Program: AL 93.658 - Foster Care Title IV-E; AL 10.561 - State Administrative Matching Grants for the Supplemental Nutrition Assistance Program; AL 93.659 - Adoption Assistance – Allowable Costs/Cost Principles Grant Number & Year: 2301NEFOST, FFY 2023; 202323S251443, FFY 2023; 2301NEADPT, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR § 75.405(a) (October 1, 2022) and 2 CFR § 200.405 (January 1, 2023) state, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2022) and 2 CFR § 200.403 (January 1, 2023) provide the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2022) and 2 CFR § 200.303 (January 1, 2023), The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Per the CAP’s RMTS Time Study Design/Coding Structure: [P]articipants are asked whether they are working on an activity that is client related. If they select “Yes” to this question, they are asked to identify the Case ID and type of case . . . . Per the CAP’s RMTS Survey Validation: The contractor and the NE DHHS staff review subsample responses to ensure the activity selected matches the description provided. If the activity and description do not match, the participant is notified and the moment is considered invalid. Per the CAP’s RMTS Response Time/Non-Responses: Participants have two (2) calendar days to respond to each moment. The two (2) day response time allows workers who may spend time outside of their office location and away from email the opportunity to respond to the moment before it expires. The two (2) day period is inclusive of calendar hours and not business days . . . . Good internal control and sound accounting practices require procedures to ensure that staff know how to complete accurate random moment time studies, which are used to allocate costs to Federal programs. Condition: The Agency did not have adequate procedures to ensure payroll charges were proper. Repeat Finding: 2022-024 Questioned Costs: $55,666 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: The Random Moment Time Study (RMTS) is conducted on an ongoing basis to provide data for the allocations of direct and indirect costs to various programs. The objective is to identify employee efforts directly related to programs administered by the Agency. We tested 55 RMTS surveys and noted 18 errors resulting in questioned costs as follows: • For 10 of 15 surveys tested, the workers erroneously reported they were working on a Foster Care IV-E (Federally funded) case when the survey should have been reported as Foster Care Non IV-E; therefore, Foster Care was overcharged. o For two surveys, the cases had previously been IV-E Foster Care cases but were changed to Non IV-E cases the month prior to the surveys submitted by the Child and Family Services Specialists. o For one survey, the worker completed the survey three calendar days after the RMTS was generated and the activity described on the survey form was for the date submitted, not when the RMTS was generated. • For 7 of 19 Supplemental Nutrition Assistance Program (SNAP) surveys tested, the RMTS survey form appeared to have been completed incorrectly. o For two surveys, the workers selected SNAP; however, per the case files, the case worker appeared to be working on Low Income Home Energy Assistance (LIHEAP) and not on SNAP. o For one survey, the worker stated on the survey form they were working on a case activity for SNAP; however, no case file name or identification case number was given to identify what case was being worked. o For three surveys, the workers selected the SNAP program; however, we could not confirm from the documentation on file what the worker was working on, and the questioned costs are unknown. o For one survey, the case worker selected the SNAP program; however, per the case files, the case worker appeared to be working on other programs along with SNAP at the time of the survey. • For one of seven Adoption IV-E surveys tested, the worker erroneously reported that they were working on an Adoption IV-E case when the survey should have been reported as Foster Care IV-E; therefore, Adoption IV-E was overcharged. Total known Federal payment errors, amount tested, error rate (amount of errors/amount tested), total dollars charged via RMTS, and potential dollars at risk (dollar rate multiplied by the population total dollars charged) are summarized below by program: See Schedule of Findings and Questioned Costs for chart/table. Cause: The Agency’s training of staff and supervisor reviews of RMTS surveys were not sufficient to ensure the surveys were accurately completed. Effect: Random moment sampling is based on the laws of probability, which state, in essence, that there is a high probability that a relatively small number of random surveys will yield an accurate depiction of the overall characteristics of the population for which the sample was taken. If RMTS surveys are not accurate, there is an increased risk costs will be allocated incorrectly between programs. Recommendation: We recommend the Agency improve procedures to ensure that random moment surveys are accurate and adequately reviewed. Management Response: The Agency agrees.
Program: Various, including AL 93.778 – Medical Assistance Program (Medicaid), and AL 93.563 – Child Support Enforcement – Allowable Costs/Cost Principles Grant Number & Year: Various, including 2205NE5ADM, FFY 2022; 2201NECSES, FFY 2022 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 2 CFR § 200.403 (January 1, 2023) and 45 CFR § 75.403 (October 1, 2022) state, in relevant part, the following: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: * * * * (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. * * * * (g) Be adequately documented. 2 CFR § 200.405(b) (January 1, 2023) and 45 CFR § 75.405(b) (October 1, 2022) state, in relevant part, the following: All activities which benefit from the non-Federal entity’s indirect (F&A) cost, including unallowable activities and donated services by the non-Federal entity or third parties, will receive an appropriate allocation of indirect costs. 2 CFR § 200, Appendix V, subsection (G)(2), (January 1, 2023) and 45 CFR § 75 Appendix V, subsection (G)(2), (October 1, 2022) state the following: Internal service funds are dependent upon a reasonable level of working capital reserve to operate from one billing cycle to the next. Charges by an internal service activity to provide for the establishment and maintenance of a reasonable level of working capital reserve, in addition to the full recovery of costs, are allowable. A working capital reserve as part of retained earnings of up to 60 calendar days cash expenses for normal operating purposes is considered reasonable. A working capital reserve exceeding 60 calendar days may be approved by the cognizant agency for indirect costs in exceptional cases. 2 CFR § 200, Appendix V, subsection (G)(4), (January 1, 2023) and 45 CFR § 75 Appendix V, subsection (G)(4), (October 1, 2022) state, in relevant part, the following: Billing rates used to charge Federal awards must be based on the estimated costs of providing the services, including an estimate of the allocable central service costs. A comparison of the revenues generated by each billed service (including revenues whether or not billed or collected) to the actual allowable costs of the service will be made at least annually and an adjustment will be made for the difference between the revenue and the allowable costs. Neb. Rev Stat. § 81-1120.22 (Cum. Supp. 2022) states the following: The Director of Communications shall develop a system of equitable billings and charges for communications services provided in any consolidated or joint-use system of communications. Such system of charges shall reflect, as nearly as may be practical, the actual share of costs incurred on behalf of or for services to each department, agency, or political subdivision provided communications services. Using agencies shall pay for such services out of appropriated or available funds. Beginning July 1, 2011, all payments shall be credited to the Communications Revolving Fund. Beginning July 1, 2011, all collections for payment of telephone expenses shall be credited to the Communications Revolving Fund. 2 CFR § 200.444(a) (January 1, 2023) and 45 CFR § 75.444(a) (October 1, 2022) state, in relevant part, the following: For states . . . the general costs of government are unallowable . . . . Unallowable costs include: (1) Salaries and expenses of the Office of the Governor of a state . . . . (2) Salaries and other expenses of a state legislature . . . . A good internal control plan requires: • Procedures to ensure rate charges are equitable, reflect actual costs incurred, and are reviewed periodically to ensure charges are appropriate for the services provided. • Adequate documentation is maintained to support both rates charged and the approval of those rates. Condition: The Agency did not have adequate documentation to support the allocation of information services and communications costs in developing rates charged by the Office of the Chief Information Officer (OCIO). Additionally, the OCIO did not maintain adequate documentation to support that charges were reasonable, equitable, and consistently applied. We also noted the Agency did not have adequate documentation to support the allocation of security costs in developing building rental rates, and the Agency’s Materiel Division did not maintain adequate documentation to support that charges were reasonable, equitable, and consistently applied. A similar finding has been noted in prior audits since 2015. Repeat Finding: 2022-017 Questioned Costs: Unknown Statistical Sample: No Context: We noted the following: Office of the Chief Information Officer (OCIO) For 6 of 14 OCIO rates selected for testing, documentation provided by the division was not adequate to support the rate charged. • Five of the rates selected utilized an employee time allocation spreadsheet prepared by the OCIO. The spreadsheet was prepared by supervisors utilizing an estimate of how much time each year every employee spends on services provided by the division. During testing, it was noted that these estimates are not backed by a time study, nor is a review of actual hours worked on each service completed by the division. • For one rate selected, we identified variances between the total for networking equipment used in the calculation of the rate charged and the totals per the supporting documentation provided, netting to $1,313,693. When asked about the variances, the OCIO was unable to explain why the amounts did not agree. • For one rate tested, the rate included equipment and maintenance costs incurred by the University of Nebraska (University). The fee was related to the network operated and maintained by Network Nebraska (a collaborative aggregation partnership between the OCIO, the University, and the Nebraska Educational Telecommunications commission). The OCIO receipts funds from the services provided to participants on the network. However, it was noted during testing that the OCIO does not pay the University for its portion of costs incurred for this fee. Per documentation provided to support the calculation of the rate charged, the University incurs $582,049 of the total annual costs of $788,510. For 8 of 14 OCIO rates selected for testing, the rate charged was not reasonable or was improper. • For the six rates previously mentioned above, we were unable to determine if the rate was proper due to the lack of supporting documentation. • For one rate tested, we noted that actual costs incurred for the service provided recalculated to 40 cents per unit. The OCIO charged 22 cents per unit for the service. Total units sold for the service in calendar year 2022 were 39,348,448, resulting in an expected loss of $7,165,169. • For one rate tested, we noted that the rate calculation included employee salaries as a base for costs incurred. Per the calculation, the OCIO utilized salaries that were effective as of January 1, 2018. We compared the hourly compensation for a sample of employees at January 1, 2018, and as of July 1, 2021. During this period, we noted an average pay increase of 9.1% for the employees selected; thus, the rate charged is inappropriate per the actual costs incurred for providing the service. For 3 of 15 OCIO receipts tested, documentation provided was not adequate to support the rate charged. • For one receipt tested, we noted that the OCIO did not charge from an outside communications provider at the same rate that was shown on the invoice from the provider. These rates were “Re-rated” by the OCIO and then charged to the agency. The OCIO could not provide support for how the re-rates were determined. The APA selected seven rates from the OCIO billing to trace to support, and five of those rates could not be traced back to the provider invoice. Of the total payment of $116,175, $11,397 was charged at a rate that could not be traced to support. • For one receipt tested, we noted that the amount charged for a monthly Supreme Court retainer fee of $56,250 is determined by a rate calculated by the OCIO, but the OCIO could not provide support for the amounts used in the calculation. • For one receipt tested, $9,057 was charged for IT Support. This was based on an employee’s annual salary being paid 90% by the agency and 10% by the OCIO. The OCIO could not provide supporting documentation for how the 90/10 split was determined. In addition to the testing mentioned previously, we asked the OCIO how rates are calculated and what procedures are performed to ensure that the rates are appropriate. Most of the rates selected for testing were last updated in 2020. The staff that created these rates are no longer with the OCIO due to turnover. The OCIO reviews each rate on a yearly basis to determine if the amount charged is appropriate based on actual costs incurred. However, no documentation on the individual rate setting processes was developed or maintained when the rates were initially created. The APA reviewed the OCIO’s fund balances and found them to be compliant with Federal regulations. However, because some rates charged are improper or inadequately supported, there is a risk of some Federal programs being overcharged and some being undercharged. The OCIO receipted $36,684,244 in Federal dollars for services performed for Federal programs. Of this amount, $16,480,956 was charged to Medicaid, and $4,597,226 was charged to Child Support Enforcement. Building Division The rental rate charged to agencies for building space includes an allocation for indirect administrative costs, grounds keeping, security, and energy management. We noted that security costs were allocated for neither the Capitol nor the Governor’s residence, even though security is provided at those locations. Because those locations were not allocated any security costs, Federal programs could be overcharged. Additionally, security costs for the Capitol and the Governor’s residence are general costs of government and, therefore, not allowable. The fiscal year 2023 indirect allocations for security were $785,709. Print Shop As noted in prior audits, the Print Shop lacked adequate support for service rates charged. The Agency was in the process of developing new rates using a new methodology, but no changes were made for fiscal year 2023. Receipts from sales for fiscal year 2023 totaled $3,058,910. Cause: Inadequate procedures. Per the Agency, the methodology used to allocate the security allocation is based on a management decision; however, management cannot simply choose to disregard Federal regulations. Effect: When information services and communications costs are not allocated to all agencies in an equitable manner, there is an increased risk that Federal programs will not be charged in accordance with Federal cost principles. Additionally, without adequate controls and procedures to ensure rates are equitable and based on actual costs, there is an increased risk that Federal programs or State agencies will be overcharged for services. When security costs are not allocated to all buildings in an equitable manner, Federal programs will not be charged in accordance with Federal cost principles. Recommendation: We recommend the Agency review its allocation of information and communications costs to ensure that the costs are allocated in an equitable manner to all activities that benefit from the services. Additionally, we recommend the Agency maintain adequate documentation to support charges and ensure rates are equitable and reflect the actual costs incurred for services. We also recommend the Agency improve procedures to ensure that published rates are the actual rates charged. Lastly, we recommend the Agency review its allocation of security costs to ensure that the costs are allocated in an equitable manner to all activities that benefit from the services, in accordance with Federal regulations. Management Response: The OCIO agrees with the findings as identified by the APA. The Building and Grounds security allocation is based on a management business decision. The Print Shop lacked the data needed to substantiate published rates at the individual service line level. In response to prior findings, the Print Shop purchased a Cost Rate Advisor license to support future rate setting methodology at the individual service line level. That tool is currently being utilized to build Print Shop rates for the fiscal year 2026 - 2027 biennium. APA Response: As noted above, security costs for the Capitol and the Governor’s residence are general costs of government; therefore, despite any management business decision, such costs are not allowable.
Program: AL 93.558 – Temporary Assistance for Needy Families; AL 93.563 – Child Support Enforcement; AL 93.568 – Low Income Home Energy Assistance (LIHEAP); AL 93.575 – Child Care and Development Block Grant; AL 93.658 – Foster Care Title IV-E; AL 93.778 – Medical Assistance Program; AL 10.561 – State Administrative Matching Grants for the Supplemental Nutrition Assistance Program – Allowable Costs/Cost Principles Grant Number & Year: 2001NETANF, FFY 2020; 2301NECSES, FFY 2023; 2301NELIEA, FFY 2023; 2301NECCDD, FFY 2023; 2301NEFOST, FFY 2023; 2305NE5ADM, FFY 2023; 233NE406S2514, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR § 75.405(a) (October 1, 2022) and 2 CFR § 200.405 (January 1, 2023) state, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2022) and 2 CFR § 200.403 (January 1, 2023) provide the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2022) and 2 CFR § 200.303 (January 1, 2023), The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Title 45 CFR § 75.302 (October 1, 2022) and 2 CFR § 200.302 (January 1, 2023) require financial management systems of the State sufficient to permit preparation of required reports and permit the tracing of funds to expenditures adequate to establish the use of these funds were in accordance with applicable regulations. EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. Good internal control requires procedures to ensure that amounts charged to Federal funds are proper. Condition: Procedures to ensure journal entries and adjustments to the Public Assistance Cost Allocation Plan (PACAP) were not adequate, resulting in multiple Federal programs being overcharged. Repeat Finding: No Questioned Costs: $581,496 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: Each quarter, as the PACAP is prepared, the Agency makes multiple adjustments for costs that either were charged to Federal funds and should not have been, or costs that were not charged to Federal funds but are claimable to a Federal grant. We tested five adjustments between two quarters. One adjustment tested for the quarter ended December 31, 2022, was recorded to charge the Foster Care grant for allowable costs incurred by the Foster Care Review Office (FCRO), a separate agency. The amounts provided by FCRO erroneously included payroll charges from a previous quarter, inflating the amount charged. The FCRO later caught the mistake and adjusted the internal spreadsheet but did not alert the Agency to the error, so a correcting adjustment was never made to the PACAP. The amount charged was $353,984; however, the adjustment should have been $212,725, a difference of $141,259. Foster Care is matched at 50%, so the grant was overcharged $70,629, which are questioned costs. Due to this error, we reviewed a second Foster Care adjustment for the quarter ending March 31, 2023, and noted the Agency’s calculation included amounts for a State funded program that should have been removed, resulting in the grant being overcharged an additional $1,561. We also tested six journal entries that moved costs between cost centers to determine any impact on the PACAP and if those journal entries were appropriate. We noted three improper journal entries that the Agency had not corrected as of the end of the fiscal year: • A journal entry for $526,487 was performed in November 2022 to temporarily move postage costs of multiple programs from State funds to the Child Support Enforcement (CSE) grant until new coding could be created in the State’s accounting system to track expenses from one fiscal year to another. The intent was to reverse the entry as soon as the new coding was completed; however, the reversing entry was never performed. Since the Agency performs a quarterly adjustment for the CSE grant to charge indirect costs identified by the Agency’s PACAP to the grant, the CSE grant was overcharged a total of $263,628. No correcting entry had been made as of September 30, 2023. These are considered questioned costs. • A journal entry for $207,369 was performed in December 2022 to move expenses to allow payroll to post. The intent was to reverse the entry before the end of the fiscal year; however, that was not done. The expenses were moved from Medicaid administration and were charged to the Central Services and Supplies Cost Center, which is then allocated to numerous other Cost Centers that are further allocated or charged directly to Federal programs such as TANF and Child Care. Due to the intricacies of PACAP allocations, exact questioned costs are unknown. No correcting entry was made as of September 30, 2023. • A journal entry for $5,317,640 was done in February 2023 to move Premium Pay to the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) grant as additional pay for certain job roles allowed under that grant. However, the entry performed included some lines that were miscoded, most significantly a line for $764,187 that was supposed to move money within the same Cost Center (CC 25C21910 – Field Office Administration); however, it pulled costs out of Cost Center 25C21780 - Protection and Safety Policy Chief instead. Additionally, we confirmed with the Agency that the costs charged to CC 25C21910 under the CSLFRF grant were also allocated to other Federal programs through the PACAP, essentially charging Federal programs twice. Due to the intricacies of the PACAP allocations, total questioned costs are unknown; however, we were able to determine that this error caused Medicaid to be overcharged $149,478, LIHEAP to be overcharged $33,447, SNAP to be overcharged $44,984, Child Care to be overcharged $10,412, and TANF to be overcharged $7,357. Cause: Inadequate procedures to ensure that adjustments to the PACAP are proper and that journal entries are appropriate for each program. Effect: Unallowable expenditures were charged to Federal funds and there is an increased risk for errors, fraud, and non-compliance with Federal regulations. Recommendation: We recommend the Agency strengthen procedures to ensure adjusting entries are complete and accurate. We further recommend the Agency strengthen procedures to ensure compliance with Federal regulations. Management Response: The Agency agrees.
Program: AL 20.509 – Formula Grants for Rural Areas – Allowability & Subrecipient Monitoring Grant Number & Year: NE-2019-013-00, Performance End FFY 2023; NE-2022-019-00, Performance End FFY 2024 Federal Grantor Agency: U.S. Department of Transportation Criteria: Per 2 CFR § 1201.1 (January 1, 2023), the U.S. Department of Transportation adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at Title 2 CFR part 200. 2 CFR § 200.403 (January 1, 2023) requires costs to be reasonable, necessary, and adequately documented. A good internal control plan requires procedures to be in place to ensure compliance with Federal and State requirements. 2 CFR § 200.332(d) (January 1, 2023) requires the pass-through entity to do the following: Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. 2 CFR § 200.430(i)(1) (January 1, 2023) states the following, in relevant part: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; * * * * (vii) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards . . . . 2 CFR § 200.431(b) (January 1, 2023) states the following, in relevant part: Leave. The cost of fringe benefits in the form of regular compensation paid to employees during periods of authorized absences from the job, such as for annual leave, family-related leave, sick leave, holidays, court leave, military leave, administrative leave, and other similar benefits, are allowable if all of the following criteria are met: * * * * (2) The costs are equitably allocated to all related activities, including Federal awards . . . . 2 CFR § 200.467 (January 1, 2023) states the following: Costs of selling and marketing any products or services of the non-Federal entity (unless allowed under § 200.421) are unallowable, except as direct costs, with prior approval by the Federal awarding agency when necessary for the performance of the Federal award. Per 2 CFR § 200.405(a) (January 1, 2023), “A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received.” Condition: The Agency lacked adequate documentation to support that payments were for allowable activities and in accordance with allowable cost principles. A similar finding was noted in the prior audit. Repeat Finding: 2022-057 Questioned Costs: $82,967 known (NE-2019-013-00 $82,121; NE-2022-019-00 $846) Statistical Sample: No Context: During the fiscal year, the Agency paid 58 subrecipients a total of $10,974,293. We selected 24 payments to subrecipients for testing. The Agency performed financial reviews for subrecipients; however, the reviews tested did not always include all necessary supporting documentation. When additional documentation was needed, we gave the Agency the opportunity to obtain additional support from the subrecipient; however, adequate support was not always obtained or able to be provided. Our random sample included an operating assistance reimbursement to North Fork Area Transit (NFAT). As identified in both the prior Single audit and a separate letter sent to the Agency, dated August 7, 2023, reimbursements for questionable expenditures were made to NFAT during the period April 1, 2022, to November 30, 2022. The former NFAT director was alleged to have committed fraud during this period. Our current testing included the reimbursement for NFAT’s August 2022 expenditures. The payment tested reimbursed NFAT $201,438 in Federal dollars. Of that amount, $78,348 was questioned, as follows: • NFAT was reimbursed $21,665 for nonoperating personnel when the timesheets supporting the time worked were all copies of the same timesheet. • NFAT was reimbursed $29,072 for operating personnel hours worked that did not appear reasonable. We noted nine employees whose hours for the four-week period were between 234.6 to 321.12 hours. This averages from 58.65 to 80.28 hours per week for each employee. Such large weekly averages give rise to concerns about not only the reasonableness and necessity of these payments but also possible compliance issues with labor standards – not to mention safety issues for riders. This was also identified in the letter dated August 7, 2023, in which employees were identified as working excessive overtime. An additional $376 was questioned, as the number of work hours for which one employee received compensation did not agree to those listed on his timesheet. • NFAT was reimbursed $12,874 for vendor payments that never appear to have cleared the bank. Invoices and checks were provided to support the maintenance expenses reimbursed; however, the checks provided never cleared the bank. This was also identified in the letter dated August 7, 2023, which noted that the Director appeared to have written the checks but not paid the vendors. • NFAT was reimbursed $14,361 for a duplicate payment. An invoice and check were provided to support the reimbursement of an insurance expense; however, this same expense was also submitted and reimbursed by the Agency in NFAT’s September 2022 request for reimbursement. We also noted issues with 12 of the 24 subrecipient payments tested, amounting to $4,619 in questioned costs, due to the following: • For eight subrecipients tested, documentation was inadequate to support that personnel charges were allowable and in accordance with Federal cost principles, resulting in questioned costs of $2,705. Specifically, we noted the following: o Payments for employee leave was not equitably allocated based on time worked. o One subrecipient had wages reimbursed based on budgeted amounts. o One subrecipient was reimbursed for health insurance for two employees who had elected to receive wages in lieu of such insurance. o One subrecipient requested reimbursement for wages that did not agree with the amount paid to employees. • For six subrecipients tested, questioned costs of $1,914 were identified due to inadequate support for capital and nonoperating costs. Questioned costs included the following: o One subrecipient was reimbursed for carpet adhesive that was later returned to the store. The subrecipient reimbursed the Director for the purchase of the carpet adhesive on her personal credit card, but the Agency was unable to identify a subsequent reimbursement request that reduced the amount sought for the returned items. Additionally, the subrecipient paid the Director for travel to another state to purchase the carpet adhesive, which not only could have been obtained from a more nearby merchant but also was ultimately returned. o Unreasonable travel reimbursements were noted. Among those was reimbursement for costs incurred by the subrecipient’s Director to travel to a meeting of an unaffiliated organization’s Board of Directors upon which she served as a member. That travel to attend a separate Board meeting was unrelated to the transit program. o A subrecipient was reimbursed for fees related to obtaining a trademark, which appears to have been a marketing expense that was not approved by the Federal awarding agency. o One subrecipient was reimbursed for an administrative fee that was not supported. The payment tested included a 7% administrative fee that was not specified in the agreement. o One subrecipient was reimbursed for unreasonable items, such as Christmas décor and Christmas candy. o One subrecipient was reimbursed for bookkeeping expenses; however, the subrecipient did not provide documentation to support that the amount allocated for that purpose was reasonable. Based on the sample tested, we estimate the potential dollars at risk for the fiscal year to be $501,670, as detailed below: See Schedule of Findings and Questioned Costs for chart/table. Cause: Procedures were inadequate to ensure that costs were in accordance with Federal requirements. Effect: Increased risk for errors or misuse of funds. Recommendation: We recommend the Agency strengthen subrecipient monitoring procedures. We further recommend the Agency improve procedures to ensure expenditures are allowable and in accordance with Federal regulations. Management Response: NDOT concurs with the findings and has revised reimbursement guidelines for subrecipients, clarifying allowed expenses and required documentation. Over the next 6-12 months, NDOT will conduct training sessions with subrecipients and collaborate with internal auditors on compliance matters. The establishment of the “Federal Oversight” unit within the Transit Section aims to improve monitoring, consistency, and compliance with federal requirements for all subrecipients.
Program: AL 21.023 – COVID-19 Emergency Rental Assistance – Allowability & Eligibility & Period of Performance Grant Number & Year: N/A Federal Grantor Agency: U.S. Department of the Treasury Criteria: Per 2 CFR § 1000.10 (January 1, 2023), the U.S. Department of the Treasury adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at 2 CFR part 200. Per 2 CFR § 200.303 (January 1, 2023): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 2 CFR § 200.403 (January 1, 2023) states, in part, the following: 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. * * * * (g) Be adequately documented. 2 CFR § 200.405(d) (January 1, 2023) states the following, in relevant part: If a cost benefits two or more projects or activities in proportions that can be determined without undue effort or cost, the cost must be allocated to the projects based on the proportional benefit. If a cost benefits two or more projects or activities in proportions that cannot be determined because of the interrelationship of the work involved, then, notwithstanding paragraph (c) of this section, the costs may be allocated or transferred to benefitted projects on any reasonable documented basis. Per 2 CFR § 1108.285 (January 1, 2023): Period of performance means the time during which a recipient or subrecipient may incur new obligations to carry out the work authorized under an award or subaward, respectively. Question 7 in the Frequently Asked Questions (FAQ) guidance document (Revised July 27, 2022), issued by the U.S. Department of the Treasury, for the Emergency Rental Assistance program, states the following: For both ERA1 and ERA2, other expenses related to housing include relocation expenses (including prospective relocation expenses), such as rental security deposits, and rental fees, which may include application or screening fees. It can also include reasonable accrued late fees (if not included in rental or utility arrears), and Internet service provided to the rental unit. . . . All payments for housing-related expenses must be supported by documentary evidence such as a bill, invoice, or evidence of payment to the provider of the service. Question 4 of the same FAQ guidance document also states the following: The statute establishing ERA1 provides that grantees may determine income eligibility based on either (i) the household’s total income for calendar year 2020, or (ii) sufficient confirmation of the household’s monthly income at the time of application, as determined by the Secretary of the Treasury (Secretary). . . . In order to provide assistance rapidly, during the public health emergency related to COVID-19 the grantee may rely on a self-attestation of household income without further verification if the applicant confirms in their application or other document that they are unable to provide documentation of their income. If a written attestation without further verification is relied on to document the majority of the applicant’s income, the grantee must reassess the household’s income every three months, by obtaining appropriate documentation or a new self-attestation. The Emergency Rental Assistance (ERA1): Closeout Resource (September 16, 2022), also promulgated by the U.S. Department of the Treasury, contains the following: The end date of the award period of performance is the last day for a grantee to obligate funds for ERA1 activities (September 30, 2022 for award funds received pursuant to the grantee’s initial allocation and December 29, 2022 for reallocated funds). Funds statutorily available for administrative costs are not considered to be “automatically” obligated; therefore, grantees must obligate award funds by the end of the award period of performance to cover their administrative costs for closeout activities. Good internal control requires procedures to ensure that adequate supporting documentation is obtained and utilized during the application review process. Good internal control also requires procedures to ensure compliance with Federal regulations. Condition: Procedures were inadequate to ensure that payments were allowable, and individuals were eligible for assistance. A similar finding was noted in the prior audit. For one contract payment tested, the costs had neither been obligated nor occurred prior to the end of the period of performance for the ERA1 program. Additionally, the costs were associated with multiple programs but charged only to the ERA1 program. Repeat Finding: 2022-052 Questioned Costs: $172,809 known Statistical Sample: No Context: We noted that 7 of 25 assistance payments tested had errors or inadequate support, as follows: • One payment lacked documentation to support the tenant’s 2020 income or monthly income at the time of the application. • Five payments were for rent assistance for October and/or November 2022, which is after the period of performance. • One payment was for late fees; however, the lease agreement provided did not contain a late fee clause. Federal payment errors for the sample tested were $7,809. The total sample tested was $35,575, and assistance payments for the fiscal year totaled $4,678,044. Based on the sample tested, the dollar error rate for the sample was 21.95% ($7,809/$35,575), which estimates the potential dollars at risk for fiscal year 2023 to be $1,026,831 (dollar rate multiplied by the population). We tested three contract payments made after January 1, 2023. One payment for $165,000 was to obtain licenses to access ServiceNow for the period October 7, 2023, to January 31, 2026. This item was added to the contract on January 13, 2023. Additionally, it was noted that this access was purchased to access information related to other programs, along with ERA1. Therefore, these costs were not incurred or obligated prior to the end of the period of performance for ERA1, and the costs were not allocated to all benefitting programs as required. Cause: Inadequate review. Effect: Increased risk of loss or misuse of funds and non-compliance with Federal guidelines. Recommendation: We recommend the Agency improve procedures to ensure expenditures charged are within the allowed time period, adequately documented, and comply with Federal requirements. Management Response: Coordination with the contractor is ongoing. Audit findings are shared and revised as training and management attention was discussed. There are many checks and balance steps that continue to be discussed and revised on a weekly basis during call in monitoring and reporting session.
Criteria or Specific Requirement: CFR section 200.403, Factors affecting allowability of costs, states costs must: conform to limitations or exclusions, 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 and be adequately documented. 2 CFR section 200.405, Allowable costs, states this standard is met if the cost is incurred specifically for the Federal award and can be distributed in proportions that may be approximated using reasonable methods. Further, if costs benefit two or more projects or activities in proportions that can be determined without undue effort or cost, the cost must be allocated to the projects based on the proportional benefit. If a cost benefits two or more projects or activities in proportions that cannot be determined, the costs must be allocated on any reasonable documented basis. 2 CFR section 200.430(i) Standards for Documentation of Personnel Expenses states charges to Federal awards for salaries must be based on records that accurately reflect the work performed and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award and non-Federal award and charges for the salaries and wages of nonexempt employees must be supported by records indicating the total number of hours worked each day. Condition: The Organization did not maintain an effective control environment to ensure costs incurred for expenditures charged to the program were in accordance with contract requirements and applicable cost principles. The method for allocation of non-payroll expenditures between federally funded programs and other programs was based on percentages that had not been to reflect current funding sources. Payroll expenditures were allocated based on budget estimates and not upon the actual work performed on various Federal awards and non-federal activities. Cause: The Organization received new funding subject to Uniform Guidance and did not have written internal control policies as required by Uniform Guidance. Processes and procedures were not updated to be in accordance with Uniform Guidance. Effect or Potential Effect: Potential for unallowable activities and unallowable costs. Questioned Costs: Related questioned costs are unknown. Context: During the year under audit, the issues represent a systemic problem. Recommendation: We recommend the Organization document all methods used to allocate expenditures and ensure adequate support is maintained to substantiate allocation calculations. Management should design and implement policies and procedures to ensure payroll expenditures are based on actual time spent on the federal funded programs. View of Responsible Officials: In response to finding number 2023-001, there is no disagreement with the audit finding. As this is our first audit requiring Internal Controls over Compliance, management will draft new policies and procedures to ensure payroll expenditures are based on actual time spent of the federal funded programs. Managers will allocate employees’ time based on tasks performed and the amount of time worked on federal award activities. The allocation of non-payroll expenses will be based on percentages of current funding sources. These new policies and procedures will be in full effect throughout fiscal year 2025 and beyond.
Criteria or Specific Requirement: CFR section 200.403, Factors affecting allowability of costs, states costs must: conform to limitations or exclusions, 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 and be adequately documented. 2 CFR section 200.405, Allowable costs, states this standard is met if the cost is incurred specifically for the Federal award and can be distributed in proportions that may be approximated using reasonable methods. Further, if costs benefit two or more projects or activities in proportions that can be determined without undue effort or cost, the cost must be allocated to the projects based on the proportional benefit. If a cost benefits two or more projects or activities in proportions that cannot be determined, the costs must be allocated on any reasonable documented basis. 2 CFR section 200.430(i) Standards for Documentation of Personnel Expenses states charges to Federal awards for salaries must be based on records that accurately reflect the work performed and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award and non-Federal award and charges for the salaries and wages of nonexempt employees must be supported by records indicating the total number of hours worked each day. Condition: The Organization did not maintain an effective control environment to ensure costs incurred for expenditures charged to the program were in accordance with contract requirements and applicable cost principles. The method for allocation of non-payroll expenditures between federally funded programs and other programs was based on percentages that had not been to reflect current funding sources. Payroll expenditures were allocated based on budget estimates and not upon the actual work performed on various Federal awards and non-federal activities. Cause: The Organization received new funding subject to Uniform Guidance and did not have written internal control policies as required by Uniform Guidance. Processes and procedures were not updated to be in accordance with Uniform Guidance. Effect or Potential Effect: Potential for unallowable activities and unallowable costs. Questioned Costs: Related questioned costs are unknown. Context: During the year under audit, the issues represent a systemic problem. Recommendation: We recommend the Organization document all methods used to allocate expenditures and ensure adequate support is maintained to substantiate allocation calculations. Management should design and implement policies and procedures to ensure payroll expenditures are based on actual time spent on the federal funded programs. View of Responsible Officials: In response to finding number 2023-001, there is no disagreement with the audit finding. As this is our first audit requiring Internal Controls over Compliance, management will draft new policies and procedures to ensure payroll expenditures are based on actual time spent of the federal funded programs. Managers will allocate employees’ time based on tasks performed and the amount of time worked on federal award activities. The allocation of non-payroll expenses will be based on percentages of current funding sources. These new policies and procedures will be in full effect throughout fiscal year 2025 and beyond.
Criteria or Specific Requirement: CFR section 200.403, Factors affecting allowability of costs, states costs must: conform to limitations or exclusions, 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 and be adequately documented. 2 CFR section 200.405, Allowable costs, states this standard is met if the cost is incurred specifically for the Federal award and can be distributed in proportions that may be approximated using reasonable methods. Further, if costs benefit two or more projects or activities in proportions that can be determined without undue effort or cost, the cost must be allocated to the projects based on the proportional benefit. If a cost benefits two or more projects or activities in proportions that cannot be determined, the costs must be allocated on any reasonable documented basis. 2 CFR section 200.430(i) Standards for Documentation of Personnel Expenses states charges to Federal awards for salaries must be based on records that accurately reflect the work performed and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award and non-Federal award and charges for the salaries and wages of nonexempt employees must be supported by records indicating the total number of hours worked each day. Condition: The Organization did not maintain an effective control environment to ensure costs incurred for expenditures charged to the program were in accordance with contract requirements and applicable cost principles. The method for allocation of non-payroll expenditures between federally funded programs and other programs was based on percentages that had not been to reflect current funding sources. Payroll expenditures were allocated based on budget estimates and not upon the actual work performed on various Federal awards and non-federal activities. Cause: The Organization received new funding subject to Uniform Guidance and did not have written internal control policies as required by Uniform Guidance. Processes and procedures were not updated to be in accordance with Uniform Guidance. Effect or Potential Effect: Potential for unallowable activities and unallowable costs. Questioned Costs: Related questioned costs are unknown. Context: During the year under audit, the issues represent a systemic problem. Recommendation: We recommend the Organization document all methods used to allocate expenditures and ensure adequate support is maintained to substantiate allocation calculations. Management should design and implement policies and procedures to ensure payroll expenditures are based on actual time spent on the federal funded programs. View of Responsible Officials: In response to finding number 2023-001, there is no disagreement with the audit finding. As this is our first audit requiring Internal Controls over Compliance, management will draft new policies and procedures to ensure payroll expenditures are based on actual time spent of the federal funded programs. Managers will allocate employees’ time based on tasks performed and the amount of time worked on federal award activities. The allocation of non-payroll expenses will be based on percentages of current funding sources. These new policies and procedures will be in full effect throughout fiscal year 2025 and beyond.
Criteria or Specific Requirement: CFR section 200.403, Factors affecting allowability of costs, states costs must: conform to limitations or exclusions, 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 and be adequately documented. 2 CFR section 200.405, Allowable costs, states this standard is met if the cost is incurred specifically for the Federal award and can be distributed in proportions that may be approximated using reasonable methods. Further, if costs benefit two or more projects or activities in proportions that can be determined without undue effort or cost, the cost must be allocated to the projects based on the proportional benefit. If a cost benefits two or more projects or activities in proportions that cannot be determined, the costs must be allocated on any reasonable documented basis. 2 CFR section 200.430(i) Standards for Documentation of Personnel Expenses states charges to Federal awards for salaries must be based on records that accurately reflect the work performed and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award and non-Federal award and charges for the salaries and wages of nonexempt employees must be supported by records indicating the total number of hours worked each day. Condition: The Organization did not maintain an effective control environment to ensure costs incurred for expenditures charged to the program were in accordance with contract requirements and applicable cost principles. The method for allocation of non-payroll expenditures between federally funded programs and other programs was based on percentages that had not been to reflect current funding sources. Payroll expenditures were allocated based on budget estimates and not upon the actual work performed on various Federal awards and non-federal activities. Cause: The Organization received new funding subject to Uniform Guidance and did not have written internal control policies as required by Uniform Guidance. Processes and procedures were not updated to be in accordance with Uniform Guidance. Effect or Potential Effect: Potential for unallowable activities and unallowable costs. Questioned Costs: Related questioned costs are unknown. Context: During the year under audit, the issues represent a systemic problem. Recommendation: We recommend the Organization document all methods used to allocate expenditures and ensure adequate support is maintained to substantiate allocation calculations. Management should design and implement policies and procedures to ensure payroll expenditures are based on actual time spent on the federal funded programs. View of Responsible Officials: In response to finding number 2023-001, there is no disagreement with the audit finding. As this is our first audit requiring Internal Controls over Compliance, management will draft new policies and procedures to ensure payroll expenditures are based on actual time spent of the federal funded programs. Managers will allocate employees’ time based on tasks performed and the amount of time worked on federal award activities. The allocation of non-payroll expenses will be based on percentages of current funding sources. These new policies and procedures will be in full effect throughout fiscal year 2025 and beyond.
Criteria or Specific Requirement: CFR section 200.403, Factors affecting allowability of costs, states costs must: conform to limitations or exclusions, 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 and be adequately documented. 2 CFR section 200.405, Allowable costs, states this standard is met if the cost is incurred specifically for the Federal award and can be distributed in proportions that may be approximated using reasonable methods. Further, if costs benefit two or more projects or activities in proportions that can be determined without undue effort or cost, the cost must be allocated to the projects based on the proportional benefit. If a cost benefits two or more projects or activities in proportions that cannot be determined, the costs must be allocated on any reasonable documented basis. 2 CFR section 200.430(i) Standards for Documentation of Personnel Expenses states charges to Federal awards for salaries must be based on records that accurately reflect the work performed and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award and non-Federal award and charges for the salaries and wages of nonexempt employees must be supported by records indicating the total number of hours worked each day. Condition: The Organization did not maintain an effective control environment to ensure costs incurred for expenditures charged to the program were in accordance with contract requirements and applicable cost principles. The method for allocation of non-payroll expenditures between federally funded programs and other programs was based on percentages that had not been to reflect current funding sources. Payroll expenditures were allocated based on budget estimates and not upon the actual work performed on various Federal awards and non-federal activities. Cause: The Organization received new funding subject to Uniform Guidance and did not have written internal control policies as required by Uniform Guidance. Processes and procedures were not updated to be in accordance with Uniform Guidance. Effect or Potential Effect: Potential for unallowable activities and unallowable costs. Questioned Costs: Related questioned costs are unknown. Context: During the year under audit, the issues represent a systemic problem. Recommendation: We recommend the Organization document all methods used to allocate expenditures and ensure adequate support is maintained to substantiate allocation calculations. Management should design and implement policies and procedures to ensure payroll expenditures are based on actual time spent on the federal funded programs. View of Responsible Officials: In response to finding number 2023-001, there is no disagreement with the audit finding. As this is our first audit requiring Internal Controls over Compliance, management will draft new policies and procedures to ensure payroll expenditures are based on actual time spent of the federal funded programs. Managers will allocate employees’ time based on tasks performed and the amount of time worked on federal award activities. The allocation of non-payroll expenses will be based on percentages of current funding sources. These new policies and procedures will be in full effect throughout fiscal year 2025 and beyond.
Criteria or Specific Requirement: CFR section 200.403, Factors affecting allowability of costs, states costs must: conform to limitations or exclusions, 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 and be adequately documented. 2 CFR section 200.405, Allowable costs, states this standard is met if the cost is incurred specifically for the Federal award and can be distributed in proportions that may be approximated using reasonable methods. Further, if costs benefit two or more projects or activities in proportions that can be determined without undue effort or cost, the cost must be allocated to the projects based on the proportional benefit. If a cost benefits two or more projects or activities in proportions that cannot be determined, the costs must be allocated on any reasonable documented basis. 2 CFR section 200.430(i) Standards for Documentation of Personnel Expenses states charges to Federal awards for salaries must be based on records that accurately reflect the work performed and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award and non-Federal award and charges for the salaries and wages of nonexempt employees must be supported by records indicating the total number of hours worked each day. Condition: The Organization did not maintain an effective control environment to ensure costs incurred for expenditures charged to the program were in accordance with contract requirements and applicable cost principles. The method for allocation of non-payroll expenditures between federally funded programs and other programs was based on percentages that had not been to reflect current funding sources. Payroll expenditures were allocated based on budget estimates and not upon the actual work performed on various Federal awards and non-federal activities. Cause: The Organization received new funding subject to Uniform Guidance and did not have written internal control policies as required by Uniform Guidance. Processes and procedures were not updated to be in accordance with Uniform Guidance. Effect or Potential Effect: Potential for unallowable activities and unallowable costs. Questioned Costs: Related questioned costs are unknown. Context: During the year under audit, the issues represent a systemic problem. Recommendation: We recommend the Organization document all methods used to allocate expenditures and ensure adequate support is maintained to substantiate allocation calculations. Management should design and implement policies and procedures to ensure payroll expenditures are based on actual time spent on the federal funded programs. View of Responsible Officials: In response to finding number 2023-001, there is no disagreement with the audit finding. As this is our first audit requiring Internal Controls over Compliance, management will draft new policies and procedures to ensure payroll expenditures are based on actual time spent of the federal funded programs. Managers will allocate employees’ time based on tasks performed and the amount of time worked on federal award activities. The allocation of non-payroll expenses will be based on percentages of current funding sources. These new policies and procedures will be in full effect throughout fiscal year 2025 and beyond.
Federal Agency: U.S. Department of Education Federal Program Name: Higher Education Institutional Aid – Fostering Inclusive Excellence for STEM Achievement Assistance Listing Number: 84.031C Award Period: July 01, 2022 - June 30, 2023 Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Matters Criteria or specific requirement: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. This standard is met if the cost: (1) Is incurred specifically for the Federal award; (2) Benefits both the Federal award and other work of the non-Federal entity and can be distributed in proportions that may be approximated using reasonable methods; and (3) Is necessary to the overall operation of the non-Federal entity and is assignable in part to the Federal award in accordance with the principles in this subpart. (CFR 200.405) Condition: During testing of indirect costs, it was noted that the University did not properly calculate the allocation of indirect costs. Questioned costs: $15,710. Context: During our testing, it was noted that the University used the budgeted amount of indirect costs from the grant agreement instead of calculating the indirect costs based on actual direct costs incurred multiplied by the University’s negotiated indirect cost rate. It was also noted that the grant period for year 1 was October 1, 2021 through September 30, 2022 and that majority of indirect costs for that period were claimed in fiscal year 2023 instead of as the direct costs were incurred. Cause: By utilizing the budgeted amount instead of calculating the indirect costs for the period based off actual expenditures, $15,170 of indirect costs were claimed that should not have been. Effect: The University is not in compliance with allowable cost principles. Repeat finding: No. Recommendation: We recommend the University calculate the indirect costs when the direct cost is incurred instead of claiming the amount per the budget to ensure indirect costs are consistently calculated and allocated throughout the grant term. Views of responsible officials: Management agrees with the finding.
Criteria: 2 CFR 200.405 maintains that costs which are allocable to more than one program be allocated based on the proportional benefit or as determined on any reasonable documented basis. Condition: During our testing, 4 of the 8 expenses selected were unsupported by general ledger allocation of the expenses. The amount charged to the grant appeared to be an allocable percentage based on the budgeted amount however, the actual expenses that were incurred were not allocated out to the program in alignment with that budgeted amount. Cause: Due to turnover in program management adequate allocation of these expenses were not reconciled. Effect:The Organization must be able to demonstrate the expenses allocated to the grant on the vouchers is supported in its allocation in the general ledger to ensure proper allocation and avoidance of duplication of funding requests for the same amounts. Questioned Costs: The total of the allocated epxense transactions of $1,667 were not allocated in the general ledger system to the applicable program. Recommendation: We recommend that the Organization implement procedures and internal controls for regular review of the general ledger of their programs and reconcile to the vouchers prior to submission to the granting agency. Management's Response: We agree with this finding. See corrective action plan.
Criteria: 2 CFR 200.405 maintains that costs which are allocable to more than one program be allocated based on the proportional benefit or as determined on any reasonable documented basis. Condition: During our testing, 4 of the 8 expenses selected were unsupported by general ledger allocation of the expenses. The amount charged to the grant appeared to be an allocable percentage based on the budgeted amount however, the actual expenses that were incurred were not allocated out to the program in alignment with that budgeted amount. Cause: Due to turnover in program management adequate allocation of these expenses were not reconciled. Effect:The Organization must be able to demonstrate the expenses allocated to the grant on the vouchers is supported in its allocation in the general ledger to ensure proper allocation and avoidance of duplication of funding requests for the same amounts. Questioned Costs: The total of the allocated epxense transactions of $1,667 were not allocated in the general ledger system to the applicable program. Recommendation: We recommend that the Organization implement procedures and internal controls for regular review of the general ledger of their programs and reconcile to the vouchers prior to submission to the granting agency. Management's Response: We agree with this finding. See corrective action plan.
Reference Number: 2023-006 – Salary Allocation Federal Program Title: WIOA Cluster Federal Assistance Listing Number: 17.258 Federal Agency: Department of Labor (DOL) Pass-Through Entity: State of California Employment Development Program Federal Award Number and Year: AA211079, 170305366 Category of Finding: Allowable Costs and Cost Principles Type of Finding: Significant Deficiency in Internal Control over Compliance, Instance of Noncompliance Criteria Title 2 Code of Federal Regulations (2 CFR) §200.405 states a cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. This standard is met if the cost: (1) Is incurred specifically for the federal award; (2) Benefits both the federal award and other work of the non-federal entity and can be distributed in proportions that may be approximated using reasonable methods; and (3) Is necessary to the overall operation of the non-federal entity and is assignable in part to the federal award in accordance with the principles in this subpart. Condition During our review of payroll costs, we noted seven (7) employees with payroll allocation that did not agree to payroll allocable to the grant per the time study. Cause The Organization has experienced significant turnover in key personnel in the Organization’s finance department and management in past years. Absent robust accounting policies and procedures, when vacancies occur, information can be lost and as individuals are getting up to speed, some processes may not be fully executed if they are manual and not fully embedded into an automated system. Effect The Organization allocated more direct payroll costs than were specifically incurred for the award. Questioned Costs We identified questioned costs of $655. We are unable to estimate total likely questioned costs. Context For the forty (40) participants selected for testing, seven (7) employees had payroll costs that were not allocated to the grant correctly. The sample was not a statistically valid sample. Recommendation We recommend that the Organization develop and document processes for reviewing payroll entries posted to QuickBooks against the monthly time survey and entry to ensure allocations posted to the general ledger agree to approved allocations. We also recommend the Organization develop a recurring training program for staff involved with grant processes and procedures and compliance requirements. Views of Responsible Officials and Planned Corrective Action Person responsible: Leona Smith Di Faustino, Interim Executive Director Corrective Action Plan: Internal controls for proper vetting and approval of spreadsheets are being implemented to safeguard the accuracy of payroll report totals that tie back to labor percentages allocated to individual employee labor totals, billed to the grant. Anticipated Implementation Date: December 31, 2024
2023-001: Significant Deficiency – Allowable Costs/Cost Principles Federal Agency: U.S. Department of Education Federal Program: Adult Education - Basic Grants to States ALN: 84.002A Award Period: 07/01/2022 - 06/30/2023 Type of Finding: Significant Deficiency The Council did not implement an established and accurate cost allocation plan during the fiscal year ending June 30, 2023. Therefore, not all costs were shared among different grants consistently and accurately. Criteria: Under the U.S. Code of Federal Regulations (CFR), Title 2: Grants and Agreements, PART 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Subpart E – Cost Principles Sec. 200.405 Allocable Costs – the cost must be allocated to the grants/projects based on the proportional benefit. If a cost benefits two or more grants/projects or activities in proportions that cannot be determined because of the interrelationship of the work involved, then the costs may be allocated or transferred to benefitted projects on a reasonable documented basis. Condition & Context: During the prior year audit as well as during a monitoring visit by PDE, it was discovered that certain expenses were allocated to grants on an unsupported basis. Based on our testing of expenditures performed for the current year, an accurate cost allocation plan was not accurately developed or implemented during the fiscal year ending June 30, 2023. Cause: The Council did not create or implement an accurate cost allocation plan during the current or prior fiscal year. Effect: The Council is not in compliance with 2 CFR Sec. 200.405 – Allocable Costs. Repeat Finding: Yes Recommendation: We recommend that the Council work to develop and implement a written allocation plan including calculations for all direct and indirect costs that benefit two or more grants or programs. Specifically, the Council should review actual expenses on an ongoing basis and make any necessary adjustments to the allocated expenses.
2023-001: Significant Deficiency – Allowable Costs/Cost Principles Federal Agency: U.S. Department of Education Federal Program: Adult Education - Basic Grants to States ALN: 84.002A Award Period: 07/01/2022 - 06/30/2023 Type of Finding: Significant Deficiency The Council did not implement an established and accurate cost allocation plan during the fiscal year ending June 30, 2023. Therefore, not all costs were shared among different grants consistently and accurately. Criteria: Under the U.S. Code of Federal Regulations (CFR), Title 2: Grants and Agreements, PART 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Subpart E – Cost Principles Sec. 200.405 Allocable Costs – the cost must be allocated to the grants/projects based on the proportional benefit. If a cost benefits two or more grants/projects or activities in proportions that cannot be determined because of the interrelationship of the work involved, then the costs may be allocated or transferred to benefitted projects on a reasonable documented basis. Condition & Context: During the prior year audit as well as during a monitoring visit by PDE, it was discovered that certain expenses were allocated to grants on an unsupported basis. Based on our testing of expenditures performed for the current year, an accurate cost allocation plan was not accurately developed or implemented during the fiscal year ending June 30, 2023. Cause: The Council did not create or implement an accurate cost allocation plan during the current or prior fiscal year. Effect: The Council is not in compliance with 2 CFR Sec. 200.405 – Allocable Costs. Repeat Finding: Yes Recommendation: We recommend that the Council work to develop and implement a written allocation plan including calculations for all direct and indirect costs that benefit two or more grants or programs. Specifically, the Council should review actual expenses on an ongoing basis and make any necessary adjustments to the allocated expenses.
Finding 2023-002 Material Weakness – B. Allowable Costs Federal Agency: U.S. Department of the Treasury Passthrough Entity: Missouri Behavioral Health Council Assistance Listing Number and Federal Program: 21.027 Coronavirus State and Local Fiscal Recovery Funds Criteria: Per CFR 200.405(a), a good or service must be chargeable or assignable to the Federal award or the cost objective for that cost to be considered allocable to the Federal award. This standard is met if the cost is incurred specifically for the Federal award or benefits both the Federal award and other work of the non-Federal entity and can be proportioned using reasonable methods. In addition, the cost meets the standard listed above if the cost is necessary to the overall operation of the non-Federal entity and is assignable to the Federal award in accordance with the principles listed above. The approved cost objective stated in the grant agreement is for the construction of the Association’s new Kirksville location. Statement of Condition: During the course of our audit, it was discovered that two invoices for engineering services provided by Yager Architecture, Inc., were for remodeling one of the Hannibal locations and not for the construction of the Kirksville location. These invoices were included in the reimbursement request “KV-4” and the total for the two invoices was $4,902.50. Per the grant agreement, the grant funds were awarded for the construction of the Kirksville building construction. Statement of Cause: This is the first year the Association received grant funding from this specific grant, along with the growth the Association is experiencing, and the Association being awarded two Federal grants in quick succession, the accounting system and staff were not prepared to effectively adhere to the requirements of the grant. Therefore, unallowable costs were used for reimbursement requests. Statement of Effect: Noncompliance with the grant agreement could result in the Association being barred from receiving grant funding from the pass-through entity and/or the awarding agency for future grants, as well as the possibility that the awarding agency will require that some or all of the funding that has been received by the Association be refunded to the passthrough entity. Questioned Costs: No questioned costs were identified. Identification of Repeat Findings: N/A Recommendations: Reimbursement requests and included invoices should be reviewed and signed off on by someone other than the person completing the request. This will ensure that the correct invoices are included in the request that are allowed by the grant agreement and the invoices are in compliance with 2 CFR 200. In addition to this, the Association should create project codes or classes within their accounting system, if able to, for easier grant tracking. These recommendations would increase the accuracy of invoices used for reimbursement. Views of Responsible Official(s): The Association had converted to a different accounting system and did not have the expertise involving project codes or classes at this time. Going forward, the Association will use project codes or classes in the accounting system for grant tracking. See corrective action plan.
Federal Agency: U.S. Department of Health and Human Services Federal Program Name: COVID-19 Block Grants for Community Mental Health Services Assistance Listing Number: 93.958 Pass-Through Agency: California Department of Health Care Services Award Period: July 01, 2022, through June 2023 Type of Finding: Significant Deficiency in Internal Control over Compliance and Other Matter Criteria or Specific Requirement: 2 CFR Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Award requires compliance with the provisions of allocable costs. The County should have internal controls designed to ensure compliance with those provisions. Specifically, § 200.405, Allocable costs, (a) indicates that a cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. Additionally, 2 CFR Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Award section 200.303 requires that entities 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). Condition: There is an agreement between the Behavioral Health and Recovery Services (BHRS) department and the Adult & Aging (A&A) department whereby the A&A department performs some services for the Mental Health Services (MHS) grant. For these expenditures tested, the initial expenditures were charged to the A&A department and then the portion applicable to the MHS grant is recorded to the MHS program. We were able to review support for the original expenditure to determine the type of expenditures were allowable, yet the County was unable to provide supporting documentation for the amount moved from the A&A department to the MHS grant. Questioned Costs: $436 Context: This condition was noted on 5 of 16 samples tested. The combined amount of the 5 samples where the condition was noted was $436. Cause: Documentation for the allocable portion of expenditures could not be located. Effect: Expenditures recorded to the grant may not be relative to the benefits that were received. Repeat Finding: No Recommendation: We recommend the A&A and BHRS departments jointly review its procedures for recorded expenditures being allocated by the A&A department to the MHS grant to ensure that there is documentation supporting the allocation of expenditures and that it is retained. Views of Responsible Officials: The County concurs with the finding.
Federal Agency: U.S. Department of Health and Human Services Federal Program Name: COVID-19 Block Grants for Community Mental Health Services Assistance Listing Number: 93.958 Pass-Through Agency: California Department of Health Care Services Award Period: July 01, 2022, through June 2023 Type of Finding: Significant Deficiency in Internal Control over Compliance and Other Matter Criteria or Specific Requirement: 2 CFR Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Award requires compliance with the provisions of allocable costs. The County should have internal controls designed to ensure compliance with those provisions. Specifically, § 200.405, Allocable costs, (a) indicates that a cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. Additionally, 2 CFR Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Award section 200.303 requires that entities 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). Condition: There is an agreement between the Behavioral Health and Recovery Services (BHRS) department and the Adult & Aging (A&A) department whereby the A&A department performs some services for the Mental Health Services (MHS) grant. For these expenditures tested, the initial expenditures were charged to the A&A department and then the portion applicable to the MHS grant is recorded to the MHS program. We were able to review support for the original expenditure to determine the type of expenditures were allowable, yet the County was unable to provide supporting documentation for the amount moved from the A&A department to the MHS grant. Questioned Costs: $436 Context: This condition was noted on 5 of 16 samples tested. The combined amount of the 5 samples where the condition was noted was $436. Cause: Documentation for the allocable portion of expenditures could not be located. Effect: Expenditures recorded to the grant may not be relative to the benefits that were received. Repeat Finding: No Recommendation: We recommend the A&A and BHRS departments jointly review its procedures for recorded expenditures being allocated by the A&A department to the MHS grant to ensure that there is documentation supporting the allocation of expenditures and that it is retained. Views of Responsible Officials: The County concurs with the finding.
Federal Agency: U.S. Department of Health and Human Services Federal Program Name: COVID-19 Block Grants for Community Mental Health Services Assistance Listing Number: 93.958 Pass-Through Agency: California Department of Health Care Services Award Period: July 01, 2022, through June 2023 Type of Finding: Significant Deficiency in Internal Control over Compliance and Other Matter Criteria or Specific Requirement: 2 CFR Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Award requires compliance with the provisions of allocable costs. The County should have internal controls designed to ensure compliance with those provisions. Specifically, § 200.405, Allocable costs, (a) indicates that a cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. Additionally, 2 CFR Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Award section 200.303 requires that entities 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). Condition: There is an agreement between the Behavioral Health and Recovery Services (BHRS) department and the Adult & Aging (A&A) department whereby the A&A department performs some services for the Mental Health Services (MHS) grant. For these expenditures tested, the initial expenditures were charged to the A&A department and then the portion applicable to the MHS grant is recorded to the MHS program. We were able to review support for the original expenditure to determine the type of expenditures were allowable, yet the County was unable to provide supporting documentation for the amount moved from the A&A department to the MHS grant. Questioned Costs: $436 Context: This condition was noted on 5 of 16 samples tested. The combined amount of the 5 samples where the condition was noted was $436. Cause: Documentation for the allocable portion of expenditures could not be located. Effect: Expenditures recorded to the grant may not be relative to the benefits that were received. Repeat Finding: No Recommendation: We recommend the A&A and BHRS departments jointly review its procedures for recorded expenditures being allocated by the A&A department to the MHS grant to ensure that there is documentation supporting the allocation of expenditures and that it is retained. Views of Responsible Officials: The County concurs with the finding.
Criteria: 2 CFR 200.405 maintains that costs which are allocable to more than one program be allocated based on the proportional benefit or as determined on any reasonable documented basis. Condition: Of the testing population of 40 transactions, for 4 transactions the Organization was unable to provide support for the amount allocated to the federal program. For an additional 8 transactions the Organization did not provide the support for the expenditure. Views of Responsible Officials: Management agrees with the finding; see corrective action plan. Cause: Due to limited staffing resources, the Organization was not able to ensure maintenance of adequate documentation. Effect: The Organization must be able to demonstrate the expenses allocated to the program is properly supported to ensure adequate allocation records. Questioned Costs: Unknown Recommendation: Management should review and refine its process of allocating costs by grant to ensure that the costs are supported by a system of internal controls which provides reasonable assurance that the charges are accurate, properly allocated, and reasonably reflect the proportional benefit tot hat program.
Reference Number: 2023-006 Category of Finding: Subrecipient Monitoring Type of Finding: Material Weakness and Material Instance of Noncompliance State Administering Department: California Department of Transportation Assistance Listing Number: 20.205 Federal Program Title: Highway Planning and Construction Federal Award Numbers and Years: Q101310; 2023 Q101403; 2023 7500257; 2023 P020177; 2023 8801073; 2023 Criteria Title 2 – Grants and Agreements. Subtitle A – Office of Management and Budget Guidance for Grants and Agreements. Chapter II – Office of Management and Budget Guidance. Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D – Post Federal Award Requirements. Standards for Financial and Program Management. §200.303 Internal controls (2 CFR 200.303): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Title 2 – Grants and Agreements. Subtitle A – Office of Management and Budget Guidance for Grants and Agreements. Chapter II – Office of Management and Budget Guidance. Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D – Post Federal Award Requirements. Subrecipient Monitoring and Management §200.322 Requirements for pass-through entities (2 CFR 200.332): (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. Required information includes: 1. Federal award identification. i. Subrecipient name (which must match the name associated with its unique entity identifier); ii. Subrecipient’s unique entity identifier; Federal Award Identification Number (FAIN); iii. Federal Award Date (see the definition of Federal award date in § 200.1 of this part) of award to the recipient by the Federal agency; iv. Subaward Period of Performance Start and End Date; v. Subaward Budget Period Start and End Date; vi. Amount of Federal Funds Obligated by this action by the pass-through entity to the subrecipient; vii. Total Amount of Federal Funds Obligated to the subrecipient by the pass-through entity including the current financial obligation; viii. Total Amount of the Federal Award committed to the subrecipient by the pass-through entity; ix. Federal award project description, as required to be responsive to the Federal Funding Accountability and Transparency Act (FFATA); x. Name of Federal awarding agency, pass-through entity, and contact information for awarding official of the Pass-through entity; xi. Assistance Listings number and Title; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at time of disbursement; xii. Identification of whether the award is R&D; and xiii. Indirect cost rate for the Federal award (including if the de minimis rate is charged) per § 200.414. 2. All requirements imposed by the pass-through entity on the subrecipient so that the Federal award is used in accordance with Federal statutes, regulations and the terms and conditions of the Federal award; 3. Any additional requirements that the pass-through entity imposes on the subrecipient in order for the pass-through entity to meet its own responsibility to the Federal awarding agency including identification of any required financial and performance reports; 4. i. An approved federally recognized indirect cost rate negotiated between the subrecipient and the Federal Government. If no approved rate exists, the pass-through entity must determine the appropriate rate in collaboration with the subrecipient, which is either: 1. The negotiated indirect cost rate between the pass-through entity and the subrecipient; which can be based on a prior negotiated rate between a different PTE and the same subrecipient. If basing the rate on a previously negotiated rate, the pass-through entity is not required to collect information justifying this rate, but may elect to do so; 2. The de minimis indirect cost rate. ii. The pass-through entity must not require use of a de minimis indirect cost rate if the subrecipient has a Federally approved rate. Subrecipients can elect to use the cost allocation method to account for indirect costs in accordance with § 200.405(d). 5. A requirement that the subrecipient permit the pass-through entity and auditors to have access to the subrecipient’s records and financial statements as necessary for the pass-through entity to meet the requirements of this part; and 6. Appropriate terms and conditions concerning closeout of the subaward. (b) Evaluate each subrecipient’s risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring described in paragraphs (d) and (e) of this section, which may include consideration of such factors as: (1) The subrecipient’s prior experience with the same or similar subawards; (2) The results of previous audits including whether or not the subrecipient receives a Single Audit in accordance with Subpart F of this part, and the extent to which the same or similar subaward has been audited as a major program; (3) Whether the subrecipient has new personnel or new or substantially changed systems; and (4) The extent and results of Federal awarding agency monitoring (e.g., if the subrecipient also receives Federal awards directly from a Federal awarding agency). (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: (1) Reviewing financial and performance reports required by the pass-through entity. Condition The California Department of Transportation (Caltrans) did not clearly identify subaward agreements made to subrecipients as subawards and did not include all required elements for 5 of 40 subrecipients sampled. Additionally, the monitoring of the 5 of 40 sampled subrecipients was not sufficient to detect whether the subrecipients’ expenditures were properly reported on the respective subrecipients’ schedules of expenditures of federal awards. Identification as a Repeat Finding This was not a repeat finding from the immediate prior year. Cause Due to the decentralized administration of federal-aid highway projects, not all subaward agreements are administered in a consistent manner throughout various divisions and district offices. Effect Inadequate subaward communication may result in subrecipients being unaware of all federal laws, statutes and regulations that apply to the funding received and potentially expending the funds in an unallowable manner. Additionally, subrecipients may fail to report the expenditures made pursuant to the subawards of their schedule of expenditures of federal awards. Questioned Costs No questioned costs were identified. Context Expenditures passed to subrecipients totaled $1,222,104,172. Sampled expenditures totaled $14,694,125 and $670,937 of the total sampled expenditures related to the exceptions identified. Recommendation Caltrans should develop and implement a consistent policy and process for all divisions and district offices to use in making and monitoring subawards under the highway planning and construction program to ensure that all required subaward information is communicated to subrecipients at the time of the award and the federal funds disbursed to subrecipients are adequately monitored. Views of Responsible Officials and Corrective Action Plan Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report.
Reference Number: 2023-006 Category of Finding: Subrecipient Monitoring Type of Finding: Material Weakness and Material Instance of Noncompliance State Administering Department: California Department of Transportation Assistance Listing Number: 20.205 Federal Program Title: Highway Planning and Construction Federal Award Numbers and Years: Q101310; 2023 Q101403; 2023 7500257; 2023 P020177; 2023 8801073; 2023 Criteria Title 2 – Grants and Agreements. Subtitle A – Office of Management and Budget Guidance for Grants and Agreements. Chapter II – Office of Management and Budget Guidance. Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D – Post Federal Award Requirements. Standards for Financial and Program Management. §200.303 Internal controls (2 CFR 200.303): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Title 2 – Grants and Agreements. Subtitle A – Office of Management and Budget Guidance for Grants and Agreements. Chapter II – Office of Management and Budget Guidance. Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D – Post Federal Award Requirements. Subrecipient Monitoring and Management §200.322 Requirements for pass-through entities (2 CFR 200.332): (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. Required information includes: 1. Federal award identification. i. Subrecipient name (which must match the name associated with its unique entity identifier); ii. Subrecipient’s unique entity identifier; Federal Award Identification Number (FAIN); iii. Federal Award Date (see the definition of Federal award date in § 200.1 of this part) of award to the recipient by the Federal agency; iv. Subaward Period of Performance Start and End Date; v. Subaward Budget Period Start and End Date; vi. Amount of Federal Funds Obligated by this action by the pass-through entity to the subrecipient; vii. Total Amount of Federal Funds Obligated to the subrecipient by the pass-through entity including the current financial obligation; viii. Total Amount of the Federal Award committed to the subrecipient by the pass-through entity; ix. Federal award project description, as required to be responsive to the Federal Funding Accountability and Transparency Act (FFATA); x. Name of Federal awarding agency, pass-through entity, and contact information for awarding official of the Pass-through entity; xi. Assistance Listings number and Title; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at time of disbursement; xii. Identification of whether the award is R&D; and xiii. Indirect cost rate for the Federal award (including if the de minimis rate is charged) per § 200.414. 2. All requirements imposed by the pass-through entity on the subrecipient so that the Federal award is used in accordance with Federal statutes, regulations and the terms and conditions of the Federal award; 3. Any additional requirements that the pass-through entity imposes on the subrecipient in order for the pass-through entity to meet its own responsibility to the Federal awarding agency including identification of any required financial and performance reports; 4. i. An approved federally recognized indirect cost rate negotiated between the subrecipient and the Federal Government. If no approved rate exists, the pass-through entity must determine the appropriate rate in collaboration with the subrecipient, which is either: 1. The negotiated indirect cost rate between the pass-through entity and the subrecipient; which can be based on a prior negotiated rate between a different PTE and the same subrecipient. If basing the rate on a previously negotiated rate, the pass-through entity is not required to collect information justifying this rate, but may elect to do so; 2. The de minimis indirect cost rate. ii. The pass-through entity must not require use of a de minimis indirect cost rate if the subrecipient has a Federally approved rate. Subrecipients can elect to use the cost allocation method to account for indirect costs in accordance with § 200.405(d). 5. A requirement that the subrecipient permit the pass-through entity and auditors to have access to the subrecipient’s records and financial statements as necessary for the pass-through entity to meet the requirements of this part; and 6. Appropriate terms and conditions concerning closeout of the subaward. (b) Evaluate each subrecipient’s risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring described in paragraphs (d) and (e) of this section, which may include consideration of such factors as: (1) The subrecipient’s prior experience with the same or similar subawards; (2) The results of previous audits including whether or not the subrecipient receives a Single Audit in accordance with Subpart F of this part, and the extent to which the same or similar subaward has been audited as a major program; (3) Whether the subrecipient has new personnel or new or substantially changed systems; and (4) The extent and results of Federal awarding agency monitoring (e.g., if the subrecipient also receives Federal awards directly from a Federal awarding agency). (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: (1) Reviewing financial and performance reports required by the pass-through entity. Condition The California Department of Transportation (Caltrans) did not clearly identify subaward agreements made to subrecipients as subawards and did not include all required elements for 5 of 40 subrecipients sampled. Additionally, the monitoring of the 5 of 40 sampled subrecipients was not sufficient to detect whether the subrecipients’ expenditures were properly reported on the respective subrecipients’ schedules of expenditures of federal awards. Identification as a Repeat Finding This was not a repeat finding from the immediate prior year. Cause Due to the decentralized administration of federal-aid highway projects, not all subaward agreements are administered in a consistent manner throughout various divisions and district offices. Effect Inadequate subaward communication may result in subrecipients being unaware of all federal laws, statutes and regulations that apply to the funding received and potentially expending the funds in an unallowable manner. Additionally, subrecipients may fail to report the expenditures made pursuant to the subawards of their schedule of expenditures of federal awards. Questioned Costs No questioned costs were identified. Context Expenditures passed to subrecipients totaled $1,222,104,172. Sampled expenditures totaled $14,694,125 and $670,937 of the total sampled expenditures related to the exceptions identified. Recommendation Caltrans should develop and implement a consistent policy and process for all divisions and district offices to use in making and monitoring subawards under the highway planning and construction program to ensure that all required subaward information is communicated to subrecipients at the time of the award and the federal funds disbursed to subrecipients are adequately monitored. Views of Responsible Officials and Corrective Action Plan Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report.
2023-008 —Allowable Costs and Cost Principles– Significant Deficiency in Internal Control Over Compliance and Noncompliance Federal program information: Funding agencies: U.S. Department of Interior Titles: Assistance to Tribally Controlled Community Colleges ALN Number: 15.027 Award years: 2023 Criteria: According to 2 CFR Section 200.405(b) All activities which benefit from the recipient’s or subrecipient’s indirect cost, including unallowable activities and donated services by the recipient or subrecipient of third parties, will receive an appropriate allocation of indirect costs. Condition: The College improperly calculated indirect costs for the fiscal year and overcharged for the federal program by $49,481. Cause: The College did not have sufficient procedures in place to ensure that indirect cost charges were calculated correctly. Effect: The College is not in compliance with Allowable Costs and Cost Principles requirements. Questioned Costs: $49,481 Context: Indirect Costs were overcharged by $49,481 during fiscal year 2023. Recommendation: Enforce policies and procedures to ensure that the calculated rates are in agreement with the approved indirect cost rate, management should perform reviews of the calculation to ensure accuracy. Management’s Response: The College concurs with this finding.
2023-008 —Allowable Costs and Cost Principles– Significant Deficiency in Internal Control Over Compliance and Noncompliance Federal program information: Funding agencies: U.S. Department of Interior Titles: Assistance to Tribally Controlled Community Colleges ALN Number: 15.027 Award years: 2023 Criteria: According to 2 CFR Section 200.405(b) All activities which benefit from the recipient’s or subrecipient’s indirect cost, including unallowable activities and donated services by the recipient or subrecipient of third parties, will receive an appropriate allocation of indirect costs. Condition: The College improperly calculated indirect costs for the fiscal year and overcharged for the federal program by $49,481. Cause: The College did not have sufficient procedures in place to ensure that indirect cost charges were calculated correctly. Effect: The College is not in compliance with Allowable Costs and Cost Principles requirements. Questioned Costs: $49,481 Context: Indirect Costs were overcharged by $49,481 during fiscal year 2023. Recommendation: Enforce policies and procedures to ensure that the calculated rates are in agreement with the approved indirect cost rate, management should perform reviews of the calculation to ensure accuracy. Management’s Response: The College concurs with this finding.
2023-002 (2022-002) – Allocation Percentage Charged – Significant Deficiency in Internal Controls over Compliance ALN: 84.126 Federal Award Title: Rehabilitation Services Vocational Rehabilitation Grants to States Federal Agency: United States Department of Education Pass-Through Entity: Texas Health and Human Services Commission Award Number(s): HHS000186000005, HHS000202900008 Federal Award Year: 2023 Condition: The Organization allocated nonpayroll costs between grants using an incorrect calculation in 2 out of 40 items tested. Criteria: Per Title 2 US Code of Federal Regulations Part 200.303a, non-federal entities must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entities 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). According to 2 CFR 200.405(a)(2), costs allocated to a Federal award must be distributed in proportions that may be approximated using reasonable methods. Effect: The Organization may unintentionally under/over charge expenses to the grant which could lead to questioned costs and repayment of funds to the grantor agency. Cause: The Organization does not have proper controls in place to verify the approved allocation % is charged on expenses. Questioned Costs: Known questioned costs of $27 and likely questioned costs of $939.
2023-002 (2022-002) – Allocation Percentage Charged – Significant Deficiency in Internal Controls over Compliance ALN: 84.126 Federal Award Title: Rehabilitation Services Vocational Rehabilitation Grants to States Federal Agency: United States Department of Education Pass-Through Entity: Texas Health and Human Services Commission Award Number(s): HHS000186000005, HHS000202900008 Federal Award Year: 2023 Condition: The Organization allocated nonpayroll costs between grants using an incorrect calculation in 2 out of 40 items tested. Criteria: Per Title 2 US Code of Federal Regulations Part 200.303a, non-federal entities must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entities 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). According to 2 CFR 200.405(a)(2), costs allocated to a Federal award must be distributed in proportions that may be approximated using reasonable methods. Effect: The Organization may unintentionally under/over charge expenses to the grant which could lead to questioned costs and repayment of funds to the grantor agency. Cause: The Organization does not have proper controls in place to verify the approved allocation % is charged on expenses. Questioned Costs: Known questioned costs of $27 and likely questioned costs of $939.
FINDING REFERENCE NUMBER 2023-030 (See Finding Reference Number 2023-002) FEDERAL PROGRAM (ALN – 93.489; 93.575 AND 93.596) CHILD CARE CLUSTER U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBER G2101PRCDC6 (Federal Award Years: 2020 through 2023) ADMINISTRATION ADMINISTRATION FOR THE CARE AND COMPREHENSIVE DEVELOPMENT OF CHILDREN (ACUDEN, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ACTIVITIES ALLOWED OR UNALLOWED // ALLOWABLE COSTS/COSTS PRINCIPLES TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR Section 200.302 (b)(4) establishes that the financial management system of each non-Federal entity must provide effective control over, and accountability for, all funds, property, and other assets. The non-Federal entity must adequately safeguard all assets and assure that they are used solely for authorized purposes. In 2 CFR 200.405 (a)(1) establishes that a cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. This standard is met if the cost: is incurred specifically for the Federal award. In addition, 34 CFR 76.702 establishes that a State and a subgrantee shall use fiscal control and fund accounting procedures that insure proper disbursement of and accounting for Federal funds. STATEMENT OF CONDITION As part of our audit procedures over internal controls and compliance with the allowable activities’ requirement, we selected a sample of forty-four (44) disbursements to suppliers made during the fiscal year under audit of a total population of 2,534. In one (1) instance, we found that the ACUDEN issued an advance payment to a supplier who in turn subcontracted with other suppliers for professional services or consumer education advertising campaign, media plan, and event coordination not performed, and that they had been invoiced in advance as of the invoice date. QUESTIONED COSTS $208,823.33. PERSPECTIVE INFORMATION This deficiency is a systemic problem. When the invoices reach the ACUDEN finance personnel in charge of the payment issuance process, they must review the invoice in all its parts, ensuring that the billed services are received accordingly, identifying the period of service performed. However, a supplier issued an invoice dated March 21, 2023, which included professional services of marketing for a consumer education campaign, media planning, and event coordination for the ACUDEN Child Care Program and PDG-B-5 programs. These services had been invoiced in advance for the period from April 1, 2023 through September 30, 2023 and during the payment process this situation was not detected and the payment for these services invoiced in advance was incorrectly issued on May 2, 2023, according to the disbursement voucher. During our inspection of the disbursement voucher, we noted the voucher had a note from de Finance Director indicating her refusing to authorize the disbursement voucher. However, although the disbursement voucher had this note, the Administrator signed the disbursement voucher and authorized the payment. STATEMENT OF CAUSE The lack of proper training and controls that requires standard evaluation and approval of expenditures incurred, in accordance with the state and Federal regulation. POSSIBLE ASSERTED EFFECT ACUDEN incurred in overpayments to suppliers for services not rendered to ACUDEN. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend management to establish internal control processes consistent with the requirements of 2 CFR 200. In addition, design and implement internal control processes to meet the requirements of subrecipient monitoring and procurement standards.
FINDING REFERENCE NUMBER 2023-030 (See Finding Reference Number 2023-002) FEDERAL PROGRAM (ALN – 93.489; 93.575 AND 93.596) CHILD CARE CLUSTER U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBER G2101PRCDC6 (Federal Award Years: 2020 through 2023) ADMINISTRATION ADMINISTRATION FOR THE CARE AND COMPREHENSIVE DEVELOPMENT OF CHILDREN (ACUDEN, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ACTIVITIES ALLOWED OR UNALLOWED // ALLOWABLE COSTS/COSTS PRINCIPLES TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR Section 200.302 (b)(4) establishes that the financial management system of each non-Federal entity must provide effective control over, and accountability for, all funds, property, and other assets. The non-Federal entity must adequately safeguard all assets and assure that they are used solely for authorized purposes. In 2 CFR 200.405 (a)(1) establishes that a cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. This standard is met if the cost: is incurred specifically for the Federal award. In addition, 34 CFR 76.702 establishes that a State and a subgrantee shall use fiscal control and fund accounting procedures that insure proper disbursement of and accounting for Federal funds. STATEMENT OF CONDITION As part of our audit procedures over internal controls and compliance with the allowable activities’ requirement, we selected a sample of forty-four (44) disbursements to suppliers made during the fiscal year under audit of a total population of 2,534. In one (1) instance, we found that the ACUDEN issued an advance payment to a supplier who in turn subcontracted with other suppliers for professional services or consumer education advertising campaign, media plan, and event coordination not performed, and that they had been invoiced in advance as of the invoice date. QUESTIONED COSTS $208,823.33. PERSPECTIVE INFORMATION This deficiency is a systemic problem. When the invoices reach the ACUDEN finance personnel in charge of the payment issuance process, they must review the invoice in all its parts, ensuring that the billed services are received accordingly, identifying the period of service performed. However, a supplier issued an invoice dated March 21, 2023, which included professional services of marketing for a consumer education campaign, media planning, and event coordination for the ACUDEN Child Care Program and PDG-B-5 programs. These services had been invoiced in advance for the period from April 1, 2023 through September 30, 2023 and during the payment process this situation was not detected and the payment for these services invoiced in advance was incorrectly issued on May 2, 2023, according to the disbursement voucher. During our inspection of the disbursement voucher, we noted the voucher had a note from de Finance Director indicating her refusing to authorize the disbursement voucher. However, although the disbursement voucher had this note, the Administrator signed the disbursement voucher and authorized the payment. STATEMENT OF CAUSE The lack of proper training and controls that requires standard evaluation and approval of expenditures incurred, in accordance with the state and Federal regulation. POSSIBLE ASSERTED EFFECT ACUDEN incurred in overpayments to suppliers for services not rendered to ACUDEN. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend management to establish internal control processes consistent with the requirements of 2 CFR 200. In addition, design and implement internal control processes to meet the requirements of subrecipient monitoring and procurement standards.
FINDING REFERENCE NUMBER 2023-030 (See Finding Reference Number 2023-002) FEDERAL PROGRAM (ALN – 93.489; 93.575 AND 93.596) CHILD CARE CLUSTER U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBER G2101PRCDC6 (Federal Award Years: 2020 through 2023) ADMINISTRATION ADMINISTRATION FOR THE CARE AND COMPREHENSIVE DEVELOPMENT OF CHILDREN (ACUDEN, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ACTIVITIES ALLOWED OR UNALLOWED // ALLOWABLE COSTS/COSTS PRINCIPLES TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR Section 200.302 (b)(4) establishes that the financial management system of each non-Federal entity must provide effective control over, and accountability for, all funds, property, and other assets. The non-Federal entity must adequately safeguard all assets and assure that they are used solely for authorized purposes. In 2 CFR 200.405 (a)(1) establishes that a cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. This standard is met if the cost: is incurred specifically for the Federal award. In addition, 34 CFR 76.702 establishes that a State and a subgrantee shall use fiscal control and fund accounting procedures that insure proper disbursement of and accounting for Federal funds. STATEMENT OF CONDITION As part of our audit procedures over internal controls and compliance with the allowable activities’ requirement, we selected a sample of forty-four (44) disbursements to suppliers made during the fiscal year under audit of a total population of 2,534. In one (1) instance, we found that the ACUDEN issued an advance payment to a supplier who in turn subcontracted with other suppliers for professional services or consumer education advertising campaign, media plan, and event coordination not performed, and that they had been invoiced in advance as of the invoice date. QUESTIONED COSTS $208,823.33. PERSPECTIVE INFORMATION This deficiency is a systemic problem. When the invoices reach the ACUDEN finance personnel in charge of the payment issuance process, they must review the invoice in all its parts, ensuring that the billed services are received accordingly, identifying the period of service performed. However, a supplier issued an invoice dated March 21, 2023, which included professional services of marketing for a consumer education campaign, media planning, and event coordination for the ACUDEN Child Care Program and PDG-B-5 programs. These services had been invoiced in advance for the period from April 1, 2023 through September 30, 2023 and during the payment process this situation was not detected and the payment for these services invoiced in advance was incorrectly issued on May 2, 2023, according to the disbursement voucher. During our inspection of the disbursement voucher, we noted the voucher had a note from de Finance Director indicating her refusing to authorize the disbursement voucher. However, although the disbursement voucher had this note, the Administrator signed the disbursement voucher and authorized the payment. STATEMENT OF CAUSE The lack of proper training and controls that requires standard evaluation and approval of expenditures incurred, in accordance with the state and Federal regulation. POSSIBLE ASSERTED EFFECT ACUDEN incurred in overpayments to suppliers for services not rendered to ACUDEN. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend management to establish internal control processes consistent with the requirements of 2 CFR 200. In addition, design and implement internal control processes to meet the requirements of subrecipient monitoring and procurement standards.
2023-011 Improve Controls and Compliance with Approval of Allowable Costs Federal Program Information Federal Agency: U.S. Department of Housing and Urban Development Award Name(s): CDBG Entitlement Grants Cluster Assistance Listing Number(s): 14.218 Award Year: 2023 Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Type of Finding Internal Control over Compliance – Significant Deficiency Criteria or Specific Requirement Per Uniform Guidance (2 CFR § 200.403, 200.405), recipients of federal funds must ensure that costs charged to federal awards are allowable, properly approved, and supported by adequate documentation. Effective internal controls should be in place to verify that all expenditures, including vendor invoices, are reviewed and approved prior to payment and charging to federal grants. SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (CONTINUED) Condition and Context During testing of 34 vendor invoices charged to the Community Development Block Grants/Entitlement Grants program, 2 invoices were identified that had not been approved prior to payment or being charged to the grant. Cause The City did not consistently enforce controls requiring the review and approval of all invoices before they were processed as federal expenditures. Effect or Potential Effect The lack of proper invoice approval increases the risk of unauthorized, erroneous, or unallowable costs being charged to the federal program. Questioned Costs No questioned costs are reported. Identification as a Repeat Finding This was not a finding in the prior year. Recommendation The City should strengthen its internal controls by requiring documented approval for all invoices prior to payment and charging to federal programs, and perform periodic reviews to ensure ongoing compliance with allowable cost procedures. Views of Responsible Official Management’s corrective action plan is included at the end of this report after the Schedule of Prior Year Findings.
Finding 2023-006 – Activities Allowed or Unallowed/Allowable Costs/Cost Principles – Material Weakness in Internal Controls over Compliance and Instance of Noncompliance Head Start ALN# 93.600 (Repeat 2022-008) U.S. Department of Health & Human Services Federal Grant/Contract Number: 10CH011215-03-03; 10CH011215-03-C3; 10CH011215-04; 10HE000901-01-C6 Grant period – 2022 & 2023 Criteria – Per 2 CFR 200.303, the 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 follow 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 – Factors affecting allowability of costs – Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: paragraph (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles; paragraph (g) Be adequately documented. Per 2 CFR section 200.404 – Reasonable costs – A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost. Per 2 CFR section 200.405 – Allocable costs –focuses on how costs are allocable, ensuring they are directly tied to the federal award or its benefits. Per 2 CFR 200.430(i), charges to Federal awards for salaries and wages must be based on records that are supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated and that are incorporated into the official records of the non-Federal entity. Condition – From the population of all disbursements charged to the grant, we selected 25 program disbursements, of which 9 invoices could not be located. Cause – Turnover in staff and the passage of time since the period under audit has caused documentation to be misplaced. Effect – Inadequate or inconsistent documentation of expenses may result in erroneous or fraudulent transactions occurring, loss of funding, or disallowed costs. Questioned Costs – Known questioned costs totaling $121 were identified related to 10 invoices could not be located. In addition, likely questioned costs are estimated at $34,616, based on the projection of the error identified in the tested transactions to the applicable population. Recommendation – Documentation should be prepared, reviewed, and retained to support the expense. Management’s Response – Management has reviewed and accepted the finding. See “Corrective Action Plan”.
Section II – Financial Statement Findings Section III - Federal Award Findings and Questioned Costs Material Weakness Public and Indian Housing – CFDA 14.850 Housing Choice Voucher – CFDA 14.871 Finding 2023-003 Allowable Costs Criteria: Per 2 CFR 200.405, the Authority is required to develop, document, and adopt a Cost Allocation Plan for all federally funded programs. Statement of Condition: The Authority did not have an official Cost Allocation Plan adopted by the Board during the year. Accordingly, the Authority did not allocate shared costs among its programs using a reasonable and documented basis. Questioned Cost: N/A Cause: Lack of a proper Cost Allocation Plan. Effect: The Authority did not have a consistent methodology to allocate costs between programs. Identification of a repeat finding: No Recommendation: The Board and management should prepare and adopt a Cost Allocation Plan to be used to share costs between all federally funded programs. Views of responsible officials and planned corrective actions: The Authority agrees with this finding. The Authority has adopted a Cost Allocation Plan which is being used to allocate shared costs.
Section II – Financial Statement Findings Section III - Federal Award Findings and Questioned Costs Material Weakness Public and Indian Housing – CFDA 14.850 Housing Choice Voucher – CFDA 14.871 Finding 2023-003 Allowable Costs Criteria: Per 2 CFR 200.405, the Authority is required to develop, document, and adopt a Cost Allocation Plan for all federally funded programs. Statement of Condition: The Authority did not have an official Cost Allocation Plan adopted by the Board during the year. Accordingly, the Authority did not allocate shared costs among its programs using a reasonable and documented basis. Questioned Cost: N/A Cause: Lack of a proper Cost Allocation Plan. Effect: The Authority did not have a consistent methodology to allocate costs between programs. Identification of a repeat finding: No Recommendation: The Board and management should prepare and adopt a Cost Allocation Plan to be used to share costs between all federally funded programs. Views of responsible officials and planned corrective actions: The Authority agrees with this finding. The Authority has adopted a Cost Allocation Plan which is being used to allocate shared costs.
Section II – Financial Statement Findings Section III - Federal Award Findings and Questioned Costs Material Weakness Public and Indian Housing – CFDA 14.850 Housing Choice Voucher – CFDA 14.871 Finding 2023-003 Allowable Costs Criteria: Per 2 CFR 200.405, the Authority is required to develop, document, and adopt a Cost Allocation Plan for all federally funded programs. Statement of Condition: The Authority did not have an official Cost Allocation Plan adopted by the Board during the year. Accordingly, the Authority did not allocate shared costs among its programs using a reasonable and documented basis. Questioned Cost: N/A Cause: Lack of a proper Cost Allocation Plan. Effect: The Authority did not have a consistent methodology to allocate costs between programs. Identification of a repeat finding: No Recommendation: The Board and management should prepare and adopt a Cost Allocation Plan to be used to share costs between all federally funded programs. Views of responsible officials and planned corrective actions: The Authority agrees with this finding. The Authority has adopted a Cost Allocation Plan which is being used to allocate shared costs.
Section II – Financial Statement Findings Section III - Federal Award Findings and Questioned Costs Material Weakness Public and Indian Housing – CFDA 14.850 Housing Choice Voucher – CFDA 14.871 Finding 2023-003 Allowable Costs Criteria: Per 2 CFR 200.405, the Authority is required to develop, document, and adopt a Cost Allocation Plan for all federally funded programs. Statement of Condition: The Authority did not have an official Cost Allocation Plan adopted by the Board during the year. Accordingly, the Authority did not allocate shared costs among its programs using a reasonable and documented basis. Questioned Cost: N/A Cause: Lack of a proper Cost Allocation Plan. Effect: The Authority did not have a consistent methodology to allocate costs between programs. Identification of a repeat finding: No Recommendation: The Board and management should prepare and adopt a Cost Allocation Plan to be used to share costs between all federally funded programs. Views of responsible officials and planned corrective actions: The Authority agrees with this finding. The Authority has adopted a Cost Allocation Plan which is being used to allocate shared costs.
Finding 2022-003 ? Unallowable Use of Public Housing Program Funds (Noncompliance/Other Matter) Public Housing Program ? Assistance Listing No. 14.850a, Grant Period: Year-End December 31, 2022 Criteria The cost principles in 2 CFR Part 200, Sub-part E of the Uniform Guidance describe allowable and unallowable uses of federal award program subsidies. Parts 200.403 and 200.405 prohibit the use of federal award program subsidies to fund expenditures outside of the applicable federal award program. Specifically, the Public Housing Programs subsidies and reserves cannot be used to fund expenditures and/or deficits of other federal or non-federal programs, except through allowable Management, Book-keeping and Service Fees. Condition and Perspective During 2022, the Authority?s Public Housing Program loaned the Central Office Cost Center (COCC) $668,552. This amount was payable back to the Public Housing Program as of December 31, 2022.Questioned Costs ? None noted Cause Lack of non-federal funds available to finance non-federal expenditures. Effect Non-compliance with federal Allowable Cost requirements. Recommendation We recommend that the Authority limit funding the COCC from the Public Housing Program, to allowable Fees only as specified in the Uniform Guidance and applicable HUD literature. Management?s Response The Authority will limit funding the COCC from the Public Housing Program, to allowable Fees only. The Authority?s Executive Director, Trey George, has assumed the responsibility of executing this corrective action as of November 1, 2023.
Finding Number: 2022-002 Finding Type: Federal award finding Federal Assistance Listing No.: 64.033 Program Name: VA Supportive Services for Veteran Families Program Federal Agency: U.S. Department of Veterans Affairs Pass-Through Entity: Transition Projects, Inc. Grant Number: SSVF 19-ZZ-127 Federal Award Year: 2022 through 2023 Control Deficiency Type: Significant deficiency over compliance Instance of Noncompliance: Yes Compliance Requirement: Allowable costs/cost principles Questioned Costs: None Repeat Finding: No Criteria: In accordance with Title 38, U.S. Code of Federal Regulations, Part 62, Supportive Services for Veteran Families Program, grantees may use up to 10 percent of supportive services grant funds for administrative costs that are allowable, allocable, and reasonable in conducting the work under the supportive services grant. The determination of allowable costs must be made in accordance with the applicable Federal Cost Principles set forth in 2 CFR Part 200. Condition: While the organization had sufficient allocable administrative costs in excess of the amount charged, we noted that such costs were charged at a fixed monthly rate, rather than the amount of allowable administrative costs. Cause: The organization did not have policies and procedures over cost principles establishing the determination of allowable costs in accordance with 2 CFR 200.405 and other applicable Federal Cost Principles. Effect: The organization did not fully comply with the allowable cost principles specified in the Code of Federal Regulations. As a result, there may be charges to awards that were not properly allocated, do not have ad-equate support, and/or were not accorded consistent treatment. Questioned Costs: No known or likely questioned costs greater than $25,000. Audit Recommendation: We recommend that the organization implement procedures over the administration of federal awards, including establishing written policies and procedures to ensure compliance with Uniform Guidance cost principles. Management?s Response: Throughout 2022, MPD had a policy of allocating all administrative cost to departments based on employee head count. Within each department managing grants, administrative costs were then allocated down to each grant based on the number of FTE funded by each program. The headcount calculation was set at the beginning of the year and was not updated during the year, leading to the same overhead allocation month after month. As of April 1, 2023, MPD has adopted a new written policy for administrative cost allocation. Costs that are not allowable for federal grants are flagged both on timecards and on purchasing transactions with a subaccount code that segregates them from overhead allocations. Costs related to facilities ? rent, equipment leases, office insurance, shared supplies, depreciation, etc. ? are now allocated to departments based on the square footage occupancy of each department, calculated using the guidance referenced in 2 CFR 200. Administrative costs that serve the entire organization such as Human Resources, Accounting, outsourced IT support, etc., are allocated to each department based on headcount, as we consider the number of personnel per department to be the best estimate of supporting services required by each team. The Payroll Specialist generates a current employee roster by department at the end of each month, which is used to update the administrative allocation. Once all costs have been allocated to the department level, both facilities and administrative costs are allocated down to individual grants based on the proportion of total wage costs assigned to each grant within the department for that month.
FINDING 2022-005 Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - Subrecipient Monitoring Federal Agency: Department of the Treasury Federal Program: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Assistance Listings Number: 21.027 Federal Award Number and Year (or Other Identifying Number): FY 2022 Compliance Requirement: Subrecipient Monitoring Audit Findings: Material Weakness, Modified Opinion Condition and Context The County received a total State and Local Fiscal Recovery Funds (SLFRF) allocation of $13,177,707. During the audit period, the County provided subawards of SLFRF funds to other entities. As a pass-through entity, the County must: 1. Identify the award and the applicable requirements to each subrecipient. 2. Evaluate each subrecipient's risk of noncompliance for purposes of determining the appropriate subrecipient monitoring related to the subaward. 3. Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purpose, complies with the terms and conditions of the subaward, and achieves performance goals. Subawards, totaling $2,503,400, were provided to four different entities. Three of the subrecipient agreements associated with the subawards were selected for testing. For the three agreements tested, the following information was incomplete or missing: 1. The subrecipients unique entity identifier. 2. The federal award identification number (FAIN). 3. The federal award date of award to the recipient by the federal agency. 4. The name of the federal awarding agency, pass-through entity (auditee), and contact information for awarding official of the pass-through entity (auditee). 5. The Assistance Listings Number and Title; the pass-through entity must identify the dollar amount made available under each federal award and the Assistance Listings Number at time of disbursement. Furthermore, the County did not have an evaluation of the subrecipients' risk of noncompliance or monitoring activities demonstrating compliance with the subrecipient monitoring requirement. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.331(a) states: "Subrecipients. A subaward is for the purpose of carrying out a portion of a Federal award and creates a Federal assistance relationship with the subrecipient. See definition for Subaward in ? 200.1 of this part. Characteristics which support the classification of the non-Federal entity as a subrecipient include when the non-Federal entity: (1) Determines who is eligible to receive what Federal assistance; (2) Has its performance measured in relation to whether objectives of a Federal program were met; (3) Has responsibility for programmatic decision-making; (4) Is responsible for adherence to applicable Federal program requirements specified in the Federal award; and (5) In accordance with its agreement, uses the Federal funds to carry out a program for a public purpose specified in authorizing statute, as opposed to providing goods or services for the benefit of the pass-through entity." 2 CFR 200.332 states in part: "All pass-through entities must: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward . . . (1) Federal award identification. (i) Subrecipient name (which must match the name associated with its unique entity identifier); (ii) Subrecipient's unique entity identifier; (iii) Federal Award Identification Number (FAIN); (iv) Federal Award Date (see the definition of Federal award date in ? 200.1 of this part) of award to the recipient by the Federal agency; (v) Subaward Period of Performance Start and End Date; (vi) Subaward Budget Period Start and End Date; (vii) Amount of Federal Funds Obligated by this action by the pass-through entity to the subrecipient; (viii) Total Amount of Federal Funds Obligated to the subrecipient by the passthrough entity including the current financial obligation; (ix) Total Amount of the Federal Award committed to the subrecipient by the passthrough entity; (x) Federal award project description, as required to be responsive to the Federal Funding Accountability and Transparency Act (FFATA); (xi) Name of Federal awarding agency, pass-through entity, and contact information for awarding official of the Pass-through entity; (xii) Assistance Listings number and Title; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at time of disbursement; (xiii) Identification of whether the award is R&D; and (xiv) Indirect cost rate for the Federal award (including if the de minimis rate is charged) per ? 200.414. (2) All requirements imposed by the pass-through entity on the subrecipient so that the Federal award is used in accordance with Federal statutes, regulations and the terms and conditions of the Federal award; (3) Any additional requirements that the pass-through entity imposes on the subrecipient in order for the pass-through entity to meet its own responsibility to the Federal awarding agency including identification of any required financial and performance reports; (4) (i) An approved federally recognized indirect cost rate negotiated between the subrecipient and the Federal Government. If no approved rate exists, the passthrough entity must determine the appropriate rate in collaboration with the subrecipient, which is either: (A) The negotiated indirect cost rate between the pass-through entity and the subrecipient; which can be based on a prior negotiated rate between a different PTE and the same subrecipient. If basing the rate on a previously negotiated rate, the pass-through entity is not required to collect information justifying this rate, but may elect to do so; (B) The de minimis indirect cost rate. (iii) The pass-through entity must not require use of a de minimis indirect cost rate if the subrecipient has a Federally approved rate. Subrecipients can elect to use the cost allocation method to account for indirect costs in accordance with ? 200.405(d). (5) A requirement that the subrecipient permit the pass-through entity and auditors to have access to the subrecipient's records and financial statements as necessary for the pass-through entity to meet the requirements of this part; and (6) Appropriate terms and conditions concerning closeout of the subaward. (b) Evaluate each subrecipient's risk of noncompliance with Federal statues, regulations, and the terms and conditions of the subaward for purposes of determined the appropriate subrecipient monitoring . . . (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: (1) Reviewing financial and performance reports required by the pass-through entity. (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. (3) Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by ? 200.521. (4) The pass-through entity is responsible for resolving audit findings specifically related to the subaward and not responsible for resolving crosscutting findings. . . ." Cause The system of internal controls as established by management of the County was not properly designed, nor implemented. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the County's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. The County was responsible for providing a subaward agreement, with all required elements, and monitoring the non-profit. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the County. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the County design and implement a proper system of internal controls and develop policies and procedures to ensure subrecipients are provided with an adequate subaward agreement and monitored as appropriate. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
Finding 2022-002 Criteria or Specific Requirement: The Code of Federal Regulations Section 200 subpart E outlines the allowability of cost provisions, including indirect costs. Specifically, 2 CFR 200.403(d) states that costs should be accorded consistent treatment to be allowable, and 200.405 defines allocable costs. Condition: During our review of allowable expenses, it was noted that indirect costs were based on the grant budget and not supported by an indirect cost pool. Cause: The Organization has not implemented a cost allocation policy to track indirect costs. Effect or Potential Effect: Indirect expenses were charged to grants and allowability was unable to be determined. Questioned Costs: $40,242. Context: All cost charged as indirect cost to the research and development cluster were based on the grant budget and not supported by allocable costs. Repeat Finding: No Recommendation: We recommend the Organization implement methodology to track overhead expenses, pool them, and allocate to each grant using a reasonable basis for allocation. Views of responsible officials: Management agrees with the finding and will implement a process to pool its overhead costs and allocate them accordingly.
Finding 2022-002 Criteria or Specific Requirement: The Code of Federal Regulations Section 200 subpart E outlines the allowability of cost provisions, including indirect costs. Specifically, 2 CFR 200.403(d) states that costs should be accorded consistent treatment to be allowable, and 200.405 defines allocable costs. Condition: During our review of allowable expenses, it was noted that indirect costs were based on the grant budget and not supported by an indirect cost pool. Cause: The Organization has not implemented a cost allocation policy to track indirect costs. Effect or Potential Effect: Indirect expenses were charged to grants and allowability was unable to be determined. Questioned Costs: $40,242. Context: All cost charged as indirect cost to the research and development cluster were based on the grant budget and not supported by allocable costs. Repeat Finding: No Recommendation: We recommend the Organization implement methodology to track overhead expenses, pool them, and allocate to each grant using a reasonable basis for allocation. Views of responsible officials: Management agrees with the finding and will implement a process to pool its overhead costs and allocate them accordingly.
Finding 2022-002 Criteria or Specific Requirement: The Code of Federal Regulations Section 200 subpart E outlines the allowability of cost provisions, including indirect costs. Specifically, 2 CFR 200.403(d) states that costs should be accorded consistent treatment to be allowable, and 200.405 defines allocable costs. Condition: During our review of allowable expenses, it was noted that indirect costs were based on the grant budget and not supported by an indirect cost pool. Cause: The Organization has not implemented a cost allocation policy to track indirect costs. Effect or Potential Effect: Indirect expenses were charged to grants and allowability was unable to be determined. Questioned Costs: $40,242. Context: All cost charged as indirect cost to the research and development cluster were based on the grant budget and not supported by allocable costs. Repeat Finding: No Recommendation: We recommend the Organization implement methodology to track overhead expenses, pool them, and allocate to each grant using a reasonable basis for allocation. Views of responsible officials: Management agrees with the finding and will implement a process to pool its overhead costs and allocate them accordingly.
Finding 2022-002 Criteria or Specific Requirement: The Code of Federal Regulations Section 200 subpart E outlines the allowability of cost provisions, including indirect costs. Specifically, 2 CFR 200.403(d) states that costs should be accorded consistent treatment to be allowable, and 200.405 defines allocable costs. Condition: During our review of allowable expenses, it was noted that indirect costs were based on the grant budget and not supported by an indirect cost pool. Cause: The Organization has not implemented a cost allocation policy to track indirect costs. Effect or Potential Effect: Indirect expenses were charged to grants and allowability was unable to be determined. Questioned Costs: $40,242. Context: All cost charged as indirect cost to the research and development cluster were based on the grant budget and not supported by allocable costs. Repeat Finding: No Recommendation: We recommend the Organization implement methodology to track overhead expenses, pool them, and allocate to each grant using a reasonable basis for allocation. Views of responsible officials: Management agrees with the finding and will implement a process to pool its overhead costs and allocate them accordingly.
Finding 2022-002 Criteria or Specific Requirement: The Code of Federal Regulations Section 200 subpart E outlines the allowability of cost provisions, including indirect costs. Specifically, 2 CFR 200.403(d) states that costs should be accorded consistent treatment to be allowable, and 200.405 defines allocable costs. Condition: During our review of allowable expenses, it was noted that indirect costs were based on the grant budget and not supported by an indirect cost pool. Cause: The Organization has not implemented a cost allocation policy to track indirect costs. Effect or Potential Effect: Indirect expenses were charged to grants and allowability was unable to be determined. Questioned Costs: $40,242. Context: All cost charged as indirect cost to the research and development cluster were based on the grant budget and not supported by allocable costs. Repeat Finding: No Recommendation: We recommend the Organization implement methodology to track overhead expenses, pool them, and allocate to each grant using a reasonable basis for allocation. Views of responsible officials: Management agrees with the finding and will implement a process to pool its overhead costs and allocate them accordingly.
Finding 2022-002 Criteria or Specific Requirement: The Code of Federal Regulations Section 200 subpart E outlines the allowability of cost provisions, including indirect costs. Specifically, 2 CFR 200.403(d) states that costs should be accorded consistent treatment to be allowable, and 200.405 defines allocable costs. Condition: During our review of allowable expenses, it was noted that indirect costs were based on the grant budget and not supported by an indirect cost pool. Cause: The Organization has not implemented a cost allocation policy to track indirect costs. Effect or Potential Effect: Indirect expenses were charged to grants and allowability was unable to be determined. Questioned Costs: $40,242. Context: All cost charged as indirect cost to the research and development cluster were based on the grant budget and not supported by allocable costs. Repeat Finding: No Recommendation: We recommend the Organization implement methodology to track overhead expenses, pool them, and allocate to each grant using a reasonable basis for allocation. Views of responsible officials: Management agrees with the finding and will implement a process to pool its overhead costs and allocate them accordingly.
Repeat of Prior Audit Finding 2021-001 Federal Program: Trans-National Crime Federal Agencies: United States Department of State- United States Bureau of International Narcotics and Law Enforcement Affairs Federal Assistance Listing Number: 19.705 Federal Award Year: December 31, 2022 Criteria: 2 CFR Part 200.303(a) of the Uniform Guidance require all non-Federal entities to establish and maintain effective internal control over the Federal awards that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal awards. In addition, 2 CFR section 200.405 requires federal awards be expended only for allowable activities. Condition/Context: Panthera Corporation was unable to provide a signed contract, payment information, invoice or reconciliation to evidence allowability of the expenditures or documentation of review and approval for the following: ? For 34 out of 80 selections, no evidence of approval of the invoice or approval of signed contract could be provided (control) ? For 63 out of 80 selections, no evidence of approval of payment could be provided (control) ? For 46 out of 80 selections, no evidence of signed contract or payment support could be provided (compliance) This was not a statistically valid sample. Questioned Costs: Questioned costs were approximately $65,341. Cause: Panthera Corporation did not retain/could not retrieve the signed contract or any related support for the disbursements due to poor document retention and staffing turnover and did not follow its internal control procedures by including formal, written review of disbursement payments. Effect: Panthera Corporation has not complied with the specific requirements for activities allowed or unallowed and allowable costs/cost principles as described in the Uniform Guidance. Unallowable costs may have been charged to the federal program. Recommendation: We recommend that Panthera Corporation review its process and implement procedures that would allow management to properly maintain all required documentation on its federal expenditures. Views of Responsible Officials: Management acknowledges the finding and is in the process of attaining the proper systems to adequately track and maintain documentation including the review and approval process.
CRITERIA Per CFR 200.405 (a)(1) A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. This standard is met if the cost: (1) Is incurred specifically for the Federal award; (2) Benefits both the Federal award and other work of the non-Federal entity and can be distributed in proportions that may be approximated using reasonable methods; and (3) Is necessary to the overall operation of the non-Federal entity and is assignable in part to the Federal award in accordance with the principles in this subpart. CONDITION During our control and compliance test work over cash management, as well as reconciliation of the Schedule of Federal Expenditures (SEFA), we noted the following: - In testing two of the monthly requests for reimbursement by examining all the invoices related to the reimbursements, we found that there were amounts overbilled that totaled $25,186. - In reconciling the total expenditures on the SEFA, we found that total reimbursement requests exceeded actual expenses incurred by $186,089 (this total includes the $25,186). CAUSE Proper internal control procedures are not maintained to ensure federal reimbursement requests include only actual costs incurred vs budgeted amounts. EFFECT The Organization billed the federal government for amounts of costs that had not yet been incurred and is at-risk for noncompliance with allowable activities and allowable costs, as well as cash management requirements. QUESTIONED COSTS $186,089 CONTEXT Management?s monthly reimbursement requests for the communications and grants technical manager position was based on budgeted amounts and not actual costs incurred. RECOMMENDATION We recommend that management contact the grantor with regard to the overbilled amounts. For future reimbursement requests, only requests funds that are for direct costs incurred and for the approved 10% indirect rate. MANAGEMENT VIEW AND CORRECTIVE ACTION PLAN Corrective action has been taken. FHI has discussed this finding with grantor (USDA Department of Agriculture) as has Auditor. To date, there has been no action taken by the USDA. As of July 2023, FHI has been billing only reimbursable amounts for direct costs incurred and for the approved 10% indirect rate.
FINDING #2022-001 U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES Passed through Indian Health Services Urban Indian Health Services ? 4-in-1 Programs ? CFDA #93.193 Condition: Costs benefitting other programs (in addition to the 4-in-1 Program) were not properly allocated to those benefitted programs, resulting in excess charges to the 4-in-1 Program. Criteria: 2 CFR Part 200, Subpart E ? Cost Principles at 200.405 ? Allocable Costs (c) states, in part, that costs allocable to a particular Federal program may not be charged to other Federal programs ?? to overcome fund deficiencies ? or for other reasons.? However, shifting costs that are allowable under two or more awards is permissible when done in accordance with applicable states, regulations, or award conditions. Cause: The end of the approved budget period (3/31/22) was approaching and the Organization had unspent funds remaining in the 4-in-1 Program. Effect: Costs benefitting other programs (in addition to the 4-in-1 Program) were not properly allocated to those benefitted programs, resulting in excess charges to the 4-in-1 Program. Questioned Costs: $19,323.11 Context: Out of a randomly selected sample of 25 items with a monetary value of $40,814, we noted 8 items where the supporting documentation indicated that Federal award programs, in addition to the 4-in-1 Program were benefitted from the cost incurred; however, the 4-in-1 Program was disproportionately charged for these costs. Recommendation: We recommend that the Organization strengthen its procedures to assure that costs are properly allocated to the programs receiving the benefit of the cost. In those cases where it is deemed appropriate for the Organization to shift costs from one grant to another (2 CFR 200.405 (c) and (d)), the supporting documentation should support the change.
Finding 2022-002 - Activities Allowed or Unallowed & Allowable Costs/Cost Principles (Internal Control over Compliance/Compliance) ALN No.: 93.829 - Section 223 Demonstration Programs to Improve Community Mental Health Services Award Year: January 1, 2022 ? December 31, 2022 Federal Agency: United States Department of Health and Human Services Pass Through Entity: Not applicable Criteria: 2 CFR Part 200.303(a) of the Uniform Guidance requires all non-Federal entities to establish and maintain effective internal control over the Federal awards that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal awards. In addition, 2 CFR section 200.405 requires federal awards be expended only for allowable activities. Condition/Context: South Shore made a clerical error in calculating allocated payroll amount claimed for 1 selection tested out of 40 selections leading to an error of $118. The sampling method was nonstatistical sampling. Cause: There was not proper review and oversight over the individual preparing the monthly claims for reimbursement. Effect: South Shore has not complied with the specific requirements for activities allowed or unallowed and allowable costs/cost principles as described in the Uniform Guidance. Unallowable costs were charged to the federal program. Questioned Costs: None. Recommendation: South Shore should develop an internal control process for proper preparation and review of the monthly claims for reimbursement. Views of Responsible Officials: Management agrees with the recommendation and plans to put in place an appropriate internal control process.