Finding 2025-001 – Internal Control over Indirect Cost Calculation, Monitoring and Reporting Federal Program – Office of Air and Radiation (OAR) Assistance Listing Number - #66.034 Award Number – XA-84066101 Criteria: Uniform Guidance (2 CFR §200.414) requires that indirect costs charged to federal awards be supported by a current, approved Negotiated Indirect Cost Rate Agreement (NICRA) and applied in accordance with the approved rate and allocation base. Costs charged in excess of the approved indirect cost rate are unallowable. Additionally, Uniform Guidance (2 CFR §200.328) requires that financial reports submitted to federal awarding agencies or pass-through entities, including Federal Financial Reports (FFRs), accurately reflect the allowable costs incurred under the award and be supported by the Organization’s underlying accounting records. Condition: The Organization charged indirect costs to the major federal program in excess of the amount permitted under its approved NICRA for the fiscal year ended September 30, 2025. The Organization’s NICRA has historically been based on a salary and fringe benefits allocation base. During fiscal year 2025, the Organization experienced significant turnover of long-tenured employees, resulting in a substantial decrease in salaries and wages and, accordingly, a reduction in the approved indirect cost rate. As a result, indirect costs were overcharged to the federal program by $96,196. In addition, amounts reported on the annual Federal Financial Report (FFR) to the federal funder were incorrect, reporting the wrong base and charged amounts. The amounts reported on the FFR did not match the actual indirect cost base and charges for fiscal year 2025. Cause: Although the revised NICRA rate reflected the lower salary base, the Organization charged indirect costs throughout the year using actual indirect expenses rather than recalculating allowable indirect costs based on the approved rate. Also, it appears the errors in the FFR were caused by oversight. Effect: The Organization charged unallowable indirect costs totaling $96,196 to the federal program, resulting in noncompliance with Uniform Guidance requirements. This overcharge may subject the Organization to repayment to the federal awarding agency or reduction of a future award. In addition, the FFR submitted to the federal awarding agency was inaccurate and did not reflect the allowable indirect costs. Questioned Costs: $96,196 Repeat Finding: No Recommendation: We recommend the Organization strengthen internal controls over the calculation, monitoring and reporting of indirect costs charged to the federal program. Specifically we recommend that the Organization evaluate and received approval from the federal agency, whether certain costs currently included in the indirect cost pool may be directly charged to the federal award when those costs can be specifically identified with the program and allocated based on actual usage or time incurred, in accordance with Uniform Guidance requirements. Additionally, management should establish documentation and review procedures to support the allocation methodology used for any costs charged directly to federal programs. This approach may help ensure compliance with the approved NICRA while allowing the Organization to recover eligible program costs in a manner consistent with federal requirements. Response: To address this issue going forward, NACAA met with its auditors and accountant to discuss corrective action. It was recommended that some of NACAA’s overhead costs that have traditionally been added to the indirect cost pool (professional fees, rent, office insurance, etc.) be charged as direct costs using NACAA’s grant-related salaries and fringe benefits to allocate expenses between direct and indirect costs. To correct the other issue related to the Federal Financial Report (FFR) errors, NACAA will work with its accountant to complete the required FFRs to ensure that all figures being reported are correct.
FINDING 2025-003 Subject: Teacher and School Leader Incentive Grants – Subrecipient Monitoring Federal Agency: Department of Education Federal Program: Teacher and School Leader Incentive Grants Assistance Listings Number: 84.374 Federal Award Numbers and Years (or Other Identifying Numbers): Year 2-3, Year 3-4 Compliance Requirement: Subrecipient Monitoring Audit Findings: Material Weakness, Modified Opinion Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, material noncompliance related to the Teacher and School Leader Incentive Grants (TSL) funds passed through to subrecipients. The School Corporation received and passed through to subrecipients $6,143,393 of TSL funds. The School Corporation is to clearly identify the award and applicable requirements to the subrecipients, evaluate the risk of noncompliance related to the subrecipients to determine appropriate monitoring of the subaward, and monitor the activities of the subrecipients to ensure that the subaward is used for authorized purposes, complies with the terms and conditions of the subaward, and achieves performance goals. The School Corporation did not enter into an agreement with the subrecipients. As such, there is no agreement between the School Corporation and the subrecipients that clearly identifies the award as a subaward or includes all the required data elements. In addition, the School Corporation did not have any policies or procedures in place to evaluate the subrecipients' risk of noncompliance or to monitor the activity of the subrecipients. Per inquiry of the School Corporation, it was determined an evaluation of the risk of noncompliance for the subrecipients was not completed, nor did the subrecipients' files support any such evaluation. The lack of internal controls and noncompliance were systemic issues throughout the audit period. INDIANA STATE BOARD OF ACCOUNTS 19 METROPOLITAN SCHOOL DISTRICT OF DECATUR TOWNSHIP SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 200.332 states: "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 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; (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 pass-through 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; INDIANA STATE BOARD OF ACCOUNTS 20 METROPOLITAN SCHOOL DISTRICT OF DECATUR TOWNSHIP SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (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 pass-through 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. (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; INDIANA STATE BOARD OF ACCOUNTS 21 METROPOLITAN SCHOOL DISTRICT OF DECATUR TOWNSHIP SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (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). (c) Consider imposing specific subaward conditions upon a subrecipient if appropriate as described in § 200.208. (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. If a subrecipient has a current Single Audit report posted in the Federal Audit Clearinghouse and has not otherwise been excluded from receipt of Federal funding (e.g., has been debarred or suspended), the pass-through entity may rely on the subrecipient's cognizant audit agency or cognizant oversight agency to perform audit follow-up and make management decisions related to cross-cutting findings in accordance with section § 200.513(a)(3)(vii). Such reliance does not eliminate the responsibility of the pass-through entity to issue subawards that conform to agency and award-specific requirements, to manage risk through ongoing subaward monitoring, and to monitor the status of the findings that are specifically related to the subaward. (e) Depending upon the pass-through entity's assessment of risk posed by the subrecipient (as described in paragraph (b) of this section), the following monitoring tools may be useful for the pass-through entity to ensure proper accountability and compliance with program requirements and achievement of performance goals: (1) Providing subrecipients with training and technical assistance on program-related matters; and (2) Performing on-site reviews of the subrecipient's program operations; (3) Arranging for agreed-upon-procedures engagements as described in § 200.425. INDIANA STATE BOARD OF ACCOUNTS 22 METROPOLITAN SCHOOL DISTRICT OF DECATUR TOWNSHIP SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (f) Verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the subrecipient's Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in § 200.501. (g) Consider whether the results of the subrecipient's audits, on-site reviews, or other monitoring indicate conditions that necessitate adjustments to the pass-through entity's own records. (h) Consider taking enforcement action against noncompliant subrecipients as described in § 200.339 of this part and in program regulations." Cause The School Corporation's management was not aware of the requirements for subrecipient and subaward monitoring compliance. Thus, the School Corporation had not implemented its system of internal controls, which would include appropriate segregation of duties that would likely be effective in preventing, or detecting and correcting, noncompliance related to the Subrecipient Monitoring compliance requirement. 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. 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 School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls, including segregation of duties, to evaluate the subrecipients' risk of noncompliance and adequately monitor the subrecipients. Additionally, policies and procedures should be implemented to ensure appropriate reviews, approvals, and oversight are taking place, as needed, to evaluate and monitor its subrecipients. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
Finding 2025-001: Significant Deficiency – Unallowable Cost Included in Indirect Cost Pool Agency: Department of Defense Federal Program: Research & Development Cluster Assistance Listing Number: 12.630, Award Number: W911NF-16-2-0092 U.S. Army Research Institute - Basic, Applied and Advanced Research in Science and Engineering Assistance Listing Number: 12.300, Award Number: FA8650-13-2-6366 U.S. Air Force/Air Force Materiel Command - Basic and Applied Scientific Research Grant Year: 2025 Criteria: Per 2 CFR § 200.411 and § 200.414(e), indirect cost rates must be developed using only allowable costs. Unallowable costs must be excluded from the indirect cost pool, and if included, the rates must be adjusted or refunds issued to the Federal Government. Per 2 CFR § 200.411 Each cost incurred for the same purpose in like circumstances must be treated consistently either as a direct or an indirect cost to avoid possible double-charging of Federal awards. Condition: During our testing of the indirect cost pool, we noted inclusion of bad debt expense. Bad debt is explicitly addressed at §200.426 of 2 CFR Part 200 and identified as an unallowable cost. In addition, we noted that rent expense for leased space was charged directly as well as being included in the indirect cost pool, thus causing it to be double-counted. Context: The bad debt and duplicative rent included in the indirect cost pool totaled $52,400. We observed that the indirect rates for these awards were capped at a lower rate than the Consortium’s negotiated indirect rate, resulting in a portion of allowable indirect costs incurred not being charged to the grant in amounts greater than the error. Effect: Including unallowable costs in the indirect cost pool resulted in an inflated indirect cost rate, however, the approved rates used for the awards was less than the actual negotiated rate and therefore, not all possible allowable indirect was passed through to the government agency. Cause: The inclusion of bad debt and duplicative rent expense in the indirect cost pool appears to be due to a lack of adequate internal controls regarding review of the preparation of the Indirect Cost Rate Proposal and review of cost classifications against Uniform Guidance requirements. Questioned costs: No questioned costs. Perspective: Statistical sampling was not used, however, samples were determined using AICPA approved guidelines. Repeat finding: This is not a repeat finding. Recommendation: The Consortium should remove the bad debt and duplicative rent expense from the indirect cost pool, recalculate their indirect rate based on the adjusted indirect cost pool and implement a stronger review for any unallowable costs in alignment with the Cost Principles as outlined in the Uniform Guidance when preparing the incurred cost submission. Management’s response (unaudited): See Management’s Corrective Action Plan.
Federal Programs - TRIO Program Cluster – Assistance Listing Numbers 84.042, 84.044, 84.047, 84.066, and 84.217 – U.S. Department of Education (ED) Program Year 2024–2025 - Gaining Early Awareness and Readiness for Undergraduate Programs (GEAR UP) – Assistance Listing Number 84.334 – ED Program Year 2024-2025 Criteria or Specific Requirement – Allowable Costs/Cost Principles – 2 CFR §200.414 Condition – For both programs, three transactions unallowed under the modified total direct cost (MTDC) definition for the program were inappropriately charged indirect cost during the fiscal year. Questioned Costs – TRIO Program Cluster, Assistance Listing Number 84.042A: $17.45 and Assistance Listing Number 84.047A: $11.70; GEAR UP (Assistance Listing Number 84.334): $17.57; based on indirect cost rate times charge Context – For both programs, 50 expenditure transactions were selected for testing. Of these transactions, indirect costs were inappropriately charged on three different costs that were unallowed under the MTDC definition for the program as stated in the Grant Award Notification. These transactions totaled $364.32 (TRIO Program Cluster) and $242.87 (GEAR UP) and were charged indirect cost at a rate of 8% for a total indirect cost of $29.15 and $17.57, respectively. Our sample was not, and was not intended to be, statistically valid. Effect – Unallowable indirect costs were charged to the program and, as such, ED provided excess funding to the University. Cause – The University’s system for tracking costs requires manual review and adjustment, and this review was not completed on a timely basis. This resulted in the charging of inappropriate indirect costs not being corrected during the fiscal year. Identification as a Repeat Finding, if Applicable – N/A Recommendation – The University should ensure the review and adjustment of indirect costs are completed on a timely basis. Views of Responsible Officials and Planned Corrective Actions – Management agrees with the finding.
2025-004 – Significant Deficiency in Internal Controls over Compliance – Activities Allowed or Unallowed and Allowable Costs/Cost Principles US Department of Agriculture / Oregon Department of Human Services / Farmers Market Fund Federal Assistance Listing Number: 10.565, 10.568, 10.569, 10.182 Federal Program Name: Food Distribution Cluster, Local Food Purchase Agreements Criteria – 2 CFR §200.414 Indirect Costs – Entities must maintain accurate records and apply indirect costs consistently across all federal awards. They must also ensure that subrecipient indirect costs are managed in accordance with federal regulations. Condition/context – Indirect costs are not being requested, applied, billed, or reported consistently by the Organization. Indirect costs are not being applied to subrecipients consistently. During the FY24 audit, we observed numerous inconsistencies in the application of indirect costs by the Oregon Food Bank, including: not requesting indirect costs in grant applications, negotiating non-de minimis rates with passthrough agencies after electing a de minimis rate, billing indirect costs in excess of indirect costs awarded in the grant agreement, erroneously including passthrough awards greater than $25,000 per subrecipient in the modified total direct cost base, approving indirect cost rates for subrecipients that did not match the subrecipient's elected de minimis rate, and including subrecipient indirect costs in the section of SF-425 reports reserved for reporting its own indirect costs. During the FY25 audit, indirect costs were not subjected to testing as the total amounts charged were less than program materiality. Due to the timing of the completion of the FY24 single audit, this finding remains applicable in the year under audit. Questioned costs – $19,788 Cause/effect – The Organization has decentralized grant controls which are not designed to ensure compliance over indirect costs and consistency of application across all federal awards. Indirect costs in excess of allowable indirect costs were billed to federal awards. Repeat finding – Yes, prior year finding 2024-004. Recommendation – The Organization should develop procedures and internal controls to ensure indirect cost rates are requested, applied, billed, and reported consistently across all federal awards using the same rate. The Organization should develop similar procedures to ensure it is awarding and reporting subrecipient indirect costs accurately. The Organization should ensure individuals responsible for these controls are adequately trained. Views of responsible officials and planned corrective actions – Oregon Food Bank acknowledges this repeat finding and agrees with the auditors' assessment. Ben Ardell, Director of Finance, is the party responsible. Since the prior audit period, management has taken steps to establish procedures and internal controls to ensure consistent application, billing, and reporting of indirect cost rates across all federal awards. Such steps include defining and documenting roles and responsibilities for applicable staff members during each phase of the grants management lifecycle, as well as implementing procedures and tools to ensure compliance with subrecipient monitoring requirements. These steps involve multiple levels of review for accurate and consistent application of indirect cost rates. Finance will continue implementing the corrective actions necessary to achieve effective controls over compliance with indirect cost rate requirements. Policy and procedures on allowable and allocable costs will be drafted to clearly document how direct and indirect costs will be billed to federal awards. Training will be provided to relevant staff members to ensure accurate implementation and ongoing compliance. These actions will improve our ability to manage indirect costs effectively and ensure compliance with federal requirements. The anticipated completion date remains June 30, 2026.
Criteria: Per Uniform Guidance 2 CFR 200.414, governmental entities must submit an annual indirect cost proposal or cost allocation plan to their cognizant agency for review and approval to recover indirect costs. Condition: The Office on Aging did not update or submit its indirect cost allocation plan for the fiscal year ended June 30, 2025. Consequently, indirect costs were charged to federal awards based on an expired rate or plan. Cause: The Office on Aging lacked a formal process or assigned personnel responsible for ensuring the annual renewal of the indirect cost plan. Effect: Indirect costs charged to federal programs during the year may be unallowable or inaccurate, leading to potential over-recovery or under-recovery of federal funds. Questioned Costs: Undetermined amount representing the total indirect costs charged using the unapproved plan. Auditor’s Recommendation: The Office on Aging’s management should implement a policy to ensure the indirect cost plan is updated and submitted annually to the cognizant agency. All future charges should be based on an approved, current Negotiated Indirect Cost Rate Agreement (NICRA).
2025-002: Allocation of Costs Other Than Payroll Criteria or specific requirement: In accordance with Title 2 U.S. Code of Federal Regulations (CFR) Part 200.414, the Alliance must allocate indirect costs appropriately. Condition and context: The Alliance allocates certain shared costs, other than payroll, using an approach that details the full-time equivalents performing work on each grant. During the year ended June 30, 2025, costs were allocated using a schedule that did not agree to actual underlying payroll data. Cause: The NetSuite program, used to ensure that the proper allocations were used, was not reviewed for an error in the program that did not adequately account for the addition of new grants which slightly changed some allocations of space costs Effect or potential effect: Without adequate controls over this process, the Alliance could incorrectly charge costs to federal grants. Questioned costs: None. Identification as a repeat finding, if applicable: This is a repeat finding. Recommendation: The Alliance should ensure that internal control processes for the allocation of costs are consistently followed. A review process should be in place to ensure that accurate allocations are used. During the fiscal year ending June 30, 2025, the Alliance has implemented the use of the de minimis cost rate, which will alleviate the need to create an allocation approach for shared costs. Views of responsible officials: Refer to the Corrective Action Plan prepared by the Alliance in regard to this matter.
Finding 2025-001: Indirect Costs Federal Agency: Department of Justice Federal Program: Second Chance Act Community-based Reentry Program Assistance Listing Number: 16.812 Federal Award Identification Number and Year: 15PBJA-23-GK-05505-SCAX - 2025; 15PBJA-23-GG-05285-SCAX - 2025 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Period: October 1, 2023 through September 30, 2026 Compliance Requirement Affected: Allowable Costs Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or Specific Requirement Title 2 CFR Section 200.414 requires that indirect costs charged to Federal awards be allowable, properly allocated in accordance with an approved indirect cost rate methodology. The costs need to be adequately documented and effective internal controls be established and maintained over the preparation, review, and approval of indirect cost allocations. Condition For one of the three months selected for indirect cost testing, one month’s calculation did not have documentation as to who prepared, reviewed, and approved the calculation. Questioned costs None Context Condition occurred within one month’s indirect cost calculation out of 3 tested. Cause Established controls related to segregation of duties over the preparation and review of indirect cost allocations were not followed. Effect The absence of documented review increases the risk that errors in indirect cost allocations may not be detected in a timely manner, which could result in unallowable or inaccurate costs being charged to the Federal program. Repeat Finding This is not a repeat finding. Recommendation We recommend that TASC follow its established procedures for segregation of duties over the calculation of indirect cost allocations. Views of Responsible Officials There is no disagreement with this finding. Management will follow established procedure to make sure that segregation of duties over the calculation of indirect cost allocations is properly documented. Management will review the procedure with all accounting staff.
Questioned Cost $ – Finding No. 2025-008: Subrecipient Monitoring (Material Weakness) State Agency: Office of Planning and Sustainable Development Federal Agency: Department of Commerce AL Number and Title: 11.419 – Coastal Zone Management Administration Awards Award Number and Award Year: NA22NOS4190022 2022 NA22NOS4190065 2022 NA23NOS4190139 2023 NA24NOSX419C0023 2024 Repeat Finding? No Condition During our audit, we tested a non-statistical sample of two subawards and found that the State did not communicate the following award information required under 2 CFR 200.332: Subrecipient’s unique entity identifier; Federal Award Date; Subaward Period of Performance Start and End Date; Subaward Budget Period Start and End Date; Assistance Listing title and number; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listing Number at the time of disbursement; Identification of whether the Federal award is for research and development; and Indirect cost rate for the Federal award (including if the de minimis rate is used in accordance with 200.414). Criteria 2 CFR Section 200.332(a) requires the State to clearly identify certain information to subrecipients at the time of the subaward, including the information specified above. Effect By not including the required information in the subaward, the State may not be providing the appropriate level of monitoring over its subrecipients. Cause and View of Responsible Officials Program personnel incorrectly classified subawards as vendor contracts. Recommendation We recommend that the management strengthen internal controls over subaward identification and monitoring subrecipients to ensure subrecipient monitoring requirements are met.
2025-004 – Activities Allowed or Unallowed, Allowable Costs/Cost Principles – Significant Deficiency in Internal Control over Compliance and Noncompliance Federal Agencies: Department of Health and Human Services Federal Assistance Listing Numbers: 93.243 Programs: Substance Abuse and Mental Health Services Project of Regional and National Significance Award/Pass-Through Entity Identifying Numbers: S24-SM84816-053-CTP, S25-SM84816-053-CTP, S24-SM84816-053-LGBTQCT, S25-SM84816-053-LGBTQCT, and CBO27589 Criteria: Per the 2024 Revised Uniform Guidance in 2 CFR §200.414 (f), “Recipients and subrecipients that do not have a current federal negotiated indirect cost rate (including provisional rate) may elect to charge a de minimis rate of up to 15% of modified total direct costs (MTDC). The recipient or subrecipient is authorized to determine the appropriate rate up to this limit.” Prior to the revisions, a de minimis rate of up to 10% was allowed. Condition: The Organization’s Negotiated Indirect Cost Rate expired on June 30, 2024. The Organization charged indirect costs using a percentage in excess of the applicable de minimis rate to two awards from July 1, 2024 to September 30, 2024. Cause: The Organization failed to revisit their indirect cost calculations when their negotiated indirect cost rate expired. Effect or Potential Effect: Indirect costs were charged in excess of allowable amounts. Questioned Costs: Known and likely questioned costs are $149,766. Context: This is a condition identified per review of the Organization’s compliance with specified requirements not using a statistically valid sample. Total indirect costs of the program were $1,861,380 for the year ended June 30, 2025. Identification as a Repeat Finding: Not a repeat finding. Recommendation: We recommend the Organization provide training to staff on all applicable compliance requirements to the Organization, especially related to the 2024 Uniform Guidance revisions. Views of Responsible Officials: Management agrees with the finding. Management is improving policies and procedures surrounding transition events.
Federal Agency: Federal Government Federal Program Name: Research & Development and Economic Development Cluster Assistance Listing Number: Multiple Federal Award Identification Number and Year: Multiple Pass-Through Agency: Multiple Pass-Through Number: Multiple Award Period: July 1, 2024 to June 30, 2025 Type of Finding: - Material Weakness in Internal Control over Compliance Criteria or specific requirement: 2 CFR 200.403: Factors affecting allowability of costs; 2 CFR 200.413: Direct costs; 2 CFR 200.414: Indirect costs, OSU Policy 4-0135. Per Uniform Guidance 2 CFR 200.303, nonfederal entities receiving federal awards are required to establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. Condition: Oklahoma State University’s (OSU) policies were not consistently followed related to Professional Engineering Service (PES) rates charged by Oklahoma Aerospace Institute for Research and Education (OAIRE), a department within OSU. Questioned costs: Up to $2,853,832 of which approximately $935,974 occurred in FY2025. Of this $2,853,832, $1,333,596 was related to cost-reimbursable agreements, $1,159,037 to time and materials agreements, $221,613 to fixed price agreements, and $139,586 to undefined agreements. Context: OAIRE developed (PES) rates, which are the types of hourly rates typically used by contractors in time-and-materials type federal agreements. In some instances, OAIRE charged these fixed hourly rates for PES work in cost-reimbursable federal agreements, which resulted in OAIRE charging more than its actual costs incurred for such PES work. In addition, the PES rates were not consistent with OSU’s facilities and administration (F&A) rate agreement in that they included costs typically charged as indirect in its direct cost labor rates without justification and defining special circumstances when bidding contract rates. Certain labor rates were also calculated based on an understated number of available hours, which resulted in an overstated PES rate. Cause: Professional services rates were developed without documented review or attestation by subject matter experts in research administration or sponsored programs. Effect: Failure to adhere to costing principles may result in questioned costs and overbilling to sponsors. Repeat Finding: No Recommendation: We recommend that OSU should notify the applicable sponsors and federal agencies regarding the calculated questioned costs and make any necessary repayments or adjustments. Further, OSU should develop and document a process to ensure the PES rates are developed and billed in accordance with OSU Policy, applicable federal regulations, and the requirements of OSU’s Federal Agreements. Views of responsible officials: Management agrees with the finding and has developed a plan to correct the finding.
Improper Calculation of Modified Total Direct Cost (MTDC) Base for Indirect Cost Allocation Federal Programs Workforce Innovation and Opportunity Act Cluster ALN 17.258, 17.259, and 17.278 Federal Agency U.S. Department of Labor (DOL) Compliance Requirement Indirect Cost Finding Type Significant deficiency in Internal Control over Compliance Criteria The Department’s indirect cost calculations were required to comply with the applicable provisions of the Uniform Guidance and the Department’s negotiated indirect cost rate agreement (“NICRA”). Specifically: 2 CFR §200.68 defines Modified Total Direct Cost (“MTDC”) as including “all direct salaries and wages, applicable fringe benefits, materials and supplies, services, travel, and up to the first $25,000 of each subaward,” and expressly excludes “the portion of each subaward in excess of $25,000.” 2 CFR §200.403 provides that costs charged to federal awards must be necessary, reasonable, allocable to the federal award, and must conform to any limitations or exclusions set forth in the Uniform Guidance or the federal award. 2 CFR §200.414 establishes the federal framework for indirect (F&A) costs and requires the use of the negotiated indirect cost rate methodology approved by the cognizant agency. The Department’s NICRA further established the approved indirect cost base as MTDC. Accordingly, when calculating indirect costs, the Department was required to apply its negotiated indirect cost rate to an MTDC base that excluded the portion of each subaward or subcontract in excess of $25,000. Condition The Department recorded indirect cost transactions using an incorrect Modified Total Direct Cost (MTDC) base for the year ended June 30, 2025. The approved indirect cost methodology establishes the base as total direct costs excluding subawards and subcontracts in excess of $25,000. However, the Department did not apply the $25,000 limitation when calculating the MTDC base and included the full amount of certain subgrants and subcontracts in the base used to allocate indirect costs. As a result, the MTDC base used by the Department to calculate indirect costs was overstated, which affected the allocation of indirect costs charged to the programs. Cause The deficiency occurred because the Department did not implement adequate review controls over the calculation and application of the Modified Total Direct Cost (MTDC) base used to allocate indirect costs. Specifically, the Department did not ensure that the MTDC base excluded the portion of subawards and subcontracts in excess of $25,000, as required by the Negotiated Indirect Cost Rate Agreement (NICRA) and Uniform Guidance. As a result, indirect costs were calculated using an incorrect cost base. Effect As a result of applying an incorrect Modified Total Direct Cost (MTDC) base, the Department overstated the cost base used to calculate indirect costs. This condition may have resulted in indirect costs being improperly allocated to federal programs. Consequently, amounts charged to federal awards may not comply with the limitations established in the Uniform Guidance and the Department’s Negotiated Indirect Cost Rate Agreement (NICRA). If not corrected, this condition increases the risk of misallocation of costs among programs and potential disallowance of indirect costs by the federal awarding agency. Questioned Costs The error was detected before the issuance of the basic financial statements and therefore, the transaction was adjusted and recorded correctly. Therefore, there is no questioned cost. Identification as a Repeated Finding This is not a repeat finding from the immediate previous audit. Recommendation We recommend that the Department strengthen its internal controls over the calculation and application of indirect costs to ensure compliance with the requirements of the Negotiated Indirect Cost Rate Agreement (NICRA) and Uniform Guidance. Specifically, the Department should establish procedures to verify that the Modified Total Direct Cost (MTDC) base is calculated in accordance with federal regulations, including the exclusion of the portion of subawards and subcontracts in excess of $25,000. The Department should also implement a formal supervisory review of the MTDC base and indirect cost calculations prior to charging indirect costs to federal programs. In addition, the Department should provide guidance or training to personnel responsible for grant accounting to ensure consistent application of NICRA requirements and federal cost principles. Views of responsible officials and planned corrective actions Management of the Department agrees with this finding. Refer to the corrective action plan on pages 114-119.
Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name: Home Investment Partnerships Program Assistance Listing Number: 14.239 Federal Award Identification Number and Year: M24-MC-51-0001, 2024 Award Period: 10/1/2023 to 9/30/2033 Compliance Requirement: Subrecipient Monitoring Type of Finding: Significant Deficiency in Internal Control, Other Matter Criteria or Specific Requirement: Internal Control: Per 2 CFR Section 200.303(a), a non-Federal entity must: Establish and maintaineffective 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 theterms and conditions of the Federal award. These internal controls should comply with guidance in“Standards for Internal Control in the Federal Government” issued by the Comptroller General of theUnited States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Compliance: 2 CFR §200.332(a) - Requirements for Pass-Through Entities states, in part, that all passthrough entities must 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: (i) Subrecipient's name (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; (v) Subaward Period of Performance Start and End Date; (vi) Subaward Budget Period Start and End Date; (vii) Amount of Federal Funds Obligated in the subaward; (viii) Total Amount of Federal Funds Obligated to the subrecipient by the pass-through entity, including the current financial obligation; (ix) Total Amount of the Federal Award committed to the subrecipient by the pass-through entity; (x) Federal award project description, as required by the Federal Funding Accountability and Transparency Act (FFATA); (xi) Name of the Federal agency, pass-through entity, and contact information for awarding official of the pass-through entity; (xii) Assistance Listings title and number; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at the time of disbursement; (xiii) Identification of whether the Federal award is for research and development; and (xiv) Indirect cost rate for the Federal award (including if the de minimis rate is used in accordance with § 200.414). Condition: The City did not furnish the information below to subrecipients at the time the subawards were issued: a. Federal Award Identification Number (FAIN) b. Subaward Budget Period Start and End Date c. Federal award project description, as required by the Federal Funding Accountability and Transparency Act (FFATA) d. Name of the Federal agency, pass-through entity, and contact information for awarding official of the pass-through entity e. Assistance Listings title and number f. the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at the time of disbursement g. Identification of whether the Federal award is for research and development. Questioned Costs: None Context: The City failed to include the required information as noted above in the subrecipient agreements. Cause: The City failed to include all required information in the subrecipient agreements. Effect: Excluding required federal grant award information at the time of the subaward may cause subrecipients and their auditors to be uninformed about program-specific regulations that apply to the funds they receive. There is also the potential for subrecipients to have incomplete Schedules of Expenditures of Federal Awards (SEFA) in subrecipients’ Single Audit reports, and federal funds may not be properly audited at the subrecipient level in accordance with the Uniform Guidance. Repeat Finding: No Recommendation: The City should review and enhance its internal controls and procedures to ensure that all required information is included in subawards at the time of issuance and maintained in subsequent modifications. Views of Responsible Officials: There is no disagreement with the audit finding and the City will undertake additional training for departments in FY 2026, to include providing departments with a grants responsibility checklist.
Finding 2025-002 – Indirect Cost Reimbursement Noncompliance with Federal Requirement Program: ALN # 84.282M Charter Schools Program Criteria or Specific Requirements In accordance with: •2 CFR §200.403, costs charged to federal awards must be allowable and based on actual activity; •2 CFR §200.414, indirect costs must be calculated by applying the approved rate to actual direct costs incurred; and •2 CFR §200.305(b), under the reimbursement method, federal funds must be drawn only for costs incurred. Condition The Organization requested and received $130,000 of indirect cost reimbursement during the fiscal year ended June 30, 2025. However, only $44,575 was supported by actual allowable direct costs incurred during the eligible period April 1, 2025 to June 30, 2025. The excess amount of $85,425 relates to expenditures applicable to a subsequent period. During the audit, management recorded this amount as a grant advance (liability) and did not recognize it as revenue or expense in the current year. Cause Use of budgeted amounts and lack of review controls. Effect Reimbursement requests exceeded allowable costs incurred during the period, resulting in noncompliance. Questioned Costs None, the excess was adjusted to a liability account. Context This exception was noted in 1 of 1 sample selected of indirect cost claims during the period. Recommendation We recommend that the Organization design and implement controls to ensure reimbursements are reviewed and based on actual costs. Views of Responsible Officials and Corrective Action Plan iLearn Schools, Inc. notes that the excess reimbursement of $85,425 was identified, properly recorded as a grant advance liability, and not recognized as revenue or expense in the current year. Going forward, all reimbursement requests will be based on actual allowable direct costs incurred. Management will establish written procedures for indirect cost recovery, implement a formal review and reconciliation process prior to submission, and provide staff training on Uniform Guidance requirements. These corrective actions will be in place for the fiscal year ending June 30, 2026.
Federal Agency: U.S. Department of the Treasury Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Pass-Through Agency: Connecticut Department of Social Services Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: The Organization must comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Condition: The Organization did not comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Questioned costs: None Context: The Organization did not comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Cause: Management was unaware of the requirement to use the actual base costs incurred multiplied by the 10% de-minimis cost rate. Instead, indirect costs were calculated based on funds received. Effect: There is a risk that indirect costs are not calculated correctly per the actual base costs incurred. Recommendation: We recommend that the Organization review and follow the indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance Views of responsible officials: There is no disagreement with the audit finding.
Federal Agency: U.S. Department of the Treasury Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Pass-Through Agency: Connecticut Department of Social Services Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: The Organization must comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Condition: The Organization did not comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Questioned costs: None Context: The Organization did not comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Cause: Management was unaware of the requirement to use the actual base costs incurred multiplied by the 10% de-minimis cost rate. Instead, indirect costs were calculated based on funds received. Effect: There is a risk that indirect costs are not calculated correctly per the actual base costs incurred. Recommendation: We recommend that the Organization review and follow the indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance Views of responsible officials: There is no disagreement with the audit finding.
Federal Agency: U.S. Department of the Treasury Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Pass-Through Agency: Connecticut Department of Social Services Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: The Organization must comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Condition: The Organization did not comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Questioned costs: None Context: The Organization did not comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Cause: Management was unaware of the requirement to use the actual base costs incurred multiplied by the 10% de-minimis cost rate. Instead, indirect costs were calculated based on funds received. Effect: There is a risk that indirect costs are not calculated correctly per the actual base costs incurred. Recommendation: We recommend that the Organization review and follow the indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance Views of responsible officials: There is no disagreement with the audit finding.
Federal Agency: U.S. Department of the Treasury Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Pass-Through Agency: Connecticut Department of Social Services Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: The Organization must comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Condition: The Organization did not comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Questioned costs: None Context: The Organization did not comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Cause: Management was unaware of the requirement to use the actual base costs incurred multiplied by the 10% de-minimis cost rate. Instead, indirect costs were calculated based on funds received. Effect: There is a risk that indirect costs are not calculated correctly per the actual base costs incurred. Recommendation: We recommend that the Organization review and follow the indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance Views of responsible officials: There is no disagreement with the audit finding.
Federal Agency: U.S. Department of the Treasury Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Pass-Through Agency: Connecticut Department of Social Services Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: The Organization must comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Condition: The Organization did not comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Questioned costs: None Context: The Organization did not comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Cause: Management was unaware of the requirement to use the actual base costs incurred multiplied by the 10% de-minimis cost rate. Instead, indirect costs were calculated based on funds received. Effect: There is a risk that indirect costs are not calculated correctly per the actual base costs incurred. Recommendation: We recommend that the Organization review and follow the indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance Views of responsible officials: There is no disagreement with the audit finding.
Federal Agency: U.S. Department of the Treasury Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Pass-Through Agency: Connecticut Department of Social Services Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: The Organization must comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Condition: The Organization did not comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Questioned costs: None Context: The Organization did not comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Cause: Management was unaware of the requirement to use the actual base costs incurred multiplied by the 10% de-minimis cost rate. Instead, indirect costs were calculated based on funds received. Effect: There is a risk that indirect costs are not calculated correctly per the actual base costs incurred. Recommendation: We recommend that the Organization review and follow the indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance Views of responsible officials: There is no disagreement with the audit finding.
Federal Agency: U.S. Department of the Treasury Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Pass-Through Agency: Connecticut Department of Social Services Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: The Organization must comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Condition: The Organization did not comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Questioned costs: None Context: The Organization did not comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Cause: Management was unaware of the requirement to use the actual base costs incurred multiplied by the 10% de-minimis cost rate. Instead, indirect costs were calculated based on funds received. Effect: There is a risk that indirect costs are not calculated correctly per the actual base costs incurred. Recommendation: We recommend that the Organization review and follow the indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance Views of responsible officials: There is no disagreement with the audit finding.
Federal Agency: U.S. Department of the Treasury Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Pass-Through Agency: Connecticut Department of Social Services Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: The Organization must comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Condition: The Organization did not comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Questioned costs: None Context: The Organization did not comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Cause: Management was unaware of the requirement to use the actual base costs incurred multiplied by the 10% de-minimis cost rate. Instead, indirect costs were calculated based on funds received. Effect: There is a risk that indirect costs are not calculated correctly per the actual base costs incurred. Recommendation: We recommend that the Organization review and follow the indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance Views of responsible officials: There is no disagreement with the audit finding.
Federal Agency: U.S. Department of the Treasury Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Pass-Through Agency: Connecticut Department of Social Services Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: The Organization must comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Condition: The Organization did not comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Questioned costs: None Context: The Organization did not comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Cause: Management was unaware of the requirement to use the actual base costs incurred multiplied by the 10% de-minimis cost rate. Instead, indirect costs were calculated based on funds received. Effect: There is a risk that indirect costs are not calculated correctly per the actual base costs incurred. Recommendation: We recommend that the Organization review and follow the indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance Views of responsible officials: There is no disagreement with the audit finding.
Federal Agency: U.S. Department of the Treasury Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Pass-Through Agency: Connecticut Department of Social Services Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: The Organization must comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Condition: The Organization did not comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Questioned costs: None Context: The Organization did not comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Cause: Management was unaware of the requirement to use the actual base costs incurred multiplied by the 10% de-minimis cost rate. Instead, indirect costs were calculated based on funds received. Effect: There is a risk that indirect costs are not calculated correctly per the actual base costs incurred. Recommendation: We recommend that the Organization review and follow the indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance Views of responsible officials: There is no disagreement with the audit finding.
Federal Agency: U.S. Department of the Treasury Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Pass-Through Agency: Connecticut Department of Social Services Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: The Organization must comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Condition: The Organization did not comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Questioned costs: None Context: The Organization did not comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Cause: Management was unaware of the requirement to use the actual base costs incurred multiplied by the 10% de-minimis cost rate. Instead, indirect costs were calculated based on funds received. Effect: There is a risk that indirect costs are not calculated correctly per the actual base costs incurred. Recommendation: We recommend that the Organization review and follow the indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance Views of responsible officials: There is no disagreement with the audit finding.
Federal Agency: U.S. Department of the Treasury Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Pass-Through Agency: Connecticut Department of Social Services Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: The Organization must comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Condition: The Organization did not comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Questioned costs: None Context: The Organization did not comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Cause: Management was unaware of the requirement to use the actual base costs incurred multiplied by the 10% de-minimis cost rate. Instead, indirect costs were calculated based on funds received. Effect: There is a risk that indirect costs are not calculated correctly per the actual base costs incurred. Recommendation: We recommend that the Organization review and follow the indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance Views of responsible officials: There is no disagreement with the audit finding.
2024-001 Research and Development Cluster – Education Innovation and Research (formerly Investing in Innovation (i3) Fund – Validation Grants) Assistance Listing No. 84.411A Criteria: 2 CFR 200.332 notes, “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 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; (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 pass-through entity including the current financial obligation; (ix) Total Amount of the Federal Award committed to the subrecipient by the pass-through 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; …” Condition: For both subawards selected for testing, the identification of the contact information for the awarding agency was incorrect. The contact information was Education Analytics, Inc., the Organization’s grantor, but should have been Future Forward, Inc. Further, one of the two subawards selected for testing had information missing from the subaward including all requirements for the award to be used in accordance with Federal statutes, regulations and terms and conditions of the Federal award. We consider this condition to be an instance of noncompliance relating to the Subrecipient Monitoring compliance requirement. Statistical sampling was not used in making sample selections. Questioned Costs: N/A Cause and Effect: Without communication of the required information, subrecipients may overspend award amounts or incur unallowable expenses towards the grant as well as report the incorrect grantor on their schedule of expenditures of federal awards. Recommendation: We recommend the Organization evaluates policies and procedures to ensure all required information is communicated with the subrecipient. Views of Responsible Officials: Management agrees with this Single Audit Finding and response is included in the Corrective Action Plan.
FINDING 2024-001 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): FY2024 Compliance Requirement: Subrecipient Monitoring Audit Findings: Material Weakness, Other Matters INDIANA STATE BOARD OF ACCOUNTS 13 HANCOCK COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context The County received an allocation of the COVID-19 - State and Local Fiscal Recovery Funds (SLFRF) from the U.S. Department of the Treasury to support its response and recovery from the novel coronavirus. A portion of the County's allocation was then used to subaward funds to another entity (i.e., the subrecipient) to carry out an eligible use. The subaward was provided to the subrecipient via two different subaward agreements. Both subaward agreements were selected for testing. The County, as the pass-through entity, is to clearly identify the subaward and the terms and conditions of the award in the agreement with the subrecipient. During review of the two subaward agreements, it was determined that the Assistance Listings Number (ALN) and Federal Award Identification Number (FAIN) were not included as required. Additionally, the County as the pass-through entity, is to monitor the activities of the subrecipient to ensure that the subaward is used for authorized purposes in compliance with federal statutes, regulations, and terms and conditions of the subaward and that performance goals are achieved. Part of the monitoring requirements include verifying the subrecipient received an audit as required so as to be able to issue management decisions on any findings, as applicable. The County did not have a process in place to obtain and review audits received by the subrecipient. Therefore, the County would not have been able to issue management decisions or ensure timely and appropriate action by the subrecipient. The lack of internal controls and noncompliance were systemic 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 200.332 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 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); INDIANA STATE BOARD OF ACCOUNTS 14 HANCOCK COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (ii) Subrecipient's unique entity identifier; (iii) Federal Award Identification Number (FAIN); (iv) Federal Award Date . . . 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 pass-through entity; (x) Federal award project description, as required to be responsive to the Federal Funding Accountability and Transparency Act (FFATA); (xi) Name of Federal 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 used charged) per § 200.414. . . . (g) Consider whether the results of the subrecipient's audits, on-site reviews, or other monitoring indicate conditions that necessitate adjustments to the pass-through entity's own records. (h) Consider taking enforcement action against noncompliant subrecipients as described in § 200.339 of this part and in program regulations." Cause The County did not have adequate processes or procedures in place to ensure all of the proper information about the grant was provided to the subrecipient and all required monitoring activities were being conducted. Effect Not providing award identification information to subrecipients could result in the subrecipient not properly reporting the grant on their Schedule of Expenditures of Federal Awards. Furthermore, due to the absence of policies and procedures to monitor the activities of subrecipients, subrecipients could be spending federal funds for unauthorized purposes without the County's knowledge. As such, the County cannot ensure proper accountability and compliance with the program requirements. INDIANA STATE BOARD OF ACCOUNTS 15 HANCOCK COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs There were no questioned costs identified. Recommendation We recommended that the County strengthen its system of internal controls to ensure that the County verifies that all subrecipients of federal awards receive an audit and that the County receives and reviews any audit reports of the subrecipients. Additionally, we recommended that the County strengthen its system of internal controls to ensure that subaward agreements include all required information that should be known to the subrecipient. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
Federal Agency: U.S. Department of the Treasury Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Pass-Through Agency: Connecticut Department of Social Services Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: The Organization must comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Condition: The Organization did not comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Questioned costs: None Context: The Organization did not comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Cause: Management was unaware of the requirement to use the actual base costs incurred multiplied by the 10% de-minimis cost rate. Instead, indirect costs were calculated based on funds received. Effect: There is a risk that indirect costs are not calculated correctly per the actual base costs incurred. Recommendation: We recommend that the Organization review and follow the indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance Views of responsible officials: There is no disagreement with the audit finding.
Federal Agency: U.S. Department of the Treasury Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Pass-Through Agency: Connecticut Department of Social Services Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: The Organization must comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Condition: The Organization did not comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Questioned costs: None Context: The Organization did not comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Cause: Management was unaware of the requirement to use the actual base costs incurred multiplied by the 10% de-minimis cost rate. Instead, indirect costs were calculated based on funds received. Effect: There is a risk that indirect costs are not calculated correctly per the actual base costs incurred. Recommendation: We recommend that the Organization review and follow the indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance Views of responsible officials: There is no disagreement with the audit finding.
Federal Agency: U.S. Department of the Treasury Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Pass-Through Agency: Connecticut Department of Social Services Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: The Organization must comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Condition: The Organization did not comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Questioned costs: None Context: The Organization did not comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Cause: Management was unaware of the requirement to use the actual base costs incurred multiplied by the 10% de-minimis cost rate. Instead, indirect costs were calculated based on funds received. Effect: There is a risk that indirect costs are not calculated correctly per the actual base costs incurred. Recommendation: We recommend that the Organization review and follow the indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance Views of responsible officials: There is no disagreement with the audit finding.
Federal Agency: U.S. Department of the Treasury Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Pass-Through Agency: Connecticut Department of Social Services Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: The Organization must comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Condition: The Organization did not comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Questioned costs: None Context: The Organization did not comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Cause: Management was unaware of the requirement to use the actual base costs incurred multiplied by the 10% de-minimis cost rate. Instead, indirect costs were calculated based on funds received. Effect: There is a risk that indirect costs are not calculated correctly per the actual base costs incurred. Recommendation: We recommend that the Organization review and follow the indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance Views of responsible officials: There is no disagreement with the audit finding.
Federal Agency: U.S. Department of the Treasury Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Pass-Through Agency: Connecticut Department of Social Services Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: The Organization must comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Condition: The Organization did not comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Questioned costs: None Context: The Organization did not comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Cause: Management was unaware of the requirement to use the actual base costs incurred multiplied by the 10% de-minimis cost rate. Instead, indirect costs were calculated based on funds received. Effect: There is a risk that indirect costs are not calculated correctly per the actual base costs incurred. Recommendation: We recommend that the Organization review and follow the indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance Views of responsible officials: There is no disagreement with the audit finding.
Federal Agency: U.S. Department of the Treasury Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Pass-Through Agency: Connecticut Department of Social Services Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: The Organization must comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Condition: The Organization did not comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Questioned costs: None Context: The Organization did not comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Cause: Management was unaware of the requirement to use the actual base costs incurred multiplied by the 10% de-minimis cost rate. Instead, indirect costs were calculated based on funds received. Effect: There is a risk that indirect costs are not calculated correctly per the actual base costs incurred. Recommendation: We recommend that the Organization review and follow the indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance Views of responsible officials: There is no disagreement with the audit finding.
Federal Agency: U.S. Department of the Treasury Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Pass-Through Agency: Connecticut Department of Social Services Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: The Organization must comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Condition: The Organization did not comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Questioned costs: None Context: The Organization did not comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Cause: Management was unaware of the requirement to use the actual base costs incurred multiplied by the 10% de-minimis cost rate. Instead, indirect costs were calculated based on funds received. Effect: There is a risk that indirect costs are not calculated correctly per the actual base costs incurred. Recommendation: We recommend that the Organization review and follow the indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance Views of responsible officials: There is no disagreement with the audit finding.
Federal Agency: U.S. Department of the Treasury Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Pass-Through Agency: Connecticut Department of Social Services Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: The Organization must comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Condition: The Organization did not comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Questioned costs: None Context: The Organization did not comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Cause: Management was unaware of the requirement to use the actual base costs incurred multiplied by the 10% de-minimis cost rate. Instead, indirect costs were calculated based on funds received. Effect: There is a risk that indirect costs are not calculated correctly per the actual base costs incurred. Recommendation: We recommend that the Organization review and follow the indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance Views of responsible officials: There is no disagreement with the audit finding.
Federal Agency: U.S. Department of the Treasury Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Pass-Through Agency: Connecticut Department of Social Services Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: The Organization must comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Condition: The Organization did not comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Questioned costs: None Context: The Organization did not comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Cause: Management was unaware of the requirement to use the actual base costs incurred multiplied by the 10% de-minimis cost rate. Instead, indirect costs were calculated based on funds received. Effect: There is a risk that indirect costs are not calculated correctly per the actual base costs incurred. Recommendation: We recommend that the Organization review and follow the indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance Views of responsible officials: There is no disagreement with the audit finding.
Federal Agency: U.S. Department of the Treasury Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Pass-Through Agency: Connecticut Department of Social Services Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: The Organization must comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Condition: The Organization did not comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Questioned costs: None Context: The Organization did not comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Cause: Management was unaware of the requirement to use the actual base costs incurred multiplied by the 10% de-minimis cost rate. Instead, indirect costs were calculated based on funds received. Effect: There is a risk that indirect costs are not calculated correctly per the actual base costs incurred. Recommendation: We recommend that the Organization review and follow the indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance Views of responsible officials: There is no disagreement with the audit finding.
Federal Agency: U.S. Department of the Treasury Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Pass-Through Agency: Connecticut Department of Social Services Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: The Organization must comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Condition: The Organization did not comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Questioned costs: None Context: The Organization did not comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Cause: Management was unaware of the requirement to use the actual base costs incurred multiplied by the 10% de-minimis cost rate. Instead, indirect costs were calculated based on funds received. Effect: There is a risk that indirect costs are not calculated correctly per the actual base costs incurred. Recommendation: We recommend that the Organization review and follow the indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance Views of responsible officials: There is no disagreement with the audit finding.
Federal Agency: U.S. Department of the Treasury Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Pass-Through Agency: Connecticut Department of Social Services Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: The Organization must comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Condition: The Organization did not comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Questioned costs: None Context: The Organization did not comply with indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance. Cause: Management was unaware of the requirement to use the actual base costs incurred multiplied by the 10% de-minimis cost rate. Instead, indirect costs were calculated based on funds received. Effect: There is a risk that indirect costs are not calculated correctly per the actual base costs incurred. Recommendation: We recommend that the Organization review and follow the indirect cost rate guidance set out at 2 CFR section 200.414 within Uniform Guidance Views of responsible officials: There is no disagreement with the audit finding.
2024-001 Research and Development Cluster – Education Innovation and Research (formerly Investing in Innovation (i3) Fund – Validation Grants) Assistance Listing No. 84.411A Criteria: 2 CFR 200.332 notes, “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 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; (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 pass-through entity including the current financial obligation; (ix) Total Amount of the Federal Award committed to the subrecipient by the pass-through 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; …” Condition: For both subawards selected for testing, the identification of the contact information for the awarding agency was incorrect. The contact information was Education Analytics, Inc., the Organization’s grantor, but should have been Future Forward, Inc. Further, one of the two subawards selected for testing had information missing from the subaward including all requirements for the award to be used in accordance with Federal statutes, regulations and terms and conditions of the Federal award. We consider this condition to be an instance of noncompliance relating to the Subrecipient Monitoring compliance requirement. Statistical sampling was not used in making sample selections. Questioned Costs: N/A Cause and Effect: Without communication of the required information, subrecipients may overspend award amounts or incur unallowable expenses towards the grant as well as report the incorrect grantor on their schedule of expenditures of federal awards. Recommendation: We recommend the Organization evaluates policies and procedures to ensure all required information is communicated with the subrecipient. Views of Responsible Officials: Management agrees with this Single Audit Finding and response is included in the Corrective Action Plan.
FINDING 2024-001 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): FY2024 Compliance Requirement: Subrecipient Monitoring Audit Findings: Material Weakness, Other Matters INDIANA STATE BOARD OF ACCOUNTS 13 HANCOCK COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context The County received an allocation of the COVID-19 - State and Local Fiscal Recovery Funds (SLFRF) from the U.S. Department of the Treasury to support its response and recovery from the novel coronavirus. A portion of the County's allocation was then used to subaward funds to another entity (i.e., the subrecipient) to carry out an eligible use. The subaward was provided to the subrecipient via two different subaward agreements. Both subaward agreements were selected for testing. The County, as the pass-through entity, is to clearly identify the subaward and the terms and conditions of the award in the agreement with the subrecipient. During review of the two subaward agreements, it was determined that the Assistance Listings Number (ALN) and Federal Award Identification Number (FAIN) were not included as required. Additionally, the County as the pass-through entity, is to monitor the activities of the subrecipient to ensure that the subaward is used for authorized purposes in compliance with federal statutes, regulations, and terms and conditions of the subaward and that performance goals are achieved. Part of the monitoring requirements include verifying the subrecipient received an audit as required so as to be able to issue management decisions on any findings, as applicable. The County did not have a process in place to obtain and review audits received by the subrecipient. Therefore, the County would not have been able to issue management decisions or ensure timely and appropriate action by the subrecipient. The lack of internal controls and noncompliance were systemic 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 200.332 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 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); INDIANA STATE BOARD OF ACCOUNTS 14 HANCOCK COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (ii) Subrecipient's unique entity identifier; (iii) Federal Award Identification Number (FAIN); (iv) Federal Award Date . . . 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 pass-through entity; (x) Federal award project description, as required to be responsive to the Federal Funding Accountability and Transparency Act (FFATA); (xi) Name of Federal 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 used charged) per § 200.414. . . . (g) Consider whether the results of the subrecipient's audits, on-site reviews, or other monitoring indicate conditions that necessitate adjustments to the pass-through entity's own records. (h) Consider taking enforcement action against noncompliant subrecipients as described in § 200.339 of this part and in program regulations." Cause The County did not have adequate processes or procedures in place to ensure all of the proper information about the grant was provided to the subrecipient and all required monitoring activities were being conducted. Effect Not providing award identification information to subrecipients could result in the subrecipient not properly reporting the grant on their Schedule of Expenditures of Federal Awards. Furthermore, due to the absence of policies and procedures to monitor the activities of subrecipients, subrecipients could be spending federal funds for unauthorized purposes without the County's knowledge. As such, the County cannot ensure proper accountability and compliance with the program requirements. INDIANA STATE BOARD OF ACCOUNTS 15 HANCOCK COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs There were no questioned costs identified. Recommendation We recommended that the County strengthen its system of internal controls to ensure that the County verifies that all subrecipients of federal awards receive an audit and that the County receives and reviews any audit reports of the subrecipients. Additionally, we recommended that the County strengthen its system of internal controls to ensure that subaward agreements include all required information that should be known to the subrecipient. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
Type of Finding: Significant Deficiency in Internal Control over Compliance and Instance of Noncompliance Federal Agency: U.S. Department of Defense Federal Program Name: Conservation and Rehabilitation of Natural Resources on Military Installations Assistance Listing Number: 12.005 Federal Award Identification Number and Year: H79TI083313 - 2020 Award Period: September 28, 2020 through September 27, 2025 Criteria or specific requirement: Per 2 CFR 200.414(f), "recipients and subrecipients that do not have a current Federal negotiated indirect cost rate (including provisional rate) may elect to charge a de minimis rate of up to 15% [formerly 10%] of modified total direct costs (MTDC)”. Condition: One of the Organization's requests for reimbursement requested indirect costs in excess of the 10% de minimis rate that was allowable at the time of the request. Questioned costs: $8,519 known questioned costs. Context: This was deemed to be an isolated incident as it only applied to the first drawdown request of FY24, which was the first request since the Organization transitioned from having a Federal negotiated indirect cost rate agreement (NICRA) to using the de minimis rate. Cause: Due to confusion about the timing of the transition from a NICRA to using the de minimis rate. Effect: Indirect costs in excess of the allowable indirect cost rate may be charged to the federal program. Any costs in excess of the allowable amount may be considered unallowable costs and may be required to be reimbursed to the federal program. Repeat finding: No Recommendation: CLA recommends additional internal scrutiny and controls surrounding applicable compliance requirements when there is a change in policies and procedures, such as the change in effective indirect cost rate. Views of responsible officials: There is no disagreement with the audit finding.
Federal Program/Award Identification: 11.307 COVID-19 Economic Adjustment Assistance – Economic Development Cluster Federal Award Project Number: 01-79-15100 Federal Award Project Year: 2019 Name of Federal Agency: United States Department of Commerce Name of the Applicable Pass-Through Entity: N/A Criteria: The Organization is required to comply with all terms and conditions of the grant agreement with the Revolving Loan Fund (RLF) Award granted by the U.S. Department of Commerce, Economic Development Administration (EDA). Per the Uniform Guidance (2 CFR section 200.414(f), recipients that do not have a current Federal negotiated indirect cost rate may elect to charge a de minimis rate up to 10 percent of modified total direct costs (MTDC). MTDC excludes capital expenditures including revolving loan fund capital. Condition: Management’s requests for reimbursement of indirect costs were not based on 10% of allowable modified total direct costs (MTDC). Reimbursements submitted were based on the amount included in the authorized budget from the EDA but not in accordance with the Uniform Guidance requirements for a de minimis indirect cost rate. Cause: The Organization is a small entity with limited resources to ensure all grant requirements are met. The Organization believed the calculation was allowed based on verbal conversations with the EDA representatives, but it was never documented in writing. Effect or Potential Effect: The Organization could have recognized revenue for indirect costs in excess of what was allowable under the Uniform Guidance. Questioned Costs: None Context: UHY requested that management calculate its indirect cost reimbursement under the requirements of Uniform Guidance and compare the amount paid by EDA to the calculation. The results of the calculation indicated that the Organization had not collected in excess of what it was entitled to, therefore, no questioned costs were identified. Recommendation: Management should implement a process to ensure the calculation of indirect costs charged against the EDA grant are in accordance with the Uniform Guidance and exclude any costs that are not allowed to be included in the MTDC. Views of Responsible Officials and Planned Corrective Action: See “Management’s Response and Corrective Action” plan section.
FINDING 2024-003 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): SLFRP1096 Compliance Requirement: Subrecipient Monitoring Audit Finding: Material Weakness INDIANA STATE BOARD OF ACCOUNTS 19 CITY OF ANDERSON SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context Subrecipients associated with the City's Non-profit, Affordable Housing, and Homeless Initiatives activities funded by the COVID-19 - Coronavirus State and Local Fiscal Recovery Funds were required to submit reports on program activities either quarterly or monthly. The City did not have adequate internal controls in place designed to ensure that these reports were reviewed. Responsibility for reviewing these reports rested primarily with one employee. For two of three subrecipients tested, we were not able to determine that there was a second employee involved that would ensure that the reports submitted by the subrecipients were reviewed by the City. The lack of internal controls was a systemic issue 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 200.332 states: "All pass-through entities must: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and include the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward notification. 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; (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; INDIANA STATE BOARD OF ACCOUNTS 20 CITY OF ANDERSON SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (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. (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). INDIANA STATE BOARD OF ACCOUNTS 21 CITY OF ANDERSON SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (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). (c) Consider imposing specific subaward conditions upon a subrecipient if appropriate as described in § 200.208. (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. INDIANA STATE BOARD OF ACCOUNTS 22 CITY OF ANDERSON SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (4) The pass-through entity is responsible for resolving audit findings specifically related to the subaward and not responsible for resolving crosscutting findings. If a subrecipient has a current Single Audit report posted in the Federal Audit Clearinghouse and has not otherwise been excluded from receipt of Federal funding (e.g., has been debarred or suspended), the pass-through entity may rely on the subrecipient's cognizant audit agency or cognizant oversight agency to perform audit follow-up and make management decisions related to cross-cutting findings in accordance with section § 200.513(a)(3)(vii). Such reliance does not eliminate the responsibility of the pass-through entity to issue subawards that conform to agency and award-specific requirements, to manage risk through ongoing subaward monitoring, and to monitor the status of the findings that are specifically related to the subaward. (e) Depending upon the pass-through entity's assessment of risk posed by the subrecipient (as described in paragraph (b) of this section), the following monitoring tools may be useful for the pass-through entity to ensure proper accountability and compliance with program requirements and achievement of performance goals: (1) Providing subrecipients with training and technical assistance on program related matters; and (2) Performing on-site reviews of the subrecipient's program operations. (3) Arranging for agreed-upon-procedures engagements as described in § 200.425. (f) Verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the subrecipient's Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in § 200.501. (g) Consider whether the results of the subrecipient's audits, on-site reviews, or other monitoring indicate conditions that necessitate adjustments to the pass-through entity's own records. (h) Consider taking enforcement action against noncompliant subrecipients as described in § 200.339 of this part and in program regulations." Cause A system of internal controls to include oversite and review of the quarterly or monthly reports prepared by the subrecipients was not in place. One individual was primarily responsible for reviewing the subrecipient reports. Effect Not having procedures in place for oversite and review of the monitoring reports could lead to noncompliance with the requirements for subrecipient monitoring. 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 City. INDIANA STATE BOARD OF ACCOUNTS 23 CITY OF ANDERSON SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the City establish a proper system of internal controls to include oversite and review to ensure that the subrecipient report reviews are reviewed/approved by a second party. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
Identification of the federal program: Federal grantor: United States Department of Health and Human Services (HHS) Assistance Listing No.: 93.048 Program name: Special Programs for the Aging, Title IV, and Title II, Discretionary Projects Criteria or specific requirement (including statutory, regulatory, or other citation): Under 2 CFR 200.403 costs must be allowable; 2 CFR 200.405 allocable; and indirect costs must follow 2 CFR 200.414 and Appendix IV to Part 200 (nonprofit rate determination). Entities without a current negotiated rate may elect the 10% de minimis rate (2 CFR 200.414(f)). HHS adopts these requirements at 45 CFR Part 75. Condition: The organization applied and included an expired provisional indirect cost rate in its HHS grant application and budgets. HHS approved the application and budgets; however, the rate in use was not current and the Organization had no active negotiated indirect cost rate agreement (NICRA). Cause: Lapse in monitoring and renewing the negotiated indirect cost rate. Effect or potential effect: Risk of noncompliance with cost principles and potential unallowable indirect cost recoveries if the expired rate differs from an approved current rate. Questioned costs: Undetermined. The variance between the expired rate and an allowable rate was not calculated. Recommendation: Either (1) obtain an updated NICRA from the cognizant agency (HHS) and apply it prospectively and, if required, retroactively. Implement controls to track rate expirations and require documented verification of the current rate before budget submissions and draw requests. Views of responsible officials: Management occurs with the recommendation. See Management’s Corrective Action Plan.
Finding Number: 2024-005 Assistance Listing Number and Title: AL # 14.251 Economic Development Initiative, Community Project Funding, and Miscellaneous Grants Federal Award Identification Number / Year: B-22-CP-OH-0726 Federal Agency: U.S. Department Of Housing And Urban Development Compliance Requirement: Activities Allowed or Unallowed and Allowable Cost Principles Pass-Through Entity: N/A Repeat Finding from Prior Audit? No Prior Audit Finding Number: N/A Questioned Cost, Noncompliance, and Material Weakness 2 CFR 2400 gives regulatory effect to the Department of Housing And Urban Development for 2 CFR Part 200.414(f) which provides, in part, that recipients and subrecipients that do not have a current Federal negotiated indirect cost rate (including provisional rate) may elect to charge a de minimis rate of up to 10 percent of modified total direct costs (MTDC). The recipient or subrecipient is authorized to determine the appropriate rate up to this limit. When applying the de minimis rate, costs must be consistently charged as either direct or indirect costs and may not be double charged or inconsistently charged as both. The de minimis rate does not require documentation to justify its use and may be used indefinitely. Once elected, the recipient or subrecipient must use the de minimis rate for all Federal awards until the recipient or subrecipient chooses to receive a negotiated rate. 2 CFR Part 200.1 defines Modified Total Direct Cost (MTDC) as all direct salaries and wages, applicable fringe benefits, materials and supplies, services, travel, and up to the first $50,000 of each subaward (regardless of the period of performance of the subawards under the award). MTDC excludes equipment, capital expenditures, charges for patient care, rental costs, tuition remission, scholarships and fellowships, participant support costs, and the portion of each subaward in excess of $50,000. Other items may only be excluded when necessary to avoid a serious inequity in the distribution of indirect costs and with the approval of the cognizant agency for indirect costs. The County charged $300,000 in Administrative Indirect Costs for the Economic Development Initiative, Community Project Funding, and Miscellaneous Grants AL# 14.251 using a de minimis indirect cost rate. The $300,000 was calculated as 10% of total project costs of $3,000,000, which included $300,000 in indirect costs and $2,700,000 in direct costs. Further, the $2,700,000 of direct costs expended for the project were capital expenditures related to construction on the Devola Sewer Project. Therefore, the Modified Total Direct Cost (MTDC) on the Project was $0. As a result, the County should not have charged any indirect costs on the project using a de minimus rate. The County improperly charging Indirect Costs on the Project was due to confusion over how to calculate Modified Total Direct Costs. Therefore, we consider the amount of $300,000 to be a questioned cost. Failure to properly apply the de minimus indirect cost rate could lead to future questioned costs, reduced future federal funding, and the requirement to repay grant funds. Additional controls should be implemented to help ensure proper application of the de minimus indirect cost rate.
Finding 2024-004 – Suspension/Debarment Federal Agency: U.S. Department of Treasury Federal Program: Coronavirus State and Local Fiscal Recovery Funds AL Number: 21.027 Pass-through: City of Columbus and Community Shelter Board Award Number: 2920-2021 and YMCA-24-CSB Award Year: Various Type of Finding: Significant Deficiency and Noncompliance Criteria: Per 2 CFR 200.414, "Recipients and subrecipients are subject to the nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, as well as 2 CFR part 180. The regulations in 2 CFR part 180 restrict making Federal awards, subawards, and contracts with certain parties that are debarred, suspended, or otherwise excluded from receiving or participating in Federal awards." Per 2 CFR 180 Subpart C, section 300, recommendations to verify that the person or company you intend to do business with is not excluded or disqualified include: (a) Checking SAM.gov Exclusions, (b) Collecting a certification from that person, or (c) Adding a clause or condition to the covered transaction with that person. Condition: The controls in place were not sufficient to ensure vendors the Association transacted with were not debarred, suspended, or otherwise excluded from participating in Federal awards. Context: Out of three vendors selected for testing, the Association did not verify whether they were suspended or debarred from entering into federally covered transactions for any of them. Cause: The Association indicated that they were not familiar with this compliance requirement for this funding. Effect: The Association did not identify the need to verify vendors and therefore did not have any support that they verified vendors for this program. Questioned costs: None. Identification of how questioned costs were computed: Not applicable. Repeat finding: No. Recommendation: The Association should put processes in place that ensures vendors are not suspended or debarred from entering into transactions involving Federal awards and retain documentation of the verification. Views of responsible officials: See Corrective Action Plan.
2 CFR Subpart F § 200.510(b) requires the auditee prepare a Schedule of Expenditures of Federal Awards (the Schedule) for the period covered by the City’s financial statements which must include the total federal awards expended as determined in accordance with § 200.502. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL number information is not available. (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in § 200.502 Basis for determining Federal awards expended, paragraph (b), identify in the notes to the schedule the balances outstanding at the end of the audit period. (6) Include notes that describe the significant accounting policies used in preparing the schedule, and note whether or not the auditee has elected to use the 10 percent de minimis cost rate as covered in § 200.414 Indirect (F&A) costs. The City’s internal control procedures identified and properly recorded $141,051 of Coronavirus relief funds and $577,081 of Highway Planning and Construction pass-through expenses for PID #113961 for recording in their Schedule of Federal Awards Expenditures (Schedule). The City did not identify $381,346 of pass-through expenses for PID #115721 in the Schedule related to the Highway Planning and Construction Funds. Adjustments, to which management have agreed, are reflected in the accompanying Schedule. Noncompliance with grant requirements as well as errors and omissions on the Schedule of Expenditures of Federal Awards could have an adverse effect on future grant awards by the awarding agencies in addition to an inaccurate assessment of major federal programs that would be subjected to audit.
2024-001 [2023-001] — INDIRECT COST CALCULATIONS AND REPORTING Type of Finding: (F) Significant Deficiency in Internal Control Over Compliance of Federal Awards (G) Instance of Noncompliance Related to Federal Awards Funding Agency: U.S. Department of Veteran Affairs Title: VA Homeless Providers Grant and Per Diem Program Assistance Listing #: 64.024 Award #: NMVI604-2909-501-PD Award Period: 10/1/2023–9/30/2024 Estimated Questioned Costs: $29,745 Statement of Condition: During our review of the NMVIC’s indirect cost (IDC) calculations, we identified discrepancies between the calculated allowable IDC and the amounts reported. The NMVIC reported total direct costs of $652,406, and after removing rent of $9,083, we calculated a Modified Total Direct Cost (MTDC) base of $643,323. However, because the NMVIC does not separately track federal versus non-federal expenditures, the accuracy of this base is uncertain. As a result, we used revenue received of $427,443 as the base for estimating allowable IDC, applying the approved indirect cost rate of 10% to arrive at an allowable IDC of $42,744. In comparison, the NMVIC’s Profit and Loss report reflected IDC of $64,830, and the SF-425 reports and client-provided calculations indicated IDC of $72,490. The variance appears to have resulted from the calculation method and inconsistent bases used by the NMVIC. Criteria: Per Uniform Guidance (2 CFR 200.403 and 2 CFR 200.414), indirect costs must be calculated based on the approved indirect cost rate agreement and applied to the appropriate base (Modified Total Direct Costs), excluding specifically unallowable costs such as rent. Additionally, the cost base should be properly supported and consistently applied. Cause: The NMVIC did not apply the approved indirect cost rate to an appropriate and supported cost base. Instead, alternative and inconsistent calculation methods were used, resulting in the overstatement of IDC. Effect: As a result of this miscalculation, the NMVIC claimed indirect costs in excess of the allowable amount under their approved rate. This raises the risk of disallowed costs and potential repayment requirements and reflects a deficiency in internal controls over financial reporting related to grant compliance. Recommendation: We recommend that the NMVIC implement procedures to ensure indirect costs are calculated accurately and consistently, in accordance with the approved indirect cost rate agreement and applicable federal regulations. Specifically, the NMVIC should establish controls to maintain a properly supported cost base that distinguishes between federal and non-federal expenditures and ensures that unallowable costs, such as rent, are excluded from the calculation. Additionally, management should reconcile indirect cost calculations across internal reports and federal filings to prevent discrepancies. View of Responsible Officials and Corrective Action Plan We acknowledge the findings and appreciate the diligence of the audit team in identifying the discrepancies in our indirect cost calculations and reporting as outlined in the draft findings. The Veterans Integration Center (VIC) is committed to maintaining the highest standards of compliance with all federal regulations and grant requirements. Corrective Action Plan 1. Training and Guidelines: All relevant staff will undergo training to understand and implement the correct procedures for calculating indirect costs. Comprehensive guidelines will be developed and disseminated to ensure consistency across all calculations and reporting. 2. Completion of SF-425 Jointly: The COO, and VIC’s contracted Accountant will confirm the accurate Modified Total Direct Costs (MTDC) which is to be used in completing the SF-425, then prepare the GPD SF-425 jointly to ensure its accuracy. 3. Review and Approval Process: An additional layer of review and approval will be established for all indirect cost calculations before they are reported. This step will involve our Chief Executive Officer (CEO) to ensure accuracy and compliance. Corrective Action Plan Timeline • Staff Training and Guidelines Distribution: Completed by Q4 2025 • Completion of SF-425 Jointly: Starting Q3 2025 with SF-425 revision • Review and Approval Process: Effective immediately, with CEO, reviews starting Q3 2025 Designation of Employee Position Responsible for Meeting Deadline The Chief Operating Officer (COO) will be responsible for the oversight and successful implementation of the corrective action plan. The COO will coordinate with the contracted internal Accountant to ensure all actions are taken within the stipulated timelines and report directly to the Chief Executive Officer on the progress.