District’s internal control over grant compliance, along with budgetary review, were not sufficient to detect and correct errors in a timely manner. The effect was that actual costs were not recorded accurately with the grant budget by either function or object codes. Questioned Costs – None. The grants were not overspent in total, nor would the grant expenditure tests have been considered unallowable if they had been correctly allocated with the budget. Career and Technical Education had five instances. American Rescue Plan Act, Homeless Children and Youth II had one instance which was adjusted and corrected. Recommendation – We recommend the School District expand its internal control over budgetary review of its grants, particularly in regard to reviewing MDE approved budgeted amounts to actual expenditures. View of Responsible Officials – The School District agrees with our finding and recommendation. Planned Corrective Actions – See corrective action plan, annexed.
2024-001 – Significant Deficiency in Internal Control over Major Federal Program and Noncompliance – Budget Allocation. Career and Technical Education – Basic Grants to the States, ALN # 84.048 and #84.048A, Award Numbers 233480 231400, 233480 231405, 233480 231410 and 243520 24124; and American Rescue Plan Act, Homeless Children and Youth II (COVID-19), ALN # 84.425W, Award Number 211012 2122 Federal Agency: U.S. Department of Education Criteria – Management is responsible for complying with the specific compliance requirements set forth by the Uniform Guidance, the U.S. Department of Education and the District’s pass-through entity Michigan Department of Education (MDE), as it relates to federally funded grants. Title 2 CFR 200.403 requires that costs be charged appropriately according to budget and that costs be necessary and reasonable for the performance of the grant. Condition- As a result of our audit procedures, we identified function and object codes misallocated in comparison to the grant budget approved by MDE. Neither grant misallocations were material to the grants. Cause and Effect – The District’s internal control over grant compliance, along with budgetary review, were not sufficient to detect and correct errors in a timely manner. The effect was that actual costs were not recorded accurately with the grant budget by either function or object codes. Questioned Costs – None. The grants were not overspent in total, nor would the grant expenditure tests have been considered unallowable if they had been correctly allocated with the budget. Career and Technical Education had five instances. American Rescue Plan Act, Homeless Children and Youth II had one instance which was adjusted and corrected. Recommendation – We recommend the School District expand its internal control over budgetary review of its grants, particularly in regard to reviewing MDE approved budgeted amounts to actual expenditures. View of Responsible Officials – The School District agrees with our finding and recommendation. Planned Corrective Actions – See corrective action plan, annexed.
2024-001 – Significant Deficiency in Internal Control over Major Federal Program and Noncompliance – Budget Allocation. Career and Technical Education – Basic Grants to the States, ALN # 84.048 and #84.048A, Award Numbers 233480 231400, 233480 231405, 233480 231410 and 243520 24124; and American Rescue Plan Act, Homeless Children and Youth II (COVID-19), ALN # 84.425W, Award Number 211012 2122 Federal Agency: U.S. Department of Education Criteria – Management is responsible for complying with the specific compliance requirements set forth by the Uniform Guidance, the U.S. Department of Education and the District’s pass-through entity Michigan Department of Education (MDE), as it relates to federally funded grants. Title 2 CFR 200.403 requires that costs be charged appropriately according to budget and that costs be necessary and reasonable for the performance of the grant. Condition- As a result of our audit procedures, we identified function and object codes misallocated in comparison to the grant budget approved by MDE. Neither grant misallocations were material to the grants. Cause and Effect – The District’s internal control over grant compliance, along with budgetary review, were not sufficient to detect and correct errors in a timely manner. The effect was that actual costs were not recorded accurately with the grant budget by either function or object codes. Questioned Costs – None. The grants were not overspent in total, nor would the grant expenditure tests have been considered unallowable if they had been correctly allocated with the budget. Career and Technical Education had five instances. American Rescue Plan Act, Homeless Children and Youth II had one instance which was adjusted and corrected. Recommendation – We recommend the School District expand its internal control over budgetary review of its grants, particularly in regard to reviewing MDE approved budgeted amounts to actual expenditures. View of Responsible Officials – The School District agrees with our finding and recommendation. Planned Corrective Actions – See corrective action plan, annexed.
Federal Agency: U.S. Department of Justice Federal Program Title: Postconviction Testing of DNA Evidence; Capital Case Litigation Initiative Assistance Listing Number: 16.820; 16.746 Federal Award Identification Number and Year: Multiple Award Period: July 1, 2023 to June 30, 2024 Type of Finding: Other Matters Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: Per 2 CFR 200.516(4): Known questioned costs that are greater than $25,000 for a Federal program which is not audited as a major program should be reported as finding. Except for audit follow-up, the auditor is not required under this part to perform audit procedures for such a Federal program; therefore, the auditor will normally not find questioned costs for a program that is not audited as a major program. However, if the auditor does become aware of questioned costs for a Federal program that is not audited as a major program (e.g., as part of audit follow-up or other audit procedures) and the known questioned costs are greater than $25,000, then the auditor must report this as an audit finding. Additionally, per Uniform Guidance 2 CFR 200.303, nonfederal entities receiving federal awards are required to establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. CFR 200.403(a) requires costs incurred on federal awards to be necessary and reasonable for the performance of the Federal award and be allocable thereto. Condition: CLA was notified by the Post-Award Office of Sponsored Programs that they were informed about several irregularities and potentially unallowable costs related to certain Department of Justice Awards. Context: The University conducted an internal investigation in conjunction with the Idaho State Board of Education Internal Audit and Advisory Services, the investigation identified unallowable costs/activities that were charged to Department of Justice Awards. The University notified the Department of Justice of this situation through a Disclosure Letter to the Department. The disallowed costs were related to time and effort that was not allocable to the affected grants as well as lobbying efforts and related indirect cost recoveries. Questioned costs: $65,750.67. Effect: The University was out of compliance as it relates to charging disallowable costs/activities to federal programs. Cause: An employee was found to have intentionally overridden the system of internal controls in violation of University policy. Repeat finding: No Recommendation: We recommend the University continue to foster a research and creative activity environment that stresses the importance of compliance and prompt disclosure and resolution of any self-identified issues. Views of responsible officials: Management agrees with the finding and has developed a plan to correct the finding.