MATERIAL WEAKNESS Finding Number: 2024-003 Material Weakness in Internal Control over Compliance Federal Program: 84.027 & 84.173 Special Education Cluster (IDEA) Federal Program: 84.425D/84.425U Education Stabilization Fund Criteria: 2 CFR §200.318(a) requires non-federal entities to establish and maintain effective internal control over procurement transactions to ensure compliance with applicable federal statutes and regulations. 2 CFR §§200.317–200.327 require non-federal entities to maintain written procurement policies and procedures that address procurement methods, documentation requirements, and contract administration. 2 CFR §200.430(i) requires charges to federal awards for salaries and wages to be supported by documentation that accurately reflects the work performed and supports the allowability and allocation of payroll costs.2 CFR §200.302(b)(3) requires financial management systems to maintain records that adequately identify the source and application of funds for federally funded activities. Condition: The entity did not maintain adequate internal controls over procurement and payroll expenditures charged to the federal program. Specifically: • The entity does not have a formally adopted, written procurement policy that complies with federal procurement requirements. • Invoices tested did not include supporting documentation such as purchase orders, executed contracts, or memoranda of understanding (MOUs) to substantiate the procurement of goods or services, approval of the transactions, or the basis for the costs incurred. • Payroll expenditures charged to the federal program lacked sufficient supporting documentation, including employment contracts or documentation identifying the employee’s placement on the applicable salary chart within the Teacher and Support Staff Association agreement. • As a result, the entity was unable to demonstrate that payroll costs were calculated in accordance with approved pay rates and were allowable and properly supported. Cause: The deficiencies resulted from the absence of formal procurement policies and insufficient internal controls over documentation standards and record retention for procurement and payroll transactions. Effect: Due to the lack of written procurement policies and insufficient supporting documentation for procurement and payroll expenditures, the entity is unable to demonstrate compliance with federal procurement and cost principles. These deficiencies increase the risk that unallowable or improperly supported costs could be charged to the federal program and not be detected in a timely manner. Identification of Questioned Costs:None identified. Context: The absence of formal procurement policies and consistent supporting documentation limited the ability to readily demonstrate compliance with federal procurement and cost principles and increased the extent of audit procedures required. Repeat Finding: This is a repeat finding of 2023-03.Recommendation: We recommend that management update its procurement policy to include all current requirements under 2 CFR 200 and implement a process to periodically review and revise the policy to remain compliant with future federal regulation changes. Require that all procurement transactions be supported by purchase orders, executed contracts, MOUs, invoices, and evidence of approval and receipt. Ensure payroll expenditures charged to federal programs are supported by employment contracts and documentation identifying employee placement on the applicable salary schedule in accordance with collective bargaining agreements, as required by 2 CFR §200.430. Implement monitoring and training procedures to ensure consistent compliance with federal documentation requirements. Views of Responsible Officials and Corrective Action Plan: Please see the Corrective Action Plan issued by the entity.
2024-005: Federal Awards – Allowable Costs: Condition: The City charged CDBG payroll expenses to the program based a timesheet allocation and did not adjust the charges to reconcile to actual time incurred per employee timesheets. Criteria 2 CFR 200.430(i), Standards for Documentation of Personnel Expenses, states, in part: “Charges to Federal awards for salaries and wages must be based on records thataccurately reflect the work performed…” Charges must “support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award;…” And “budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards.” Cause The City's payroll system charges time for employees each pay period based on an allocation rather than actual hours documented on the employee’s timesheet. Effect Payroll costs charged to the program were greater than amounts supported by thedocumentation. Questioned Costs There were questioned costs in the amount of $68,488. Recommendation We recommend that the City charge time to the program based on actual hours worked perthe employees' timesheets.
2024-006: Federal Awards – Allowable Costs Federal Agency: U.S. Department of Housing and Urban Development CFDA No.: 14.871 Federal Program: Housing Choice Voucher Program Federal Award Year: 2024 Control Category: Allowable Costs Questioned Costs: $116,045 Condition The City charged HCV payroll expenses to the program based a timesheet allocation and did not adjust the charges to reconcile to actual time incurred per employee timesheets. Criteria 2 CFR 200.430(i), Standards for Documentation of Personnel Expenses, states, in part: “Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed…” Charges must “support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award;…” And “budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards.” Cause The City's payroll system charges time for employees each pay period based on an allocation rather than actual hours documented on the employee’s timesheet. Effect Payroll costs charged to the program were greater than amounts supported by the documentation. Questioned Costs There were questioned costs in the amount of $116,045. Recommendation We recommend that the City charge time to the program based on actual hours worked per the employees' timesheets. Management’s Response Regarding Corrective Action Taken or Planned Management acknowledges the importance of ensuring that payroll costs charged to the program are consistent between the payroll system and the employee’s timesheet. The City continues to monitor its internal control process to ensure thorough review procedures are being followed. Timesheets are reviewed, bi-weekly, by payroll and adjusted to reflect actual hours as they relate to a specific activity. The City was able to hire a permanent accountant hiring who will provide additional oversight of these processes ensuring that hours worked are both reported correctly on the timesheets and are following the funding allocations that are approved by the grant.
Finding 2024-006: Improve Documentation and Controls over Allowable Costs Federal Program(s) Information Federal Agency: Department of Education Cluster/Program: Special Education Cluster Award Name: Special Education Grants to States and Special Education Preschool Grants Assistance Listing Number: 84.027/84.173 Award Year: 2024 Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Type of Finding - Compliance Internal Control over Compliance – Material Weakness Criteria or Specific Requirement Per Uniform Guidance (2 CFR § 200.430), charges to federal grants for salaries and wages must be based on records that accurately reflect the work performed. Time and effort documentation—such as personnel activity reports, after-the-fact certifications, or properly maintained timesheets for hourly employees—must support that the amount charged to the grant is allocable and appropriate. Condition and Context Of the 40 payroll selections tested for the Special Education Cluster, 28 lacked required time and effort documentation to support the time worked on the grant. In addition, for 21 hourly employees, timesheets were not maintained, preventing verification that only hours spent on grant functions were charged to the grants. Cause The Town did not have effective controls in place to ensure required time and effort documentation and timesheets were completed and retained for all employees whose salaries or wages were charged, in whole or in part, to federal grant programs. Effect or Potential Effect Lack of proper time and effort support and failure to maintain timesheets for hourly employees increases the risk of unallowable or unsupported costs being charged to the grants, resulting in material noncompliance and the potential for disallowed costs. Questioned costs are reported as follows: AL Number(s): Name of Federal Program or Cluster Questioned Costs 84.027/84.173 Special Education Cluster $1,251,490 Recommendation The Town should implement and enforce procedures to ensure all employees whose salaries or wages are charged to federal grants maintain and retain appropriate time and effort documentation, including timesheets for hourly staff and semi-annual certifications for salaried staff, in compliance with Uniform Guidance. Views of Responsible Official See corrective action plan included herein.
Finding 2024-003 U.S. Department of Housing and Urban Development (HUD) Assistance Listing Number 14.218 – CDBG - Entitlement Grants Cluster Significant Deficiency and Noncompliance over Activities Allowed or Unallowed and Allowable Costs/Cost Principles (Payroll) Repeat Finding: No Criteria: In accordance with 2 CFR §200.303, The non-federal entity must: (a) Establish and maintain effective internal controls 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 In accordance with 2 CFR 200.430: (i) Standards for Documentation of Personnel Expenses (1) Charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-federal entity, not exceeding 100% of compensated activities; (iv) Encompass both federally assisted and all other activities compensated by the non-federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-federal entity’s written policy; (v) Comply with the established accounting policies and practices of the non-federal entity; and (vi) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one federal award; a federal award and non-federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Condition and Context: For the 3 out of 3 employees selected for testing, the timesheet does not support the allocation of work performed to be funded by the federal program. Cause: Timesheets do not report hours by program, so payroll expenses are not allocated to the federal programs based off actual time spent on the grant program. Effect or Potential Effect: Failure to allocate employee pay in accordance with federal requirements could result in a loss of funding. Unallowed costs could be charged to the grant. Questioned Costs: Unknown. Recommendation: The department should maintain support and rationale for all allocations of payroll costs for employees charged to federal awards. Additionally, employees should earmark their timesheets with the number of hours worked on each program. Views of Responsible Officials: Management agrees with the finding. Refer to the Corrective Action Plan Section of this report
Finding 2024-008 U.S. Department of Health and Human Services Assistance Listing Number 93.224, 93.527 – Health Center Program Cluster Significant Deficiency and Noncompliance over Activities Allowed or Unallowed and Allowable Costs/Cost Principles (Payroll) Repeat Finding: No Criteria: In accordance with 2 CFR §200.303, The non-federal entity must: (a) Establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-Federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award In accordance with 2 CFR 200.430: (i) Standards for Documentation of Personnel Expenses (1) Charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-federal entity, not exceeding 100% of compensated activities; (iv) Encompass both federally assisted and all other activities compensated by the non-federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-federal entity’s written policy; (v) Comply with the established accounting policies and practices of the non-federal entity; and (vi) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Condition and Context: For the 4 out of 4 employees selected for testing, the timesheet does not support the allocation of work performed to be funded by the federal program. Cause: Timesheets does not report hours by program, so payroll expenses are not allocated to the federal programs based off actual time spent on the grant program. Effect or Potential Effect: Failure to allocate employee pay in accordance with federal requirements could result in a loss of funding. Unallowed costs could be charged to the grant. Section III - Federal Award Findings and Questioned Costs (continued) Finding 2024-008 (continued) Questioned Costs: Unknown. Recommendation: The department should maintain support and rationale for all allocations of payroll costs for employees charged to federal awards. Additionally, employees should earmark their timesheets with the number of hours worked on each program. Views of Responsible Officials: Management agrees with the finding. Refer to the Corrective Action Plan Section of this report.
State Agency: Illinois Department of Children and Family Services (DCFS) Federal Agency: U.S. Department of Health and Human Services (USDHHS) Program Name: Foster Care – Title IV-E Adoption Assistance, Temporary Assistance for Needy Families ALN and Program Expenditures: 93.658 ($157,279,978) 93.659 ($103,674,138), 93.558 ($583,126,272) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: Cannot be determined Compliance Requirement: Activities Allowed/Unallowed and Allowable Costs/Cost Principles Finding 2024-023: Failure to Provide Supporting Documentation for Payroll and Related Costs Condition Found: DCFS could not provide adequate supporting documentation to substantiate payroll and related costs claimed for federal reimbursement under the Foster Care – Title IV-E (Foster Care), Adoption Assistance, and Temporary Assistance for Needy Families (TANF) programs. On a weekly basis, DCFS employees complete and sign timesheets to report and certify their time. These timesheets are then reviewed and approved by the employee’s immediate supervisor. The supervisor approves the timesheets based on their knowledge of the employee’s hours worked during the pay period. Timesheets are scanned for archiving once a month by the payroll department. Timesheets are manually entered into the time reporting system (Employee Monthly Time Report) which is used to accumulate the costs related to each cost center. Cost pool data from the time reporting system is used to identify personal service expenditures attributable to DCFS’s State and federal programs and to calculate and allocate the related fringe benefit charges and indirect costs. During our testing of 25 direct payroll expenditures charged to the cost pools allocated to the Foster Care, Adoption Assistance, and TANF programs (totaling $127,344) during the year ended June 30, 2024, we noted the following: • The timesheet for one employee (supporting cost pool payroll expenditures sampled of $3,735) could not be provided for testing. DCFS personnel stated they were unable to locate the timesheet for this employee for the sampled period. Upon further review, DCFS personnel noted timesheets were unable to be located for this employee and all employees within the same department (totaling four additional employees) for the entire fiscal year, resulting in approximately 120 missing timesheets (related to payroll, fringe benefits, and indirect costs included in the cost pool totaling $497,277, $399,834, and $194,253, respectively). As a result, the personal service (payroll and fringe benefit) expenditures, as well as related indirect costs, were not appropriately supported in accordance with the requirements of the applicable cost principles. Accordingly, the personal service expenditures and indirect costs were not allowable. • The hours reported for three employees (with sampled personal services expenditures from the cost pool of $15,727) in the timekeeping system used to allocate personal services expenditures to Foster Care, Adoption Assistance, TANF, and other programs operated by the agency exceeded the hours reported on manual timesheets prepared by the employees and approved by supervisors. The unsupported hours reported in the timekeeping system ranged from half an hour to 13.2 hours resulting in unsupported personal service expenditures from the cost pool of $783. Additionally, we noted the controls to ensure required documentation is obtained to support payroll and related costs and maintained to evidence management approval of payroll information were not operating effectively. We also noted adequate internal controls have not been established to ensure the data included in the timekeeping system and used to allocate personal services expenditures to Foster Care, Adoption Assistance, TANF, and other programs operated by DCFS is consistent with the hours reported on manual timesheets prepared by the employees and approved by supervisor. Personal service (payroll and fringe benefit) expenditures and related indirect costs charged to the Foster Care, Adoption Assistance, and TANF programs for the year ended June 30, 2024, were as follows: "See Table in the Audit Report" Criteria or Requirement: 2 CFR 200.403 establishes principles and standards for determining costs for federal awards carried out through grants, cost reimbursement contracts, and other agreements with state and local governments. To be allowable under federal awards, costs must meet certain general criteria. Those criteria require, among other things, that the expenditure be adequately documented. According to 2 CFR 200.430(g), charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must be, among other things, supported by a system of internal control, comply with the established accounting policies and practices of the non-Federal entity, and support the distribution of the employee’s salary or wages amount across specific activities or cost objectives if the employee works on more than one federal award; an indirect cost activity and a direct cost activity; two or more indirect activities allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. In addition, 2 CFR 200.303 requires nonfederal entities to, among other things, 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. Effective internal controls should include procedures to ensure required documentation is obtained to support payroll and related costs and to maintain documentation evidencing management approval of payroll information. Cause: In discussing these conditions with DCFS officials, they stated these exceptions were due to human error and the limitations of keeping a complete file record for the paper-based overtime approval and timesheet process. Possible Asserted Effect: Failure to accurately document and maintain required timesheets results in noncompliance with federal regulations and unallowable costs. Repeat Finding: A similar finding was not reported in the prior year audit. (Finding code 2024-023) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend DCFS review its current procedures and consider any changes necessary to ensure supporting documentation for payroll and related costs is maintained and accurately reflects work performed in accordance with the applicable federal regulations. Views of DCFS Officials: The Department has improved communication with and the training of its timekeepers to ensure accurate and consistent timekeeping standards. The Department has also instituted new quality control procedures to identify and correct errors. All timesheets are digitally archived to ensure proper record retention. The Department is also actively pursuing modernization efforts for both payroll and timekeeping, whether it is e-Time and CMS Payroll or the statewide ERP solutions.
The Department of Emergency and Military Affairs’ Emergency Management Division did not always retain documentation supporting payroll, increasing the risk that $103,045 may not have been spent in accordance with award terms and conditions Assistance Listings number(s) and name(s): 97.042 Emergency Management Performance Grants Award number(s) and year(s): EMF-2021-EP-0016-S01 October 1, 2020 through September 30, 2023 EMF-2021-EP-0018-S01 October 1, 2020 through June 30, 2025 EMF-2022-EP-0009-S01 October 1, 2021 through September 30, 2025 EMF-2023-EP-0008-S01 October 1, 2022 through September 30, 2025 Federal agency: U.S. Department of Homeland Security Compliance requirement(s): Activities Allowed or Unallowed/Allowable Costs/Cost Principles Questioned costs: $103,045 Condition Contrary to federal regulations and its policy, the Department of Emergency and Military Affairs’ Emergency Management Division (Division) did not always retain documentation supporting the payroll costs it charged to the program. Specifically, the Division did not retain personnel action forms supporting and approving employees’ pay rates and/or authorization to work on the program for 5 of 40 employees we tested totaling $103,045, as follows: X $95,080 for 2 employees’ annual payroll costs lacked supported pay rates and authorization to work on the program. These employees transferred to other State agencies after the fiscal year ended, and contrary to Division policy and federal regulation, the Division did not retain their personnel records. X $7,965 for 3 employees annual payroll costs lacked supported pay rates. Previous personnel action forms authorized these 3 employees to work on the program. Effect The Division’s failure to retain documentation supporting payroll costs increased the risk that $103,045 may not have been spent in accordance with award terms and conditions. Consequently, the Division may be required to return monies to the federal agency in accordance with federal requirements.1 The Division’s $1.7 million overall program payroll costs paid to 76 employees, or 23% of $7.3 million total program costs during fiscal year 2024, are at an increased risk of not being spent in accordance with the award terms and conditions. Finally, the Division is at risk that this finding applies to other federal programs it administers. Cause The Division’s Administrative Services Office (Office) was not trained on or aware of Division policy requirements to prepare personnel action forms authorizing all employee pay rate changes and program assignments and to retain the records of employees who subsequently transferred to another State agency. Criteria Federal regulation requires the Division to maintain records for salaries and wages charged to federal awards that accurately reflect the work performed to ensure they are accurate, allowable, and properly allocated (2 CFR §200.430 [g][1][i]) and retain these records for a period of 3 years from the date the program’s final report was submitted to the federal awarding agency or passthrough grantor (2 CFR §200.334). In addition, the Department of Emergency and Military Affairs’ policy requires the Division to prepare and retain for 5 years after an employee’s termination all the employee’s employment records, including personnel action forms authorizing employee pay rate changes and program assignments. It also requires the Division to retain necessary personnel records of employees who transfer to another State agency for no less than 5 years.2 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). 1 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Division, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521). 2 State of Arizona, Department of Emergency and Military Affairs. (2007). DEMA Directive 20.1: State Human Resources Administration, Sections 1.3: The Official Personnel File, 1.5: Employees Transferring to Another State Agency. Recommendations to the Division 1. Retain documentation for all payroll costs, including personnel action forms, to demonstrate employees’ salaries and wages are authorized to be charged to the federal program and spent in accordance with the program’s award terms and conditions. 2. Review the fiscal year 2024 payroll costs for the program to ensure they were properly supported and spent in accordance with the award terms and conditions and coordinate with the U.S. Department of Homeland Security, as necessary, to adjust future federal reimbursement requests or repay any unallowable costs the Division charged to the program. 3. Implement its written policy and train employees to prepare and retain for no less than 5 years the personnel action forms authorizing all employee pay rate changes and program assignments, including those who transfer to another state agency. Views of responsible officials State management concurs with this finding. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials regarding these recommendations. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
The University of Arizona did not support salary and employee-related expenses costs of over $4.8 million that it may be required to repay to the federal agency Cluster name(s): Research and Development Cluster Assistance Listings number(s) and name(s): Various Award number(s) and year(s): Various, 2024 Federal agency: Various Compliance requirement(s): Allowable costs/cost principles Questioned costs: $4,849,561 Condition Contrary to federal regulation and the University of Arizona’s (University) policies and procedures, the University did not properly support the distribution of salary and employee-related expenses (ERE) costs of $4,849,561 to ensure they were accurate, allowable, and properly allocated to the Research and Development Cluster during fiscal year 2024. Specifically, principal investigators or supervisors who had knowledge of work performed on the federally funded Research and Development Cluster projects either did not review and approve effort certification reports or approved them late. We tested 17 employees’ salary and ERE costs charged to the Research and Development Cluster and found that principal investigators or supervisors:1 X Did not approve 3 effort-certification reports for 2 employees. X Did not approve 5 effort-certification reports for 5 employees within the required 30 working-day time frame. Reports were approved between 4 and 35 days late. Further, we obtained a report from the University’s financial system of outstanding effortcertification reports for fiscal year 2024 and found 240 reports supporting salary and ERE costs that were charged to the Research and Development Cluster were not approved, as shown in Table 1, page 184. 1 ERE are determined by applying the appropriate percentage to actual salary expense. Benefits provided to employees, which may include health, dental, long-term disability, retirement, unemployment compensation, qualified tuition remission—employee, termination leave, employee wellness, FICA taxes, workers compensation, and liability insurance. Employees are charged a flat fringe benefit rate regardless of participation. University of Arizona. ERE Rates Overview and FAQs. Retrieved 11/28/25 from https://finance.arizona.edu/accounting/ere-rates/ overview Effect The University’s not approving the effort-certification reports or approving them late increased the risk that the University received $4,849,561 in Research and Development Cluster monies it was not entitled to and may be required to repay to the federal agency. In fact, for 1 of the employees for whom a principal investigator failed to approve effort-certification reports, the University informed us that it improperly paid this former employee $99,762 of salary and ERE for approximately 1 year and 10 months past the employee’s resignation date in June 2023. The University placed a hold on the former employee’s Arizona State Retirement System (ASRS) account and reclaimed the employee’s and employer’s ASRS contribution amounts, resulting in a recovery of $21,648. The University’s improper payments to the former employee resulted in a net loss of $78,114 to the University as of June 30, 2025.2 However, the University reimbursed the Research and Development Cluster by transferring the costs to State appropriated funds for local funding of departments in May 2025; therefore, no questioned cost resulted from this instance of noncompliance. Finally, the University is at risk that this finding applies to other federal programs it administers. 2 Arizona Auditor General. (2025). Report on Internal Control and on Compliance Year Ended June 30, 2025. Retrieved 02/9/2026 from https:// www.azauditor.gov/sites/default/files/2026-02/UniversityofArizonaJune30_2025ReportonInternalControlandonCompliance.pdf Cause Despite periodic notifications by the University’s Sponsored Projects Services, the principal investigators or supervisors either did not review and approve effort certification reports or approved the effort certification reports after the 30-working-day requirement because the policies and procedures for effort certification do not contain enforcement actions for noncompliance. In addition, the University’s policies and procedures did not provide separate time frames for the 2 required effort-certification report reviews, including the fiscal officers and principal investigators or supervisors, to approve the effort-certification reports. For example, for 2 effort-certification reports we tested that were 5 and 17 days late, the principal investigators were given limited time to complete their reviews after the fiscal officers approved the reports in 26 and 28 working days, respectively. Criteria Federal regulation requires the University to base charges to federal awards for salaries on records that accurately reflect the work performed. These records must comply with the University’s established accounting policies and procedures. Federal regulation also allows budget estimates to be used for interim accounting purposes, provided that the University’s system of internal controls includes processes to perform periodic after-the-fact reviews of interim charges made to a federal award based on budget estimates. All necessary adjustments must be made so that the final amount charged to the federal award is accurate, allowable, and properly allocated (2 CFR §200.430[g][1]). University policies and procedures require the University to perform periodic after-the-fact reviews of effort certification reports that include budgeted percentages charged to the federal awarding agency and the distribution of salary and ERE costs based on budgeted percentages amongst all applicable federal awards. These policies and procedures require a fiscal officer to perform the first review and approval of the effort-certification report in the University’s financial system. Then, the principal investigators of federally sponsored projects should approve the effort-certification reports of all employees who are paid fully or partially from federal sources for work performed on a project. If the principal investigator does not have specific knowledge of the work performed, then a direct supervisor who has knowledge of work performed should approve the report. Effort-certification reports are due within 30 working days of the document-creation date in the University’s financial system.3,4 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). 3 University of Arizona. Research & Partnerships – Effort Reporting Policy. Retrieved 11/18/2025 from https://research.arizona.edu/researchsupport 4 University of Arizona. Research & Partnerships – Effort Reporting Procedure. Retrieved 11/18/2025 from https://research.arizona.edu/ research-support Recommendations to the University 1. The principal investigators or supervisors should approve the effort-certification reports within the required 30-working-day time frame. The University should improve its written policies and procedures over effort-certification to include: 2. Enforcement actions when principal investigators or supervisors do not approve the effort certifications within the required time frame. 3. Establish separate time frames in the approval process over effort-certification reports for fiscal officers and principal investigators and supervisors. Views of responsible officials University management concurs with this finding. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials regarding these recommendations. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
DEPARTMENT OF HEALTH ACTIVITIES ALLOWED/ALLOWABLE COSTS Material Weakness Material Noncompliance 2024-027 Strengthen Controls to Ensure Compliance with Allowable Costs Requirements of the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) ALN Number(s) 10.557 - Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) Federal Award 205MS707W5003 (10/1/2019 – 9/30/2021) 215MS707W5003 (10/1/2020 – 9/30/2022) 235MS704W1003 (10/1/2022 – 9/30/2023) 235MS704W1006 (10/1/2022 – 9/30/2023) 245MS704W1003 (10/1/2023 – 9/30/2024) 245MS704W1006 (10/1/2023 – 9/30/2024) PAN-WIC-ARPA-TECH-IMPL (5/23/2023 – 9/30/2027) Questioned Costs N/A Criteria The Code of Federal Regulations (2 CFR 200.430(8)(i)) Standards for Documentation of Personnel Expenses states that: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities; (iv) Encompass both federally assisted, and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity; (vi) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. The Code of Federal Regulations (2 CFR 200.303(a)), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition During testwork performed over allowable costs requirements for the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) Program as of June 30, 2024, the Department of Health (Department) was unable to provide documentation that payroll costs charged to the program were accurate. The auditor noted the following: • For 40 of 40 timesheets selected for testing, the Department was unable to provide documentation supporting that the recorded time and pay rates were appropriately charged to the grant. • For 40 of 40 employees, who worked 100% or less than 100% and charged to the grant, auditor was unable to obtain evidence supporting the predetermined allocation was appropriately charged to the grant. Cause The Department’s procedures and controls were not sufficient to ensure that time and effort reporting was accurately performed and documented, nor that employee time was properly allocated. Effect There is an increased risk of charging unallowed payroll costs to the program. Recommendation We recommend the Department should reevaluate its current process, implement proper controls, and perform additional training over time and effort reporting. The Department should not seek federal reimbursement unless it can substantiate that the time and effort was dedicated to the federal program. Documentation should be readily available for audit. Repeat Finding No. Statistically Valid Yes.
DEPARTMENT OF HEALTH ACTIVITIES ALLOWED/ALLOWABLE COSTS Material Weakness Material Noncompliance 2024-031 Strengthen Controls to Ensure Compliance with Allowable Costs Requirements of the Immunization Cooperative Agreements program ALN Number(s) 93.268 – Immunization Cooperative Agreements Federal Award NH23IP922605 (7/1/2019 – 6/30/2024) Questioned Costs N/A Criteria Code of Federal Regulations (2 CFR 200.430(8)(i)) Standards for Documentation of Personnel Expenses states that: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities; (iv) Encompass both federally assisted, and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity; (vi) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Code of Federal Regulations (2 CFR 200.303(a)), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition During testwork performed over allowable costs requirements for the Immunization Cooperative Agreements program as of June 30, 2024, the Department of Health (Department) was unable to provide documentation that payroll costs charged to the program were accurate. The auditor noted the following: • For 40 of 40 timesheets selected for testing, the Department was unable to provide documentation supporting that the recorded time and pay rates were appropriately charged to the grant. • For 40 of 40 employees, who worked 100% or less than 100% and charged to the grant, auditor was unable to obtain evidence supporting the predetermined allocation was appropriately charged to the grant. Cause The Department’s procedures and controls were not sufficient to ensure that time and effort reporting was accurately performed and documented, nor that employee time was properly allocated. Effect There is an increased risk of charging unallowed payroll costs to the program. Recommendation We recommend the Department should reevaluate its current process, implement proper controls, and perform additional training over time and effort reporting. The Department should not seek federal reimbursement unless it can substantiate that the time and effort was dedicated to the federal program. Documentation should be readily available for audit. Repeat Finding No. Statistically Valid Yes.
DEPARTMENT OF HEALTH ACTIVITIES ALLOWED/ALLOWABLE COSTS Material Weakness Material Noncompliance 2024-032 Strengthen Controls to Ensure Compliance with Allowable Costs Requirements of the Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) program ALN Number(s) 93.323 – Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) Federal Award NU50CK000550 (8/1/2019 – 7/31/2026) Questioned Costs N/A Criteria Code of Federal Regulations (2 CFR 200.430(8)(i)) Standards for Documentation of Personnel Expenses states that: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities; (iv) Encompass both federally assisted, and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity; (vi) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Code of Federal Regulations (2 CFR 200.303(a)), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition During testwork performed over allowable costs requirements for the Epidemiology and Laboratory Capacity for Infectious Diseases program as of June 30, 2024, the Department of Health (Department) was unable to provide documentation that payroll costs charged to the program were accurate. The auditor noted the following: • For 40 of 40 timesheets selected for testing, the Department was unable to provide documentation supporting that the recorded time and pay rates were appropriately charged to the grant. • For 40 of 40 employees, who worked 100% or less than 100% and charged to the grant, auditor was unable to obtain evidence supporting the predetermined allocation was appropriately charged to the grant. Cause The Department’s procedures and controls were not sufficient to ensure that time and effort reporting was accurately performed and documented, nor that employee time was properly allocated. Effect There is an increased risk of charging unallowed payroll costs to the program. Recommendation We recommend the Department should reevaluate its current process, implement proper controls, and perform additional training over time and effort reporting. The Department should not seek federal reimbursement unless it can substantiate that the time and effort was dedicated to the federal program. Documentation should be readily available for audit. Repeat Finding No. Statistically Valid Yes.
Federal Agency: U.S. Department of Health and Human Services Federal Program Name: Community Service Block Grant Assistance Listing Number: 93.569 Federal Award Identification Numbers and Year: 2301MDCOSR 2401MDCOSR Pass-Through Agency: Maryland Department of Housing and Community Development Pass-Through Number(s): CSBG-ND-2023-NSCI CSBG-ND-2024-NSCI Award Period: 10/1/2022 - 9/30/2024 10/1/2023 - 9/30/2025 Compliance Requirement: Allowable Costs Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Matters Criteria or specific requirement: Compliance: Per 2 CFR Section 200.430 (g)(i) Standards for Documentation of Personnel Expenses states that: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities; (iv) Encompass both federally assisted, and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity; (vi) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and nonFederal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Control: Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should comply with the guidance in "Standards for Internal Control in the Federal Government" issued by the Comptroller General of the United States or the "Internal Control-Integrated Framework," issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition/Context: The Neighborhood Service Center, Inc. was unable to provide documentation to substantiate that time and effort was dedicated to the federal program. Neighborhood Service Center, Inc. did not have effective controls in place for monitoring and obtaining adequate support to validate actual payroll expenses charged to the federal program. Questioned costs: Undeterminable Cause: Controls were not operating effectively to ensure that time and effort reporting was performed and documented in a timely manner, in accordance with federal requirements. Effect: There is an increased risk of charging unallowed payroll costs to the program. Repeat Finding: No. Recommendation: We recommend the Neighborhood Service Center, Inc. reevaluate its current process, implement proper controls, and perform additional training over time and effort reporting. The Neighborhood Service Center, Inc. should not report salaries and wages unless it can substantiate that the time and effort was dedicated to the federal program. Documentation should be readily available for audit. Views of responsible officials: In response to the recommendations, effective for immediate implementation, the Neighborhood Service, Inc. will require employees whose salaries are allocated to several funding areas to do periodic (at least 2 times per year) time studies to provide documentation to support how salaries are being allocated in the payroll system to grants and other funding areas. These documents will be signed on June 15 and December 15 of each year.
Finding 2024-002 Corporation for National and Community Service Federal Assistance Listing No. 94.006 AmeriCorps State and National Material Weakness In Internal Controls and Noncompliance over Activities Allowed or Unallowed and Allowable Costs/Cost Principles (Payroll) Repeat Finding: Yes, 2023-002 Condition: For 12 out of 28 payroll selections, we did not receive support to test that payroll charges to the AmeriCorps program were for actual time and effort spent on the grant. Criteria: In accordance with 2 CFR 200.514: (c) Internal controls, (1) The compliance supplement provides guidance on internal controls over federal programs based upon the guidance in Standards for Internal Control in the Federal Government issued by the Comptroller General of the United States and the Internal Control - Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). COSO requires entities to establish and maintain effective internal controls to achieve operational, reporting and compliance objectives. In accordance with 2 CFR 200.430: (i) Standards for Documentation of Personnel Expenses (1) Charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal controls which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-federal entity, not exceeding 100% of compensated activities; (iv) Encompass both federally assisted and all other activities compensated by the non-federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-federal entity’s written policy; (v) Comply with the established accounting policies and practices of the non-federal entity; and (vi) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one federal award; a federal award and non-federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Cause: BCI did not have proper controls in place to ensure that payroll activities charged were based on actual work performed on the grant. Effect: BCI is not in compliance with activities allowed and allowable costs (payroll) requirement for the AmeriCorps program. Unallowed payroll costs could be charged to the grant. Questioned Costs: Unknown. Recommendation: We recommend that BCI establish written procedures related to federally funded payroll to ensure the charges are based on time and effort spent working on the grant and implement these procedures immediately. Auditee Response and Corrective Action Plan: Refer to management’s corrective action plan. Auditor’s Conclusion: Finding remains as stated.
Criteria: Uniform Guidance (2 CFR 200.302(b)(7) and 2 CFR 200.430) requires entities to establish and maintain effective internal control over federal awards, including ensuring that expenditures are properly authorized and supported by adequate documentation. Condition: During testing, the Organization was unable to provide documented evidence of disbursement approvals, as approvals are frequently communicated verbally or via text message and are not retained. In addition, the Organization was unable to provide employment agreements or other documentation supporting employee pay rates for individuals whose compensation was charged to the federal program. Cause: The condition appears to result from inadequate policies and procedures over documenting and retaining evidence of approval for expenditures, including both disbursement authorization and employee compensation arrangements, as well as a lack of formal controls requiring retention of such documentation. Effect: As a result, there is an increased risk that expenditures charged to federal programs may be unauthorized, improperly approved, unsupported, or not allowable under Uniform Guidance. The lack of documentation also limits the effectiveness of audit procedures and increases the likelihood that noncompliance could occur and not be detected. No questioned costs were identified as a result of this finding. Recommendation: We recommend that the Organization establish formal procedures requiring documented authorization for all disbursements and ensure that such approvals are retained in an organized and accessible manner. Additionally, the Organization should implement procedures requiring formal documentation of employee compensation arrangements, including established pay rates, and ensure that this documentation is consistently maintained and readily available for audit and compliance purposes. Management’s Response: Management agrees with the finding and indicates that it will implement formal approval procedures requiring documented authorization for all disbursements and will retain such documentation within its accounting records. Management also plans to implement standardized employment agreements and compensation authorization documentation for all employees and strengthen document retention practices to ensure compliance with federal requirements.
Criteria: Uniform Guidance (2 CFR 200.403 and 2 CFR 200.430) requires that costs charged to federal awards be properly classified, allowable, and reflect the nature of the expenditure. Compensation for personal services must be accurately categorized and charged to appropriate cost objectives. Condition: During testing, it was identified that the Organization recorded $2,143 of employee compensation, paid through its payroll process as a bonus or stipend, to a travel and development line item rather than classifying the cost as payroll-related expense. Cause: This condition appears to result from inadequate controls over the classification and coding of expenditures, as well as a lack of review procedures to ensure payroll-related costs are recorded in the appropriate accounts. Effect: As a result, $2,143 compensation costs were misclassified in the accounting records and improperly charged to the federal program under an incorrect cost category. This increases the risk that financial reports submitted for federal awards may be inaccurate and that costs may not be evaluated appropriately for allowability. Recommendation: We recommend that the Organization implement procedures to ensure that all payroll-related costs, including bonuses and stipends, are properly classified within the accounting system. Management should also establish review controls over coding of expenditures to ensure consistency with Uniform Guidance and grant reporting requirements. Management’s Response: Management agrees with the finding and indicates that it will strengthen review procedures over expense classification and ensure that compensation costs are properly recorded within payroll-related accounts going forward.
Assistance Listing Number: 93.558 Name of Federal Program or Cluster: Temporary Assistance for Needy Families (TANF) Name of Federal Agency: Department of Health and Human Services Name of Pass-Through Entity: Virginia Department of Social Services Pass-Through Entity Identifying Number: BEN-21-029 Award Period: July 1, 2023 through June 30, 2024 Criteria or Specific Requirement: 2 CFR 200.430 requires salary and benefit charges to be based on records that accurately reflect work performed. Condition and Context: UCM did not maintain effective internal controls to ensure that payroll and employee benefits charged to the federal award were allowable. Auditor tested 100% of personnel and related benefits charged to the federal award. Specific issues included: Payroll costs – time and effort reporting o No internal controls existed over time-and-effort reporting for 2 out of 12 employees charged to the federal award. o Required after-the-fact documentation of actual time worked was not maintained. Retroactive time and effort certifications were received during audit for 10 out of 12 employees who worked within the program. Employee benefits – lack of controls and overcharging o There were no internal controls to ensure that employee benefits charged to the award reflected actual costs incurred. o UCM charged budgeted benefit amounts, which were greater than actual costs. Cause: UCM lacked formal written policies and procedures governing time and effort reporting, employee benefit allocations, and documentation standards. Significant management personnel turnover resulted in inadequate federal grant knowledge and inconsistent application of Uniform Guidance requirements. Effect or Potential Effect: Unallowable, unsupported, or inaccurately allocated costs were charged to the federal award. UCM may be required to repay federal funds and implement corrective actions. Questioned Costs: Questioned costs include the 2 out of 12 unsupported time and effort costs, excess employee benefits than actual allocable to the employees within the program, and 10% de minimis charged on the questioned costs. Payroll: $15,037 Employee benefits: 77,118 Indirect overcharge on above questioned costs: 9,216 Total known questioned costs: $101,371 Recommendation: UCM should develop and implement comprehensive written policies and procedures addressing time and effort, employee benefits, payroll allocations, and documentation standards. Staff responsible for grant accounting should receive Uniform Guidance training. Views of Responsible Officials: Management acknowledges the finding and will work to implement appropriate corrective actions to address the deficiency and improve compliance going forward.
Payroll Allocation Documentation for Federal Awards Criteria Under 2 CFR 200.430(i), charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. Internal controls should provide reasonable assurance that payroll costs charged or allocated to federal awards are properly supported and consistently applied. Condition SELF maintained employee timesheets documenting hours worked, however, the timesheets did not identify the specific programs or cost objectives on which employees worked. Employees assigned to a single program were generally charged directly to their home department through the payroll system. For employees performing administrative, management, and other shared functions, payroll costs were not allocated to individual federal programs during the fiscal year. Following audit procedures and confirmation from the City of Philadelphia that certain City contracts included federal pass-through funding, management performed after-the-fact allocations of shared payroll costs to the applicable federal awards. SELF did not maintain contemporaneous documentation supporting the basis for these allocations during the audit period. Cause Management was not aware during the fiscal year that certain City of Philadelphia contracts contained federal passthrough funding subject to the Uniform Guidance requirements. As a result, procedures had not been established to identify federal awards or to contemporaneously document and allocate shared personnel costs benefiting those awards. Effect Without documentation supporting payroll allocations, the Organization cannot demonstrate that salaries charged to federal awards accurately reflect the work performed or that shared personnel costs were allocated using a consistently applied, reasonable methodology. This increases the risk that payroll expenditures charged to federal awards may not comply with Uniform Guidance requirements. Questioned Costs We were unable to determine the amount, if any, of questioned costs. Auditors’ Recommendation Management should establish procedures to identify all federal funding, including pass-through funding received through nonfederal entities, at the time awards are executed. The Organization should implement written policies requiring that payroll costs charged or allocated to federal awards be supported by contemporaneous documentation reflecting the work performed and that shared personnel costs be allocated using a documented, reasonable, and consistently applied methodology that complies with 2 CFR 200.430. Management’s Response and Corrective Action Plan Management was unaware that certain City of Philadelphia contracts contained federal pass-through funding until confirmation was received from the City during the audit. Upon becoming aware of the federal funding, management developed an allocation methodology for shared personnel costs and has begun implementing procedures to identify federal funding at award inception and to document payroll allocations contemporaneously for future reporting periods.
FINDING NO: 2024-028 (Repeat 2023-047) Develop and Implement Internal Controls Over the Payroll Allocation Process STATE AGENCY: Oklahoma State Department of Education (OSDE) FEDERAL AGENCY: United States Department of Education (USDE) ALN: 84.010; 84.425 – 84.425D & U FEDERAL PROGRAM NAME: Title I – Grants to Local Educational Agencies; Education stabilization Fund (ESF) - Elementary and Secondary School Emergency Relief (ESER) Fund and American Rescue Plan – Elementary and Secondary Schools Emergency Relief Fund (ARP ESSER) FEDERAL AWARD NUMBER: S010A230036; S425D210024, S425U210024 FEDERAL AWARD YEAR: 2024 CONTROL CATEGORY: Activities Allowed or Unallowed and Allowable Costs/Cost Principles QUESTIONED COSTS: $0 Condition and Context: During our review and follow up on the prior year finding, we requested the time and effort data for payroll charged to the Title IA and the ESF – ESSER II and ARP ESSER III programs; current OSDE staff were not able to provide the data requested due to significant staff turnover and inadequate record retention processes. We were unable to determine the following payroll costs were properly allocated to their respective program during the audit period: • Title I: $1,138,740 (0.49%) compared to total program expenditures of $234,255,756. • ESSER II: $301,888 (1.21%) compared to total program expenditures of $24,855,831.06. • ARP ESSER III: $2,023,891 (0.46%) compared to total program expenditures of $441,707,269. The United States Department of Education (USDE) Consolidated Performance Review of Oklahoma (dated July 25, 2024) covering the SFY 23 audit period noted OSDE had used estimates to allocate payroll costs to federal awards but had not reconciled those estimates to the actual work performed on each federal program as required per 2 CFR § 200.430. The OSDE’s time and attendance system did not allow the agency to accurately charge time for employees who are paid from both State and Federal sources simultaneously. Time would be charged to the Federal funding source for the first split of the fiscal year (FY) and then charged to a state funding source for the remainder of the fiscal year. During our follow-up with OSDE, we were informed that this had not been corrected during the audit period. Cause: Technical issues with the State’s recently adopted time and attendance system did not allow OSDE to accurately charge fringe benefits for employees who are paid from both State and Federal sources and OSDE had not implemented an alternative process to accurately allocate payroll costs to federal awards. In addition, OSDE’s record retention process lacked the necessary strength and consistency to ensure retention of time and effort data. Effect: Charges to Federal awards (Title IA and ESF – ESSER II and ARP ESSER III) for salaries and wages were not based on records that accurately reflect the work performed and were not properly allocated. Inaccurate allocation methods for payroll costs increases the risk of incorrect or unallowable costs charged to Federal programs, which increases the risk of inappropriate allocation of funds between federal and state dollars. Recommendation: We recommend OSDE develop and implement system changes or an alternative process to accurately allocate payroll cost to Federal awards in compliance with the time and effort requirements of 2 CFR § 200.430. We also recommend OSDE develop and provide staff members with policies and procedures and adequate training to understand and appropriately apply 2 CFR § 200.430 federal requirements for recording time and effort data and allocating salaries and wages to Federal awards. Additionally, we recommend OSDE develop record retention policies and procedures to ensure all records are appropriately retained, especially when staff turnover is high. Criteria: 2 CFR § 200.430(g)(1) states in part: “Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the recipient or subrecipient; (iii) Reasonably reflect the total activity for which the employee is compensated by the recipient or subrecipient, not exceeding 100 percent of compensated activities (for IHEs, this is the IBS); (iv) Encompass federally-assisted and all other activities compensated by the recipient or subrecipient on an integrated basis but may include the use of subsidiary records as defined in the recipient's or subrecipient's written policy; (v) Comply with the established accounting policies and procedures of the recipient or subrecipient; and (vi) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. (vii) Budget estimates (meaning, estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that: (A) The system for establishing the estimates produces reasonable approximations of the activity performed; (B) Significant changes in the related work activity (as defined by the recipient's or subrecipient's written policies) are promptly identified and entered into records. Short-term (such as one or two months) fluctuations between workload categories do not need to be considered as long as the distribution of salaries and wages is reasonable over the longer term; and (C) The recipient's or subrecipient's system of internal controls includes processes to perform periodic after the- fact reviews of interim charges made to a Federal award based on budget estimates. All necessary adjustments must be made so that the final amount charged to the Federal award is accurate, allowable, and properly allocated. (viii) Because practices vary as to the activity constituting a full workload (for example, the Institutional Base Salary (IBS) for IHEs), records may reflect categories of activities expressed as a percentage distribution of total activities.” 2 CFR § 200.334 states in part: “The recipient and subrecipient must retain all Federal award records for three years from the date of submission of their final financial report. For awards that are renewed quarterly or annually, the recipient and subrecipient must retain records for three years from the date of submission of their quarterly or annual financial report, respectively. Records to be retained include but are not limited to, financial records, supporting documentation, and statistical records. Federal agencies or pass-through entities may not impose any other record retention requirements except for the following: (a) The records must be retained until all litigation, claims, or audit findings involving the records have been resolved and final action taken if any litigation, claim, or audit is started before the expiration of the three year period.” 2 CFR § 200.303(a) states in part: “The non-Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award.” Management Response Contact Person: Tammy Smith | Senior Director of Federal Programs Anticipated Completion Date: January 2025 Corrective Action Planned: The Oklahoma State Department of Education agrees with the finding. See corrective action plan located in the corrective action plan section of this report.
FINDING NO: 2024-024 (Repeat 2023-088; 2022-085) Strengthen Internal Controls Over Reviewing Administrative Claims STATE AGENCY: State of Oklahoma, Office of Management and Enterprise Services FEDERAL AGENCY: US Department of Treasury ALN: 21.023 FEDERAL PROGRAM NAME: Emergency Rental Assistance (ERA 1 and ERA 2) FEDERAL AWARD NUMBER: ERA028 and ERAE0259 FEDERAL AWARD YEAR: 2024 CONTROL CATEGORY: Activities Allowed/Unallowed and Allowable Costs/Cost Principles QUESTIONED COSTS: $1,080,309 Condition and Context: Administrative costs charged to the ERA 1 and ERA 2 grants must be attributable to providing financial assistance and housing stability services to eligible households and must be necessary and reasonable for the performance of the ERA 1 and ERA 2 Federal award and be allocable to the ERA 1 and ERA 2 Federal award. Also, any direct and indirect administrative costs in ERA1 or ERA2 must be allocated by the grantee to either the provision of financial assistance or the provision of housing stability services. To the extent administrative costs are not readily allocable to the provision of financial assistance or the provision of housing stability services, the grantee may assume an allocation of the relevant costs of 90 percent to financial assistance and 10 percent to housing stability services. In order to determine if the subrecipient Communities Foundation of Oklahoma (CFO)/Communities Cares Partners (CCP), only charged administrative costs to the ERA 1 and ERA 2 grants in compliance with the grant requirements described above, we performed the following procedures: Analysis of Program Expenditures and Administrative Cost Charged over the Period of Performance: We obtained the SFY24 transaction data for the ERA 1 and ERA 2 grants from CFO/CCP and identified the transactions coded to the ERA 1 and ERA 2 grant by 1) awardee (i.e., State of Oklahoma, Cleveland County, Oklahoma County, Oklahoma City); and 2) type of expenditure (i.e., rent and utility assistance payments, rent and utility assistance administrative expenditures, housing stability payments, housing stability administrative expenditures). We noted that the subrecipient had zero expenditures during SFY24 for actual rent and utility assistance, however, $1,845,942 (ERA 2) and $137 (ERA 1) in rent and utility assistance administrative costs were charged to the State of Oklahoma ERA awards. We also noted that the subrecipient had $6,908,183 (ERA 2) in housing stability payments during SFY24 and charged $155,252 in housing stability administrative expenditures to the State of Oklahoma ERA2 award. We also reviewed a timeline provided by CFO/CCP that outlined the activities the subrecipient was engaged in related to the ERA awards over the period of performance. Of note, CFO/CCP stopped accepting rent and utility assistance applications at the end of August 2022 and, by the end of December 2022, CFO/CCP stopped paying virtually all rent and utility assistance applicants and marked all remaining qualified applications in the Neighborly system as Unpaid - Funds Exhausted with the exception of a few Office of Refugee Resettlement (ORR) applications that were processed through the end of June, 2023. In December of 2022, CFO/CCP closed social media channels and platforms and disbanded the Qualifications Team, Client Relations Team, Communications Team, and Processing Team with several contractors held over to continue to address remaining issues. In January of 2023, CFO/CCP created a Clean-up Team to identify and resolve remaining issues and organize files to ensure any staff at the Communities Foundation of Oklahoma could quickly find information they may need upon the closure of CCP. CFO/CCP also began funding 13 ERA-2 Housing Stability Partners. The following table shows the percentage of administrative expenditures (not including the 16 million in unallowable management fees) for the State of Oklahoma ERA 1 and ERA 2 programs administered by CFO/CCP from SFY 21 to SFY 24. CCP/CFO Administrative Expenditures for the State of Oklahoma ERA 1 and ERA 2 Programs Compared to Rent & Utility (RU) Assistance Payments and Housing Stability Expenditures SFY23 ERA 1 & ERA 2 SFY 21 & SFY 22 As of December 31, 2022 As of June 30, 2023 SFY 24 RU Assistance Payments $188,753,605.17 $72,779,085.51 $2,030,717.31 -$334,805.10 RU Assistance Admin Payments $9,113,762.73 $7,099,473.23 $1,524,364.43 $1,846,079.25 Admin % of Assistance Payments 4.83% 9.75% 75.07% -551.39% Housing Stability Payments $17,773,884.27 $1,906,561.94 $4,551,171.62 $6,908,182.87 Housing Stability Admin Payments $274,224.14 $935,236.26 $0.00 $155,252.45 Admin % of Assistance Payments 1.54% 49.05% 0.00% 2.25% Total RU Assistance & HS Payments $206,527,489.44 $74,685,647.45 $6,581,888.93 $6,573,377.77 Total RU Assistance & HS Admin Payments $9,387,986.87 $8,034,709.49 $1,524,364.43 $2,001,331.70 Total Admin % of Program Expenses 4.55% 10.76% 23.16% 30.45% Of note, the 10 % and 15% limit means that administrative costs must not exceed these limits, however, the costs still have to be attributable to providing financial assistance and housing stability services to eligible households and must be necessary and reasonable for the performance of the ERA 1 and ERA 2 Federal award and be allocable to the ERA 1 and ERA 2 Federal award. We identified several issues with CFO/CCP in relation to the amount of administrative expenditures charged to the federal awards in comparison to the actual activities that were performed and/or would have been reasonable and necessary to perform given the type of program expenditures the subrecipient was incurring at the time. Based on our analysis, it appears that CFO/CCP significant increase in administrative costs coincided with the increase to a 15% administrative limit for the ERA 2 grant award instead of the 10% limit under the ERA 1 grant award. We noted that, during this period, (mainly SFY 2023) CFO/CCP made large increases to contractor rates, paid out unallowable bonus payments of approximately 38% of the total contractor payroll (an over 470% increase over the prior period) and increased other administrative costs as well. Almost all rent and utility assistance applications were processed and paid as of the end of December 2022. Administrative costs relevant to processing and paying rent and utility assistance applications far exceed any costs relevant to administering the housing stability activities related to the relatively small number of HS contracts paid in SFY23 and SFY24; however, CFO/CCP’s administrative costs were rising in comparison to the assistance payments. Also, CFO/CCP had 6 months in SFY23 in which very little assistance applications were processed and paid, yet CFO/CCP charged over $500,000 more in SFY24 for admin costs than it did during the last 6 months of SFY23 when the majority of the closeout activities would have been completed. We also noted that CFO/CCP stopped funding qualified applications when they had expended the required 80% of the ERA I award and 75% of the ERA 2 award and not because the funds available to the subrecipient to pay the assistance applications were exhausted. At that time, CFO/CCP had already retained millions in unallowable management fees, earned millions in interest as a result of OMES advancing ERA funds far in advance of when the funds were being expended, and had set aside millions in ERA funds they intended to use for future administrative costs and management fees even though the amount retained was far in excess of what was actually needed to close out the program and administer the remaining housing stability contracts. While performing an analysis on FY21-FY24 payroll expenditures from the ERA program for the subrecipient Communities Foundation of Oklahoma (CFO)/Communities Cares Partners (CCP), we obtained the ERA data and noted the following related to payroll and bonus payments for each year: Bonuses Payroll Total Bonus % FY21 131,500 2,337,034 2,468,534 5.63% FY22 546,826 8,185,607 8,732,433 6.68% FY23 2,407,500 6,318,905 8,726,405 38.10% FY24 139,500 1,182,889 1,322,389 11.79% 3,225,326 18,024,434 21,249,760 17.89% The bonus payments are 17.89% of total payroll expenditures and 11.79% of the total for FY24. We were informed that CFO/CCP management arbitrarily distributed bonuses that were not based on specific criteria, did not adhere to CCP Bonus Policies and Procedures, and were approved after the payments were made. It appears that all bonus payments did not adhere to 2 CFR 200.430 and are unallowable. For FY24, this results in $113,963 (State of Oklahoma federal share) of questioned costs. (Note: $113,963 represents 81.6% of total bonuses of $139,500 for FY24, which is the percentage of State of Oklahoma admin to total admin which includes all other jurisdictions of ERA program funds). In addition, we tested a sample of 48 of 980 (4.90%) payroll administrative expenditures, and identified: • 48 of 48 (100%) claims are not supported with timesheets to reflect the distribution of the employee’s wages among specific activities or cost objectives for the Federal award and do not accurately reflect the work performed specifically for the State of Oklahoma ERA award. CFO also administers the ERA awards for Oklahoma County, The City of Oklahoma and Cleveland County. Also, CFO created four different non-profits internally (Sidexside, Shelterwell, Afghan Legal Network and Latitude Legal) with significant crossover in CCP staff and resources. In addition, CCP appears to have significant private funding attributed to the CCP division, but there is no indication of what projects this money is being used for or which staff members worked on privately funded projects. This results in $56,972.74 in questioned costs (excluding bonus payments). • Nine of 48 (18.75%) claims included unallowable bonus payments totaling $85,000; however, those questioned costs are already included in the SFY24 total amount of $139,500 above. Because CCP confirmed that no time and effort distribution records were kept for the State of Oklahoma ERA programs, and the timesheets did not include the number of hours worked by program, all payroll expenditures are unsupported; therefore, all payroll expenditures are questioned, totaling $966,346 (State of Oklahoma federal share). (Note: $966,346 represents 81.6% of total payroll of $1,182,889 for FY24, which is the percentage of State of Oklahoma admin to total admin which includes all other jurisdictions of ERA program funds) We also observed through CCP’s timeline that the application portal was closed as of August 31, 2022, and, as of December 2022, CCP disbanded the following teams Qualifications, Client Relations, Communications, and Processing; however, we noted that five employees in these divisions were still being paid. In addition, two employees from the fraud department were paid over $100,000 each; however, CCP has been unable to provide a list of applicants, landlords, or payments that were sent to this department for review. Cause: OMES did not timely take corrective action to address prior year findings from the SFY 21 to SFY 23 audits. OMES did not timely take corrective action to require OMES personnel to obtain, review, approve, or maintain adequate supporting documentation for housing stability program costs and housing stability administrative costs. The required corrective action would have included transferring administration of the ERA grant to the GMO office or other personnel with the experience and expertise to administer Federal grant funds before the majority of the ERA funds were expended by the subrecipient. OMES did not establish and maintain effective internal control over its claims process to provide reasonable assurance the Federal award was administered in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Additionally, OMES’s subrecipient monitoring process lacked the strength and consistency to ensure subrecipients established and maintained effective internal control over the Federal award to provide reasonable assurance that the non-Federal entity was managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Effect: Inadequate review of claims and approving claims without proper supporting documentation increases the risk of unallowable expenses resulting in noncompliance. Furthermore, noncompliance increases the risk of Federal claw backs, which impacts state dollars. Payroll costs totaling $966,346 were not supported by time distribution records. Unallowable bonus payments of $113,963, were charged to the ERA program as payroll administrative expenditures, which could have been used toward Oklahoma applicants in need of ERA funding. OMES’s decision to delay proper oversight of the ERA program and to postpone needed corrective actions until after the majority of grant funds had been expended by a subrecipient, significantly increases the risk that excess funds cannot be recovered. This also greatly increases the risk that the state taxpayers will have to repay more than $23 million in unallowable costs. Recommendation: SAI acknowledges that beginning in FY25, oversight of the ERA program was transferred to the Grants Management Office (GMO). The GMO has two staff members on the team with 20+ years of combined federal grant specific experience. The GMO entered into a subrecipient agreement that does not expire to monitor CFO’s duties and processes. GMO also required CFO to return the remaining ERA 2 program funds to ensure that proper oversight and review of ERA expenditures is performed. The GMO has implemented a multi-level system of internal controls for grant management and oversight that includes routine monitoring, desk review, and site visits for all projects and associated project/administrative expenditures to ensure allowability, accuracy, and to assist in the detection of fraud. For the ERA Program, OMES-GMO conducts bi-weekly monitoring meetings with CFO and is currently reviewing documentation provided by CFO to ensure all current ERA projects are eligible under the ERA guidelines and that CFO is exercising the proper oversight over their subrecipients; therefore, we recommend that the OMES GMO continue implementing the corrective action plan established in FY 2025 to provide proper oversight and monitoring of ERA program expenditures. Criteria: U.S. Department of the Treasury Emergency Rental Assistance Grantee Award Form (8) (a-b) Compliance with Applicable Law and Regulations, states in part, “a. Recipient agrees to comply with the requirements of Section 501 and Treasury interpretive guidance regarding such requirements. Recipient also agrees to comply with all other applicable federal statutes, regulations, and executive orders, and Recipient shall provide for such compliance in any agreements it enters into with other parties relating to this award. b. Federal regulations applicable to this award include, without limitation, the following: i. Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, 2 C.F.R. Part 200, other than such provisions as Treasury may determine are inapplicable to this Award and subject to such exceptions as may be otherwise provided by Treasury.” 2 CFR § 200.303(a) – Internal Controls states in part, “The Non-Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award.” For ERA 1, the Consolidated Appropriations Act § Section 501 (c)(5) Use of Funds - Administrative Costs states in part, “A. IN GENERAL.- Not more than 10 percent of the amount paid to an eligible grantee under this section may be used for administrative costs attributable to providing financial assistance and housing stability services under paragraphs (2) and (3), respectively, including for data collection and reporting requirements related to such funds. B. No OTHER ADMINISTRATIVE COSTS.- Amounts paid under this section shall not be used for any administrative costs other than to the extent allowed under subparagraph (A)” For ERA 2, the American Rescue Plan Act of 2021 § Section 3201(C) Administrative Costs states, “Not more than 15 percent of the total amount paid to an eligible grantee under this section may be used for administrative costs attributable to providing financial assistance, housing stability services, and other affordable rental housing and eviction prevention activities, including for data collection and reporting requirements related to such funds.” 2 CFR § 200.334 – Retention requirements for records state in part, “Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient.” 2 CFR § 200.337 – Access to records states in part, “(a) Records of non-Federal entities. The Federal awarding agency, Inspectors General, the Comptroller General of the United States, and the pass-through entity, or any of their authorized representatives, must have the right of access to any documents, papers, or other records of the non-Federal entity which are pertinent to the Federal award, in order to make audits, examinations, excerpts, and transcripts. The right also includes timely and reasonable access to the non-Federal entity's personnel for the purpose of interview and discussion related to such documents.” 2 CFR § 200.403 – Factors affecting allowability of costs states in part, “Except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles.” 2 CFR § 200.430 – Compensation – personal services states in part, “(f) Incentive compensation. Incentive compensation to employees based on cost reduction, efficient performance, suggestion awards, or safety awards is allowable to the extent that the overall compensation is determined to be reasonable and such costs are paid or accrued according to an agreement entered into in good faith between the recipient or subrecipient and the employees before the services were rendered, or according to an established plan followed by the recipient or subrecipient so consistently as to imply, in effect, an agreement to make such payment. (g) (i and iv) Standards for Documentation of Personnel Expenses. (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (iv) Encompass federally-assisted and all other activities compensated by the recipient or subrecipient on an integrated basis but may include the use of subsidiary records as defined in the recipient's or subrecipient's written policy.” For ERA 1, the Consolidated Appropriations Act § Section 501 (c)(5) Use of Funds (c) USE OF FUNDS.— (1) IN GENERAL.—"An eligible grantee shall only use the funds provided from a payment made under this section to provide financial assistance and housing stability services to eligible households. (2) FINANCIAL ASSISTANCE.— (A) IN GENERAL.—Not less than 90 percent of the funds received by an eligible grantee from a payment made under this section shall be used to provide financial assistance to eligible households, including the payment of (i) rent; (ii) rental arrears; (iii) utilities and home energy costs; (iv) utilities and home energy costs arrears; and (v) other expenses related to housing incurred due, directly or indirectly, to the novel coronavirus disease (COVID-19) outbreak, as defined by the Secretary.” For ERA 2, the American Rescue Plan Act of 2021 § Section 3201(C) Administrative Costs states, (D) OTHER AFFORDABLE RENTAL HOUSING AND EVICTION PREVENTION ACTIVITIES.-“An eligible grantee may use any funds from payments made under this section that are unobligated on October 1, 2022, for purposes in addition to those specified in this paragraph, provided that – (i) such other purposes are affordable rental housing and eviction prevention purposes, as defined by the Secretary, serving very low-income families (as such term is defined in section 3(b) of the United States Housing Act of 1937 (42 U.S.C. 1437a(b))); and (ii) prior to obligating any funds for such purposes, the eligible grantee has obligated not less than 75 percent of the total funds allocated to such eligible grantee in accordance with this section.” Management Response Contact Person: Brandy Manek, OMES Director of Budget, Policy and Gaming Compliance Anticipated Completion Date: Completed Corrective Action Planned: The Oklahoma Office of Management and Enterprise Services (OMES) concurs with the finding. See corrective action plan located in the corrective action plan section of this report. Auditor’s Response: With regard to the assertion that the State did not have “sufficient and timely notice to make full corrective actions prior to this FY2024 audit, we respectfully disagree per the following reasons: As a recipient of the Federal ERA award, the State of Oklahoma is responsible for understanding the terms and conditions of the award and to ensure the ERA award is administered in accordance with federal regulations, which includes the cost principles per 2 CFR § 200 included in the ‘Criteria’ section of this finding. In May of 2021, the State first received Coronavirus Relief Fund (CRF) Audit Finding # 2020-083 related to the State’s lack of subrecipient monitoring activities and Audit Finding # 2020-081 related to the State’s failure to obtain adequate supporting documentation for subrecipient expenditures prior to paying for goods and services. The same individual served as the State’s audit contact for both the CRF award and the ERA award and, therefore, the State could have begun implementing required subrecipient monitoring activities and ensuring adequate supporting documentation was obtained from the subrecipient in May of 2021. Although the SFY 2021 Single Audit Report was not actually released until June 2023, the SFY 2021 Single Audit Report was originally scheduled for publication near the end of September of 2022, and, on September 6, 2022, SA & I provided OMES Audit Finding # 2021-081 and Audit Finding # 2021-080 which included the following issues applicable to this finding which SA & I had identified as of that date: From Audit Finding # 2021-081: “OMES entered into agreements with two non-profit entities to administer the ERA program for the State of Oklahoma: Communities Foundation of Oklahoma (CFO) and Restore Hope Ministries (RHM). SAI reviewed the agreements for these two entities and determined that both agreements constituted a subrecipient relationship that would be subject to Part M Subrecipient Monitoring requirements. We noted that OMES failed to perform any required subrecipient monitoring activities, specifically: • OMES did not perform any during the award monitoring activities with regard to the rental and utility applications, housing stability and payments approved and paid by the subrecipients, or the administrative expenditures actually incurred by the subrecipients. OMES provided subrecipients advance payments based off expected program rental and utility expenditures for the month and then paid administrative costs on a set percentage of program funds advanced. OMES did not review any supporting documentation related to actual program expenditures for rental and utility assistance, housing stability activities, or administrative expenditures actually incurred by the subrecipients. While OMES did obtain summary information related to rental and utility payments and housing stability payments made for reporting purposes, OMES did not review any actual administrative expenditures to ensure that the administrative costs were attributable to providing financial assistance and housing stability services to eligible households. • OMES did not obtain any financial records and supporting documents from the subrecipients that would support the actual expenditures incurred by the subrecipients.” From Audit Finding # 2021-080: “While documenting controls over subrecipient program and administrative expenditures for the ERA program, we noted that OMES did not review any supporting documentation related to actual program expenditures for rental and utility assistance or housing stability activities or, administrative expenditures actually incurred by the subrecipients and, did not require that subrecipients submit supporting documentation for actual program and administrative expenditures incurred.” “While reviewing ERA administrative expenditures, we noted the following: One subrecipient charged the ERA grant $2,000,000 in unallowable management fees that were not attributable to providing financial assistance and housing stability services under the ERA program. We questioned $1,563,028 of these costs that were allocated to the State of Oklahoma ERA1 grant.” Given the State first received similar findings for the SFY 2020 CRF award in May of 2021 (12 months before the start of SFY 2023 and 24 months before the start of SFY 2024), the State did have sufficient and timely notice to make full corrective actions prior to this SFY 2024 audit and even prior to the SFY 2023 audit. It is the position of our office that the State could have greatly reduced the amount of ERA questioned costs incurred over the past few years if the State had not waited about three and a half years (May 2021 to January 2025) from when SA & I first provided applicable findings to start implementing corrective action.
Federal Agency: U.S. Department of Health and Human Services Federal Programs: Refugee and Entrant Assistance State/Replacement Designee Administered Programs, Refugee and Entrant Assistance Discretionary Grants Federal Assistance Listing Numbers: 93.566; 93.576 Pass-Through Entity Name: Wisconsin Department of Children and Families Pass-Through Grantor's Numbers: 7056, 7060, 7062A, 7065, 7068, 7071, 7072 This is partial repeat of finding 2023-001 Criteria: In accordance with 2 CFR 200.430(g) salaries and wages must be based on records that accurately reflect the work performed. The records must be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Allocations should reasonably reflect the total activities performed by the employees and support the distribution of payroll costs among federal awards and other activities when employees work on multiple cost objectives. Statement of Condition: The Organization did not allocate payroll expenses to federal awards in accordance with federal requirements. Employees whose compensation was charged to multiple federal awards were not supported by an allocation methodology that accurately reflected the actual work performed. Specifically, payroll costs were allocated using budget estimates or other unsupported methodologies that were not periodically compared to actual activity and adjusted as necessary from July 2023 through October 2023. In addition, management did not maintain sufficient documentation demonstrating that payroll allocations accurately reflected employees' work performed during the reporting period. Cause: The Organization had not implemented effective internal controls over payroll cost allocation as it initially relied on budgeted allocations rather than actual employee activities. Effect: The Organization allocated costs and submitted and received reimbursement from federal awards for payroll costs that were allocated a budget and not based on actual costs or time incurred. Context: For the period from July 1, 2023 through October 31, 2023, payroll costs were allocated based on budgeted amounts. Payroll costs submitted and reimbursed during this period were $73,553 and $69,173 for ALN 93.566 and ALN 93.576, respectively. Starting in November 2023, the Organization allocated its payroll costs based on actual costs incurred. Questioned Costs: Payroll costs for ALN 93.566 of $73,553 were allocated based on budgeted amounts. Payroll costs for ALN 93.576 of $69,173 were allocated based on budgeted amounts. The questioned costs were not based on a statistical sample. Recommendation: We recommend that management strengthen internal controls over payroll allocation by establishing written policies and procedures for allocating payroll costs in accordance with federal requirements. Allocation policies should be based on records that accurately reflect the actual work performed rather than budget estimates or predetermined percentages. The Organization should periodically monitor and adjust payroll allocations to ensure continued compliance with federal requirements. Management Response: The Organization acknowledges the finding regarding the allocation of payroll expenses to federal awards during the period July 2023 through October 2023. Fiscal year 2024 was a significant transition period for the Organization. New payroll and financial systems were implemented during the transition period from June 2023 through January 2024, and management implemented significant corrective actions related to payroll allocation beginning in November 2023. These corrective actions included transitioning away from the prior budget-based payroll allocation methodology, strengthening timekeeping and payroll processes, implementing procedures designed to document actual employee activities, and enhancing supervisory review of payroll allocations. Although aspects of the prior-year condition affected the July through October 2023 period of fiscal year 2024, significant corrective measures were implemented during fiscal year 2024 beginning in November 2023. The Organization continued strengthening these processes throughout fiscal year 2024. Corrective actions implemented and ongoing include: • Implement and maintain written payroll allocation policies and procedures. • Utilize systematic timekeeping practices designed to document actual employee activities. • Allocate payroll costs based on actual work performed and appropriate supporting documentation. • Maintain supervisory review and approval procedures over employee time reporting and payroll allocations. • Maintain appropriate levels of management review and oversight to provide checks and balances over payroll reporting and allocation. • Periodically review payroll allocations for consistency with actual employee activity and make adjustments when necessary.
Finding No. 2024-003: Activities Allowed or Unallowed and Allowable Costs/Cost Principles (Payroll) –Significant Deficiency in Internal Control over Compliance Federal Program Name: All Pass-through Entity: All Federal Assistance Listing Number: All Criteria In accordance with 2 CFR §200.430(i), charges to federal awards for salaries and wages are required to be based on records that accurately reflect the work performed. These records must support the distribution of the employee’s salary or wages among specific activities or cost objectives. Condition The Coalition allocated employees’ payroll costs to grants based on estimates and did not maintain documentation to support allocations based on actual time and effort. Questioned Costs Unknown. Context The Coalition allocated payroll costs to multiple funding sources based on estimates during the audit period and did not maintain formal documentation to support how costs were distributed. Effect The employee time and payroll costs that are charged to the grant could differ from the actual time and payroll costs expended in support of the grant activities. Cause The Coalition does not have established procedures to ensure that salaries and wages charged to federal awards are supported by records that accurately reflect the work performed. Documentation of personnel expenses should support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one federal award; a federal award and non-federal award; an indirect cost activity and a direct cost activity; two or more indirect activities allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Repeat Finding No Recommendation We recommend that management strengthen processes over payroll cost allocations to ensure amounts charged to funding sources are supported by documented actual time and effort. This may include implementing a formal methodology for allocating payroll costs, establishing procedures for employees to track or otherwise document time spent by program or funding source, and performing periodic reviews and adjustments based on actual activity. In addition, management should ensure that sufficient documentation is maintained to support how payroll costs are allocated and that such processes are consistently applied. Management’s Response/View of Responsible Officials Management agrees with this finding, see the Corrective Action Plan.
ALLOWABLE COSTS/COST PRINCIPLES – PAYROLL ALLOCATIONS Repeat of finding 2023-009 Finding Type: Significant Deficiency in Internal Controls over Compliance ALN/CSFA and Program Title: 93.558 – Temporary Assistance for Needy Families, 93.658 – Foster Care - Title IV-E, 93.676- Unaccompanied Alien Children Program, 60.074 – Out-of-Home Supports Federal/State Agency: U.S. Department of Health and Human Services, Florida Department of Children and Families Pass-Through Entity: Big Bend Community Based Care, Inc. dba NWF Health Network; Brevard Family Partnership; Children’s Network of Hillsborough; Children’s Network of Southwest Florida Social Services; Communities Connected for Kids; Community Partnership for Children; Embrace Families, Inc.; Family Support Services of North Florida, Inc.; Family Support Services of Suncoast; Heartland for Children; Kids Central, Inc.; Partnership for Strong Families; Safe Children Coalition, Inc., Liberty Wilderness Crossroads Camp Contract Number: 0299-22, C0900, PCM783, PCM788, 90ZU0501 Criteria: Under 2 CFR 200.430(g) of the Uniform Guidance, "Charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed", and "Budget estimates (meaning, estimates determined before the services are performed) alone do not qualify as support for charges to federal awards...". Per the Reference Guide for State Expenditures of the Florida Department of Financial Services, "Timesheets that support the hours worked on the project or activity must be kept." Additionally, 2 CFR 200.303(a) of the Uniform Guidance requires non-federal entities to establish and maintain effective internal control over federal awards 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, and Section 215.97(10), Florida Statutes, requires nonstate entities to have internal controls in place to provide reasonable assurance of compliance with the provisions of laws, regulations, and other rules, pertaining to state awards that have a material effect on each major state project. Condition: Time and pay for certain employees who perform work for multiple programs is allocated among these programs. The allocations are based on program budgets or other budgeted expectations of the employees’ activity. The Organization's internal control structure does not address adjusting these allocations to reflect actual time and effort expended. Cause: These employees do not record their time to each program, and management was unaware of federal and state requirements for documentation of personnel costs and charged to federal programs and state projects. Effect: Time and pay being allocated charged to the programs may not accurately reflect their actual time spent on each program. Questioned Costs: None Recommendation: We recommend all employees record their time to each program that they work on, or that time studies be completed at least annually by the employees whose time needs to be allocated and those time studies be used to determine how the employes’ time and pay should be allocated. Views of Responsible Officials and Planned Corrective Actions: See management’s response and Corrective Action Plan on page 55.
Finding Number: 2024-003 – Material Weakness – Compliance and Internal Control over Compliance Finding over Activities Allowed or Unallowed, and Allowable Costs/Cost Principles Federal Award: No. 93.778 U.S. Department of Health and Human Services – Grants to States for Medicaid Federal Agency: U.S. Department of Health and Human Services Pass-Through Entity: County of Monterey, California Repeat Finding: No Criteria or Specific Requirement: 2 CFR section §200.405, Allowable costs, states this standard is met if the cost is incurred specifically for the Federal award and can be distributed in proportions that may be approximated using reasonable methods. Further, if costs benefit two or more projects or activities in proportions that can be determined without undue effort or cost, the cost must be allocated to the projects based on the proportional benefit. If a cost benefits two or more projects or activities in proportions that cannot be determined, the costs must be allocated on any reasonable documented basis. 2 CFR section 200.430(i) Standards for Documentation of Personnel Expenses states charges to Federal awards for salaries must be based on records that accurately reflect the work performed and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award and non-Federal award and charges for the salaries and wages of nonexempt employees must be supported by records indicating the total number of hours worked each day. Condition: The Organization did not maintain contemporaneous time records, personnel activity reports, original program budgets or other verifiable documentation to support the actual time and effort devoted by employees to ensure costs incurred for expenditures charged to the program were in accordance with contract requirements and applicable cost principles. The method for allocation of payroll and non-payroll expenditures between federally funded programs and other programs was based on management's budgeted estimates, and assumptions and may differ from allocations that would have resulted from documented employee activities and resource usage. Cause: Factors beyond the control of current management, including poorly designed policies and procedures and lack of understanding of Federal award requirements and training, as key members of the accounting department left the Organization before appropriately transferring knowledge and records related to the Federal awards. Effect or Potential Effect: Potential for noncompliance of direct and material audit requirements. Questioned Costs: Related questioned costs are unknown. Context: The Organization was not able to retain or replace personnel with the appropriate skills and knowledge to implement appropriate procedures and controls. Recommendation: The Organization should develop a comprehensive internal control policy for allocation methods that includes training staff on the policy, ensuring proper implementation of procedures, and regular review to ensure allocations remain appropriate and reasonable. View of Responsible Officials: Valley Health Associates management understands the severity of this finding and will work to collect as per the recommendation' Management will work with knowledgeable staff to ensure federal award requirements are met in a consistent manner.
2024-053: U.S. Department of Homeland Security Homeland Security Grant Program, 97.067 Activities Allowed or Unallowed and Allowable Costs/Cost Principles Material Weakness in Internal Control over Compliance and Material Noncompliance Grant Award Number: Affects all grant awards included under assistance listing 97.067 on the Schedule of Expenditures of Federal Awards. Criteria: Title 2 U.S. Code of Federal Regulations (CFR) Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) section 200.430 provides that: • Charges to Federal awards for salaries and wages must be based on records that accurately reflect work performed. These records must: o Be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated; o Be incorporated into the official records of the subrecipient; o Reasonably reflect the total activity for which the employee is compensated by the recipient or subrecipient, not exceeding 100 percent of compensated activities; o Encompass federally-assisted and all other activities compensated by the recipient on an integrated basis but may include the use of subsidiary records as defined in the recipient’s written policy; o Comply with the established accounting policies and procedures of the recipient; o Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity; o Budget estimates alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes provided that all necessary adjustments are made so that the final amount charged to the Federal award is accurate, allowable, and properly allocated. Condition: The Nevada Division of Emergency Management (DEM) did not have underlying supporting documentation to support the allocation of employee payroll to the grant program. Cause: DEM did not have internal controls to ensure documentation to support the distribution of the employee’s salary or wages was maintained. Effect: Personnel costs may be charged to the program that are not representative of the actual time spent. Questioned Costs: $698,756 Context/Sampling: A nonstatistical sample of 40 transactions ($42,821) out of a population of 682 transactions ($698,756) was selected for testing. No underlying or subsidiary documentation to support the distribution of employee compensation was provided for any of the sample transactions. Given this, we questioned the entire payroll related population of $698,756. Repeat Finding from Prior Year: No Recommendation: We recommend DEM implement internal controls to ensure documentation to support the distribution of the employee’s salary or wages is maintained. Views of Responsible Officials: The Nevada Division of Emergency Management partially agrees with this finding as specified in the corrective action plan. Auditor’s Comments to Views of Responsible Officials: The Uniform Guidance requires entities to demonstrate compliance. While DEM is in partial agreement as more fully described in their corrective action plan, our finding is predicated on the fact that allowable costs must be adequately documented. DEM could not produce the documentation in accordance with standards for documentation of our sampled payroll records.
Criteria Pursuant to 2 CFR § 200.430, Compensation—Personal Services, charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed and support the distribution of employees' compensation among specific activities or cost objectives. Standards regarding time distribution are in addition to the standards for payroll documentation. Additionally, the California School Accounting Manual (CSAM), Procedure 905, Documenting Salaries and Wages, reiterates the requirements and provides guidance to local educational agencies for maintaining Personnel Activity Reports (PARs), or equivalent documentation, to support payroll costs charged to federal and other restricted programs. Condition During the initial testing of payroll expenditures charged to Elementary and Secondary School Emergency Relief (ESSER) Funds and other restricted funding sources, errors were noted related to the documentation to support payroll costs: • Four employees charged to the ESSER program all had signed PARS forms that were dated August 21, 2023, and covered the entire fiscal year ending June 30, 2024. Therefore, the PARs did not represent an after-the-fact distribution of the employees' actual activities and were not prepared regularly to coincide with one or more pay periods. • Additionally, one of the four PARS forms received for the initial sample of ESSER employees was not signed. Testing was expanded to another four employees and three additional payroll periods. For the extended sample, all PARs forms met the requirements of representing an after-the-fact distribution of the employees' actual activities, were prepared at least monthly and coincided with one or more pay periods, and contained the employee’s signatures. Through further interview with management it was determined that the incorrectly dated PARs forms were an isolated administrative error supported by the expanded testing results. Effect Support for payroll costs charged to federal and restricted programs did not consistently comply with 2 CFR § 200.430(g) – Standards for Documentation of Personnel Expenses. As a result, expenditures could be questioned or disallowed by the granting agency, and the District may be unable to demonstrate compliance with federal documentation requirements. Cause The District initially planned to spend ESSER funding on a capital project understood to be allowable under program requirements. Subsequently, the District concluded the project did not clearly align with the allowable ESSER uses and decided to transfer allowable payroll costs to maximize the use of the remaining ESSER Funds. The District’s documentation of the retro-active transfer of personnel expenses inadvertently included an earlier date rather than the date the form was completed to reflect the after-the-fact distribution of each employee’s actual activity. Questioned Cost There are no related questioned costs. Repeat Finding This is not a repeat finding. Recommendation Establish procedures when personnel expenses are retro-actively transferred to any federal or other restricted programs to ensure support documentation is consistent with the requirements of 2 CFR § 200.430(g) and California School Accounting Manual (CSAM), Procedure 905 Documenting Salaries and Wages. Ensure PARs forms or equivalent documentation are completed correctly with adequate explanation to support federal and other restricted program payroll expenditures. Additionally, continue to monitor current procedures to ensure all personnel expenses charged to federal program are supported by PARs or other documentation that reflect an after-the-fact distribution of the employees' actual activities, is prepared regularly and coincides with one or more pay periods, and is signed by the employee. District Response and Action Plan The District agrees that our PARS forms needed improvement and have since implemented a better system to document the after-the-fact distribution of the employees' actual activities.
SIGNIFICANT DEFICIENCIES 2024-001 – Allowable Costs/Cost Principles Federal Program Information: Department of Education: Passed through the State of Maine Agency of Education ALN - 84.425 – Education Stabilization Fund Criteria: The following CFR(s) apply to this finding: 2 CFR 200.430(i)(1) Condition: During audit procedures, it was identified that the School Department did not have documented payrates on file for some employees. Cause: The School Department does not require payrate documentation for all employees. Effect: Employees may not be paid the correct amount. This could result in unallowable expenses being charged and subsequently improperly reimbursed by federal funds. Identification of Questioned Costs: None identified. Context: Out of a sample of 11 employees, it was determined that 3 employees did not have documented payrates on file. This is a statistically valid sample. Repeat Finding: This is a repeat finding of 2023-001. Recommendation: It is recommended that the School Department implement internal control processes and procedures to ensure that payroll files are complete and all employees have documented payrates. Views of Responsible Officials and Corrective Action Plan: Client agrees with finding, and the unabridged version of their response can be found in the Corrective Action Plan. Please see the Corrective Action Plan issued by the School Department.
2024 – 010 – Allowable Cost - HCVP Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name: Housing Voucher Cluster Assistance Listing Number: 14.871 and 14.879 Federal Award Identification Number and Year: FL007, 2024 Award Period: July 1, 2023 to June 30, 2024 Type of Finding: • Material Weakness in Internal Control over Compliance • Material Noncompliance (Modified Opinion) Criteria or specific requirement: Under 2 CFR part 200, subpart E (Cost Principles), PHAs must ensure that all program expenditures charged to the Housing Choice Voucher (HCV) Program are allowable, reasonable, necessary, and properly supported. Specifically, 2 CFR sections 200.302 and 200.303 require the PHA to maintain effective financial management systems and internal controls to ensure that costs are accurately recorded, supported by documentation, and compliant with federal requirements. Payroll costs must be supported by appropriate time and effort documentation in accordance with 2 CFR section 200.430, and all cash disbursements must be supported by invoices, approvals, and evidence that the expenditures benefit the HCV Program. The PHA must ensure that all payroll charges, vendor payments, and other cash disbursements allocated to the HCV Program are supported by adequate documentation, properly approved, and consistent with the PHA’s cost allocation plan, financial policies, and federal cost principles. All expenditures must be recorded accurately and retained in accordance with 24 CFR section 982.158(a), which requires PHAs to maintain complete and accurate accounts and records for all program transactions. Condition: During the testing of the Housing Voucher Cluster we noted the following errors Cash Disbursements • Of the 40 invoices that we reviewed, we noted a total of 40 invoices did not have a documented approval Payroll Disbursement Testing • 7 timecards were noted as not having been approved • 8 timecards could not be provided • Information for 3 employees could not be provided Questioned costs: N/A Context: Cash Disbursements Out of the 40 invoices that we reviewed, we noted a total of 40 invoices without written approval on the invoices. Payroll Disbursements Out of the 40 timecards files that we reviewed, we noted 10 timecard files that contained errors as noted. Cause: The Authority failed to follow the internal controls process that was designed to ensure that requirements were being met. 2024 – 010 – Allowable Cost - HCVP Effect: The Authority does not have proper controls over the payroll and cash disbursement approval process. Repeat Finding: No Recommendation: We recommend that the Authority designate an individual to review both cash disbursements and payroll disbursements for all program expenditures. Views of responsible officials: There is no disagreement with the audit finding.
Finding 2024-002: Improper Controls over Personnel Expenses Federal Agency: U.S. Department of Treasury Program Name: COVID-19: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Award Year: June 1, 2023 – May 31, 2024 Program Expenditures: $1,119,206 Questioned Costs: None Criteria: Uniform Grant Guidance (2 CFR 200.430(g)(1)(i)) states charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Uniform Grant Guidance (2 CFR 200.303) requires nonfederal entities receiving Federal awards establish and maintain internal controls designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure personnel activity reports are approved. Condition: A KHSU supervisor did not properly document approval for one employee’s personnel activity reports. Cause: KHSU officials stated that this issue was an isolated incident resulting from an unintentional oversight at multiple levels of approval. While established procedures generally ensure proper documentation of personnel activity reports, in this case, the required documentation was inadvertently missed during the review and approval process. Effect: If employee’s personnel activity reports are not properly reviewed and approved, KHSU could submit unallowable costs for the program. Questioned Costs: None Context: Of the 8 employee personnel activity reports sampled, one report did not contain the proper approval by a KHSU supervisor. Repeat Finding: No. Recommendation: We recommend KHSU strengthen internal controls around the approval of personnel activity reports to confirm that a reasonable person can confirm the control occurred. Views of Responsible Officials: Management agrees with the finding. Please see corrective action plan attached.
Finding 2024-002: Improper Controls over Personnel Expenses Federal Agency: U.S. Department of Treasury Program Name: COVID-19: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Award Year: June 1, 2023 – May 31, 2024 Program Expenditures: $1,119,206 Questioned Costs: None Criteria: Uniform Grant Guidance (2 CFR 200.430(g)(1)(i)) states charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Uniform Grant Guidance (2 CFR 200.303) requires nonfederal entities receiving Federal awards establish and maintain internal controls designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure personnel activity reports are approved. Condition: A KHSU supervisor did not properly document approval for one employee’s personnel activity reports. Cause: KHSU officials stated that this issue was an isolated incident resulting from an unintentional oversight at multiple levels of approval. While established procedures generally ensure proper documentation of personnel activity reports, in this case, the required documentation was inadvertently missed during the review and approval process. Effect: If employee’s personnel activity reports are not properly reviewed and approved, KHSU could submit unallowable costs for the program. Questioned Costs: None Context: Of the 8 employee personnel activity reports sampled, one report did not contain the proper approval by a KHSU supervisor. Repeat Finding: No. Recommendation: We recommend KHSU strengthen internal controls around the approval of personnel activity reports to confirm that a reasonable person can confirm the control occurred. Views of Responsible Officials: Management agrees with the finding. Please see corrective action plan attached.
#2024-001: Grant Program: Department of Health and Human Services – National Institutes for Health Research and Development Cluster – Cancer Control – Assistance Listing #93.399 – Lack of Required Written Policies Condition: The Consortium does not have written policies and procedures in place as required by 2 CFR § 200.302 and § 200.313. Specifically, the Consortium lacks documented policies for: • The timing of federal cash draws; • The allowability of costs charged to federal awards; and • Documentation of time-and-effort for personal services. Criteria: 2 CFR § 200.302(b)(6)–(7) requires nonfederal entities to have written procedures for (a) cash drawdowns and (b) determining cost allowability. § 200.305 requires written cash-management procedures that minimize the time between draw and disbursement. § 200.430 requires a written policy that is consistently applied to both federal and nonfederal activities for documentation of compensation for personal services. Context: At the time of completion of the audit for the year ended May 31, 2024, the written policies were not in place. Cause: The Consortium has not yet developed or adopted the required written policies due to limited administrative capacity and reliance on informal practices. Effect: The absence of written policies increases the risk of noncompliance with federal requirements, mismanagement of federal funds, and audit findings in future periods. It may also impair the Consortium’s ability to consistently apply federal cost principles and properly safeguard assets. Recommendation: We recommend that the Consortium develop and implement written policies and procedures that comply with the requirements of Uniform Guidance. Management Response: See Corrective Action Plan.
Health Center Program Cluster – Assistance Listing Nos. 93.224 and 93.527 U.S. Department of Health and Human Services Award No. 6 H80CS00751-22-03, April 1, 2023 – March 31, 2024 Community Health Center Program – State Identifying No. 435.151301 Wisconsin Department of Health Agreement No. 435100-G24-3919588107-90, July 1, 2023 – June 30, 2024 Criteria or Specific Requirement – Period of Performance – Federal: 45 CFR 75.309. State: 2 CFR 200.430. Condition – Costs charged to the grant award were incurred prior to the start of the period of performance. Questioned Costs – Federal: $103,466. State: $5,195. Questioned costs were determined by identifying salaries and wages incurred prior to the beginning of the period of performance based on payroll periods and pay dates. Questioned costs by federal or state award identification number are: • Assistance Listing No. 93.527 Award No. 6 H80CS00751 – $103,466 • Agreement No. 435100-G24-3919588107-90 – $5,195 Context – Salaries and wages from the first pay period paid during the period of performance was charged to the federal and state awards. For Award No. 6 H80CS00751 within Health Center Program Cluster (HCP), payroll paid on April 7, 2023, was charged to the federal award, while 100% of payroll costs were incurred as of March 31, 2023. For Agreement No. 435100-G24-3919588107-90 within Wisconsin Department of Health Community Health Center Program (CHCG), payroll paid on June 14, 2023, was charged to the state award, while 50% of payroll costs were incurred as of June 30, 2023. Effect – The Organization charged salaries and wages incurred prior to the beginning of the period of performance in both HCP and CHCG. Cause – Salaries and wages are charged to federal and state awards based on payroll documentation summarized monthly based on pay date rather than accrual-based salary and wage expense. Identification as a repeat finding, if applicable – Not a repeat finding Recommendation – The Organization should implement cut-off procedures to ensure grant expenditures are captured on the accrual-basis consistent with period of performance compliance requirements and generally accepted accounting principles. To more easily accomplish this, the Organization should identify allowable salaries and wages by payroll period rather than from payroll data summarized monthly by pay date. Views of responsible officials and planned corrective actions – Upon identification of costs incurred prior to the beginning of the period of performance, the Organization identified allowable costs incurred within the period of performance and previously charged to program income in order to reallocate grant expenditures without creating other instances of noncompliance (such as cash management). Although the initial support provided to auditors contained instances of expenditures incurred prior to the beginning of the period of performance, expenditure justification has been updated to reflect corrections and all subsequent grant expenditure detail has been reviewed to ensure no recurrence in the subsequent period. The Organization has also reviewed our internal processes for cut-off procedures related to grant expenditures. We will implement additional internal controls at the end of the grant and the beginning of the grant to ensure accuracy of the salaries being posted are in the correct period of performance. We are also working with our accounting software vendor and payroll vendor to automate the allocation of grant salaries based on time and effort of each individual rather than after-the-fact allocations to grants. This will reduce the need to maintain manual spreadsheets to track staff by lining up grant expenditures with pay periods instead of monthly allocations. Further, relevant staff participated in a training focused on CHC grants management matters in December 2024 and will continue to look for learning opportunities to support and challenge compliance matters.
Health Center Program Cluster – Assistance Listing Nos. 93.224 and 93.527 U.S. Department of Health and Human Services Award No. 6 H80CS00751-22-03, April 1, 2023 – March 31, 2024 Community Health Center Program – State Identifying No. 435.151301 Wisconsin Department of Health Agreement No. 435100-G24-3919588107-90, July 1, 2023 – June 30, 2024 Criteria or Specific Requirement – Period of Performance – Federal: 45 CFR 75.309. State: 2 CFR 200.430. Condition – Costs charged to the grant award were incurred prior to the start of the period of performance. Questioned Costs – Federal: $103,466. State: $5,195. Questioned costs were determined by identifying salaries and wages incurred prior to the beginning of the period of performance based on payroll periods and pay dates. Questioned costs by federal or state award identification number are: • Assistance Listing No. 93.527 Award No. 6 H80CS00751 – $103,466 • Agreement No. 435100-G24-3919588107-90 – $5,195 Context – Salaries and wages from the first pay period paid during the period of performance was charged to the federal and state awards. For Award No. 6 H80CS00751 within Health Center Program Cluster (HCP), payroll paid on April 7, 2023, was charged to the federal award, while 100% of payroll costs were incurred as of March 31, 2023. For Agreement No. 435100-G24-3919588107-90 within Wisconsin Department of Health Community Health Center Program (CHCG), payroll paid on June 14, 2023, was charged to the state award, while 50% of payroll costs were incurred as of June 30, 2023. Effect – The Organization charged salaries and wages incurred prior to the beginning of the period of performance in both HCP and CHCG. Cause – Salaries and wages are charged to federal and state awards based on payroll documentation summarized monthly based on pay date rather than accrual-based salary and wage expense. Identification as a repeat finding, if applicable – Not a repeat finding Recommendation – The Organization should implement cut-off procedures to ensure grant expenditures are captured on the accrual-basis consistent with period of performance compliance requirements and generally accepted accounting principles. To more easily accomplish this, the Organization should identify allowable salaries and wages by payroll period rather than from payroll data summarized monthly by pay date. Views of responsible officials and planned corrective actions – Upon identification of costs incurred prior to the beginning of the period of performance, the Organization identified allowable costs incurred within the period of performance and previously charged to program income in order to reallocate grant expenditures without creating other instances of noncompliance (such as cash management). Although the initial support provided to auditors contained instances of expenditures incurred prior to the beginning of the period of performance, expenditure justification has been updated to reflect corrections and all subsequent grant expenditure detail has been reviewed to ensure no recurrence in the subsequent period. The Organization has also reviewed our internal processes for cut-off procedures related to grant expenditures. We will implement additional internal controls at the end of the grant and the beginning of the grant to ensure accuracy of the salaries being posted are in the correct period of performance. We are also working with our accounting software vendor and payroll vendor to automate the allocation of grant salaries based on time and effort of each individual rather than after-the-fact allocations to grants. This will reduce the need to maintain manual spreadsheets to track staff by lining up grant expenditures with pay periods instead of monthly allocations. Further, relevant staff participated in a training focused on CHC grants management matters in December 2024 and will continue to look for learning opportunities to support and challenge compliance matters.
2 CFR §2400.101 gives regulatory effect to the Department of Housing and Urban Development for 2 CFR §200.303(a) which states that the non-Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should 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). Furthermore, 2 CFR §200.430(i)(1)(i) states "charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must be supported by a system of internal controls which provides reasonable assurance that the charges are accurate, allowable, and properly allocated. The “City of Columbus Fiscal Policies and Procedures for the Administration of HUD Grants Manual” Part II Section C – Standards for Documentation of Personal Services provides the following: All grant funded staff (both city staff and subrecipient staff) will utilize personal activity reports (timesheets). All timesheets will reflect total hours worked, identify the federal grant hours worked, and be signed by either the employee or the supervisor. Furthermore, the City of Columbus Department of Development has established a procedure of timesheet review which requires supervisors review employee timesheets within one week of the pay period end date. This review is evidenced by an electronic signature on the employee-completed timesheet. While the City does have an internal control policy in place in accordance with 2 CFR 430(i)(1)(i), supervisors were not always adhering to the policy which resulted in a deficiency in the application of the control process. Payroll control testing over AL #14.239 Home Investment Partnership Program, it was noted 13 out of the 19 selected worklogs (68%) were not signed by the supervisor within the one-week requirement as required by City policy. Supervisory sign offs occurred between 7 and 102 working days (not including weekends) following the end of the pay period. Failure to follow the established internal control policy and ensuring all time sheets are appropriately approved by a knowledgeable supervisor, within one week of the pay period end date, could result in unallowable costs being allocated to a federal program and could ultimately result in noncompliance and/or a questioned cost. The City should review established policies and procedures with supervisory personnel and evaluate if additional control procedures should be in place to ensure all timesheets are appropriately reviewed timely prior to allocation to a federal program.
Condition: For 3 out of 25 selected transactions, management did not properly update the Full Time Equivalent (FTE) allocation tables, resulting in an overcharge of personnel costs to its Federal programs. Criteria: In accordance with 2 CFR §200.303: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In accordance with 2 CFR 200.430: (i) Standards for Documentation of Personnel Expenses (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities; (iv) Encompass both federally assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity’s written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity; and (vi) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Cause: Maryland Legal Aid did not have controls in place to detect errors in the FTE allocation tables that were used to allocate personnel costs to its Federal programs. Effect: Unallowed payroll costs could be charged to Federal grants. Questioned Costs: Unknown. Recommendation: We recommend Maryland Legal Aid perform a detailed review of the FTE allocations used to allocate personnel costs to its Federal programs. Auditee Response and Corrective Action Plan: Refer to management’s corrective action plan.
2023-003: Allowable costs/cost principles – Compensation Cluster: Research and Development Sponsoring Agency: U.S. Department of Justice, Department of Health and Human Services, and U.S. Department of Homeland Security Award Names: 2021 DOJ NIJ Heat Flux Through Walls, 2021 National Institute of Health Award, 2022 National Institute of Health Award, 2019 DHS Fire Prevention and Safety (FP&S), and 2018 DHS Assistance to Firefighters Grant (Subaward) Award Numbers: 15PNIJ-21-GG-04167-RESS, 7R56DE029950-02, 1R56DE031814-01, EMW-2019-FP-00770, and EMW-2018-FP-00482 Assistance Listing Titles: National Institute of Justice Research, Evaluation, and Development Project Grants, Oral Diseases and Disorders Research, Assistance to Firefighters Grant Assistance Listing Numbers: 16.560, 93.121, and 97.044 Pass-through entity: The Board of Trustees of the University of Illinois (for grant # EMW-2018-FP-00482) Criteria According to the Code of Federal Regulation Standard 2 CFR 200.430(i)(1)(viii), budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that: (A) The system for establishing the estimates produces reasonable approximations of the activity actually performed; (B) Significant changes in the corresponding work activity (as defined by the non-Federal entity's written policies) are identified and entered into the records in a timely manner. Short term (such as one or two months) fluctuation between workload categories need not be considered as long as the distribution of salaries and wages is reasonable over the longer term; and (C) The non-Federal entity's system of internal controls includes processes to review after-the-fact interim charges made to a Federal award based on budget estimates. All necessary adjustment must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated. Condition The Company charges compensation costs to federal awards based on actual hours incurred, however, for certain awards, the hourly rate used to charge the federal award is based on midpoint of the labor rate range by employee type (versus the actual compensation rate for a given employee). No formal review was performed over the budgeted labor rates used to determine if any adjustments to actual cost were needed for each award. Through our testing of 13 compensation selections totaling $47,724, we identified eight selections totaling $33,240 where the compensation rate used was based on budgeted labor rate. When assessing these further with management, the impact to the awards for our selections was the Company could have charged an additional $4,287 to the awards. Cause The Company was not aware that a control should have been in place to true up labor charges based on a budgeted rate to actual labor rates. Effect The lack of a formal process for review over the budgeted rate used in calculating the allowable compensation could result in amounts charged to federal awards that are not accurate. Questioned Costs Based on the audit results, there was a net amount of $4,287 of additional labor costs that could have been charged to certain federal awards. Recommendation We recommend the Company formalize the review required for the budget labor rates used in calculating charges to federal awards. Management's Views and Corrective Action Plan Management’s views and corrective action plan are included at the end of this report after the summary of status of prior audit finding.
2023-003: Allowable costs/cost principles – Compensation Cluster: Research and Development Sponsoring Agency: U.S. Department of Justice, Department of Health and Human Services, and U.S. Department of Homeland Security Award Names: 2021 DOJ NIJ Heat Flux Through Walls, 2021 National Institute of Health Award, 2022 National Institute of Health Award, 2019 DHS Fire Prevention and Safety (FP&S), and 2018 DHS Assistance to Firefighters Grant (Subaward) Award Numbers: 15PNIJ-21-GG-04167-RESS, 7R56DE029950-02, 1R56DE031814-01, EMW-2019-FP-00770, and EMW-2018-FP-00482 Assistance Listing Titles: National Institute of Justice Research, Evaluation, and Development Project Grants, Oral Diseases and Disorders Research, Assistance to Firefighters Grant Assistance Listing Numbers: 16.560, 93.121, and 97.044 Pass-through entity: The Board of Trustees of the University of Illinois (for grant # EMW-2018-FP-00482) Criteria According to the Code of Federal Regulation Standard 2 CFR 200.430(i)(1)(viii), budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that: (A) The system for establishing the estimates produces reasonable approximations of the activity actually performed; (B) Significant changes in the corresponding work activity (as defined by the non-Federal entity's written policies) are identified and entered into the records in a timely manner. Short term (such as one or two months) fluctuation between workload categories need not be considered as long as the distribution of salaries and wages is reasonable over the longer term; and (C) The non-Federal entity's system of internal controls includes processes to review after-the-fact interim charges made to a Federal award based on budget estimates. All necessary adjustment must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated. Condition The Company charges compensation costs to federal awards based on actual hours incurred, however, for certain awards, the hourly rate used to charge the federal award is based on midpoint of the labor rate range by employee type (versus the actual compensation rate for a given employee). No formal review was performed over the budgeted labor rates used to determine if any adjustments to actual cost were needed for each award. Through our testing of 13 compensation selections totaling $47,724, we identified eight selections totaling $33,240 where the compensation rate used was based on budgeted labor rate. When assessing these further with management, the impact to the awards for our selections was the Company could have charged an additional $4,287 to the awards. Cause The Company was not aware that a control should have been in place to true up labor charges based on a budgeted rate to actual labor rates. Effect The lack of a formal process for review over the budgeted rate used in calculating the allowable compensation could result in amounts charged to federal awards that are not accurate. Questioned Costs Based on the audit results, there was a net amount of $4,287 of additional labor costs that could have been charged to certain federal awards. Recommendation We recommend the Company formalize the review required for the budget labor rates used in calculating charges to federal awards. Management's Views and Corrective Action Plan Management’s views and corrective action plan are included at the end of this report after the summary of status of prior audit finding.
2023-003: Allowable costs/cost principles – Compensation Cluster: Research and Development Sponsoring Agency: U.S. Department of Justice, Department of Health and Human Services, and U.S. Department of Homeland Security Award Names: 2021 DOJ NIJ Heat Flux Through Walls, 2021 National Institute of Health Award, 2022 National Institute of Health Award, 2019 DHS Fire Prevention and Safety (FP&S), and 2018 DHS Assistance to Firefighters Grant (Subaward) Award Numbers: 15PNIJ-21-GG-04167-RESS, 7R56DE029950-02, 1R56DE031814-01, EMW-2019-FP-00770, and EMW-2018-FP-00482 Assistance Listing Titles: National Institute of Justice Research, Evaluation, and Development Project Grants, Oral Diseases and Disorders Research, Assistance to Firefighters Grant Assistance Listing Numbers: 16.560, 93.121, and 97.044 Pass-through entity: The Board of Trustees of the University of Illinois (for grant # EMW-2018-FP-00482) Criteria According to the Code of Federal Regulation Standard 2 CFR 200.430(i)(1)(viii), budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that: (A) The system for establishing the estimates produces reasonable approximations of the activity actually performed; (B) Significant changes in the corresponding work activity (as defined by the non-Federal entity's written policies) are identified and entered into the records in a timely manner. Short term (such as one or two months) fluctuation between workload categories need not be considered as long as the distribution of salaries and wages is reasonable over the longer term; and (C) The non-Federal entity's system of internal controls includes processes to review after-the-fact interim charges made to a Federal award based on budget estimates. All necessary adjustment must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated. Condition The Company charges compensation costs to federal awards based on actual hours incurred, however, for certain awards, the hourly rate used to charge the federal award is based on midpoint of the labor rate range by employee type (versus the actual compensation rate for a given employee). No formal review was performed over the budgeted labor rates used to determine if any adjustments to actual cost were needed for each award. Through our testing of 13 compensation selections totaling $47,724, we identified eight selections totaling $33,240 where the compensation rate used was based on budgeted labor rate. When assessing these further with management, the impact to the awards for our selections was the Company could have charged an additional $4,287 to the awards. Cause The Company was not aware that a control should have been in place to true up labor charges based on a budgeted rate to actual labor rates. Effect The lack of a formal process for review over the budgeted rate used in calculating the allowable compensation could result in amounts charged to federal awards that are not accurate. Questioned Costs Based on the audit results, there was a net amount of $4,287 of additional labor costs that could have been charged to certain federal awards. Recommendation We recommend the Company formalize the review required for the budget labor rates used in calculating charges to federal awards. Management's Views and Corrective Action Plan Management’s views and corrective action plan are included at the end of this report after the summary of status of prior audit finding.
2023-003: Allowable costs/cost principles – Compensation Cluster: Research and Development Sponsoring Agency: U.S. Department of Justice, Department of Health and Human Services, and U.S. Department of Homeland Security Award Names: 2021 DOJ NIJ Heat Flux Through Walls, 2021 National Institute of Health Award, 2022 National Institute of Health Award, 2019 DHS Fire Prevention and Safety (FP&S), and 2018 DHS Assistance to Firefighters Grant (Subaward) Award Numbers: 15PNIJ-21-GG-04167-RESS, 7R56DE029950-02, 1R56DE031814-01, EMW-2019-FP-00770, and EMW-2018-FP-00482 Assistance Listing Titles: National Institute of Justice Research, Evaluation, and Development Project Grants, Oral Diseases and Disorders Research, Assistance to Firefighters Grant Assistance Listing Numbers: 16.560, 93.121, and 97.044 Pass-through entity: The Board of Trustees of the University of Illinois (for grant # EMW-2018-FP-00482) Criteria According to the Code of Federal Regulation Standard 2 CFR 200.430(i)(1)(viii), budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that: (A) The system for establishing the estimates produces reasonable approximations of the activity actually performed; (B) Significant changes in the corresponding work activity (as defined by the non-Federal entity's written policies) are identified and entered into the records in a timely manner. Short term (such as one or two months) fluctuation between workload categories need not be considered as long as the distribution of salaries and wages is reasonable over the longer term; and (C) The non-Federal entity's system of internal controls includes processes to review after-the-fact interim charges made to a Federal award based on budget estimates. All necessary adjustment must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated. Condition The Company charges compensation costs to federal awards based on actual hours incurred, however, for certain awards, the hourly rate used to charge the federal award is based on midpoint of the labor rate range by employee type (versus the actual compensation rate for a given employee). No formal review was performed over the budgeted labor rates used to determine if any adjustments to actual cost were needed for each award. Through our testing of 13 compensation selections totaling $47,724, we identified eight selections totaling $33,240 where the compensation rate used was based on budgeted labor rate. When assessing these further with management, the impact to the awards for our selections was the Company could have charged an additional $4,287 to the awards. Cause The Company was not aware that a control should have been in place to true up labor charges based on a budgeted rate to actual labor rates. Effect The lack of a formal process for review over the budgeted rate used in calculating the allowable compensation could result in amounts charged to federal awards that are not accurate. Questioned Costs Based on the audit results, there was a net amount of $4,287 of additional labor costs that could have been charged to certain federal awards. Recommendation We recommend the Company formalize the review required for the budget labor rates used in calculating charges to federal awards. Management's Views and Corrective Action Plan Management’s views and corrective action plan are included at the end of this report after the summary of status of prior audit finding.
2023-003: Allowable costs/cost principles – Compensation Cluster: Research and Development Sponsoring Agency: U.S. Department of Justice, Department of Health and Human Services, and U.S. Department of Homeland Security Award Names: 2021 DOJ NIJ Heat Flux Through Walls, 2021 National Institute of Health Award, 2022 National Institute of Health Award, 2019 DHS Fire Prevention and Safety (FP&S), and 2018 DHS Assistance to Firefighters Grant (Subaward) Award Numbers: 15PNIJ-21-GG-04167-RESS, 7R56DE029950-02, 1R56DE031814-01, EMW-2019-FP-00770, and EMW-2018-FP-00482 Assistance Listing Titles: National Institute of Justice Research, Evaluation, and Development Project Grants, Oral Diseases and Disorders Research, Assistance to Firefighters Grant Assistance Listing Numbers: 16.560, 93.121, and 97.044 Pass-through entity: The Board of Trustees of the University of Illinois (for grant # EMW-2018-FP-00482) Criteria According to the Code of Federal Regulation Standard 2 CFR 200.430(i)(1)(viii), budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that: (A) The system for establishing the estimates produces reasonable approximations of the activity actually performed; (B) Significant changes in the corresponding work activity (as defined by the non-Federal entity's written policies) are identified and entered into the records in a timely manner. Short term (such as one or two months) fluctuation between workload categories need not be considered as long as the distribution of salaries and wages is reasonable over the longer term; and (C) The non-Federal entity's system of internal controls includes processes to review after-the-fact interim charges made to a Federal award based on budget estimates. All necessary adjustment must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated. Condition The Company charges compensation costs to federal awards based on actual hours incurred, however, for certain awards, the hourly rate used to charge the federal award is based on midpoint of the labor rate range by employee type (versus the actual compensation rate for a given employee). No formal review was performed over the budgeted labor rates used to determine if any adjustments to actual cost were needed for each award. Through our testing of 13 compensation selections totaling $47,724, we identified eight selections totaling $33,240 where the compensation rate used was based on budgeted labor rate. When assessing these further with management, the impact to the awards for our selections was the Company could have charged an additional $4,287 to the awards. Cause The Company was not aware that a control should have been in place to true up labor charges based on a budgeted rate to actual labor rates. Effect The lack of a formal process for review over the budgeted rate used in calculating the allowable compensation could result in amounts charged to federal awards that are not accurate. Questioned Costs Based on the audit results, there was a net amount of $4,287 of additional labor costs that could have been charged to certain federal awards. Recommendation We recommend the Company formalize the review required for the budget labor rates used in calculating charges to federal awards. Management's Views and Corrective Action Plan Management’s views and corrective action plan are included at the end of this report after the summary of status of prior audit finding.
#2023-001 – Significant Deficiency – Authorization and Approval Procedural Controls Victims of Crime Act (VOCA), ALN #16.575 Criteria 2 CFR 200.430 (i) Standards for Documentation of Personnel Expenses states, “Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (a) be supported by a system of internal control which provides reasonable assurance that the changes are accurate, allowable, and properly allocated; … (e) and comply with the established accounting policies and practices of the non-Federal entity.” Condition When selecting timesheets for testing, it was noted that the Executive Director was approving their own timesheet. Cause The cause is human error, as the normal internal control process is for the Executive Director to review all time allocated to the grants and approve all timesheets. Effect The potential effects of self-review and approval of payroll records could include an over or understatement of salary expenses charged to the grants. Questioned Costs None Perspective Information The finding noted related to all pay periods in calendar year 2023. Identification as a repeat finding There was no similar finding in the prior year. Recommendation We recommend delegating the approval of the Executive Director’s timesheet to another member of management involved in regular office procedures. View of Responsible Official Effective immediately, the Assistant Director signs the biweekly timesheets of the Executive Director.
#2023-001 – Significant Deficiency – Authorization and Approval Procedural Controls Victims of Crime Act (VOCA), ALN #16.575 Criteria 2 CFR 200.430 (i) Standards for Documentation of Personnel Expenses states, “Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (a) be supported by a system of internal control which provides reasonable assurance that the changes are accurate, allowable, and properly allocated; … (e) and comply with the established accounting policies and practices of the non-Federal entity.” Condition When selecting timesheets for testing, it was noted that the Executive Director was approving their own timesheet. Cause The cause is human error, as the normal internal control process is for the Executive Director to review all time allocated to the grants and approve all timesheets. Effect The potential effects of self-review and approval of payroll records could include an over or understatement of salary expenses charged to the grants. Questioned Costs None Perspective Information The finding noted related to all pay periods in calendar year 2023. Identification as a repeat finding There was no similar finding in the prior year. Recommendation We recommend delegating the approval of the Executive Director’s timesheet to another member of management involved in regular office procedures. View of Responsible Official Effective immediately, the Assistant Director signs the biweekly timesheets of the Executive Director.
#2023-001 – Significant Deficiency – Authorization and Approval Procedural Controls Victims of Crime Act (VOCA), ALN #16.575 Criteria 2 CFR 200.430 (i) Standards for Documentation of Personnel Expenses states, “Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (a) be supported by a system of internal control which provides reasonable assurance that the changes are accurate, allowable, and properly allocated; … (e) and comply with the established accounting policies and practices of the non-Federal entity.” Condition When selecting timesheets for testing, it was noted that the Executive Director was approving their own timesheet. Cause The cause is human error, as the normal internal control process is for the Executive Director to review all time allocated to the grants and approve all timesheets. Effect The potential effects of self-review and approval of payroll records could include an over or understatement of salary expenses charged to the grants. Questioned Costs None Perspective Information The finding noted related to all pay periods in calendar year 2023. Identification as a repeat finding There was no similar finding in the prior year. Recommendation We recommend delegating the approval of the Executive Director’s timesheet to another member of management involved in regular office procedures. View of Responsible Official Effective immediately, the Assistant Director signs the biweekly timesheets of the Executive Director.
Criteria: 2 CFR 200.430(i)(1)(viii) states that “budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that: (A) The system for establishing the estimates produces reasonable approximations of the activity actually performed; (B) Significant changes in the corresponding work activity (as defined by the non-Federal entity's written policies) are identified and entered into the records in a timely manner. Short term (such as one or two months) fluctuation between workload categories need not be considered as long as the distribution of salaries and wages is reasonable over the longer term; and (C) The non-Federal entity's system of internal controls includes processes to review after-the-fact interim changes made to a Federal award based on budget estimates. All necessary adjustments must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated.” Condition: Grant hours are not tracked on the employee monthly timesheet. Wages charged to the program are based on estimated hours worked. The Alliance does not have procedures in place to convert estimated to actual hours. Cause: Management used to record actual hours worked by grant. Based on instructions from a prior auditor, the accounting function stopped tracking actual hours and used estimated hours to apply wages and related costs to its various grants. Effect: Management is not in compliance with requirements for federal awards. Any costs disallowed by a federal agency, or a pass-through entity, could require repayment of those costs to the funding source. Repeat finding of 2022-003 Questioned costs: Not determined – For program personnel that worked solely on the federal award, their time worked was charged 100% to the federal award and there is a written time record of this, so there is no question about these costs. In addition, the Alliance incurred more costs for the program than were reimbursed under the major program federal award or reimbursed under matching funds. Perspective: Management was following a prior auditor’s incorrect advice that such detail of actual time spent on each grant and other functions was not necessary. Due to the predecessor auditor firm’s schedule, the 2022 audit was not complete until March of 2024. This did not allow management to implement their corrective action plan until 2024. Recommendation: Management should ensure that their procedures for recording time worked, for both exempt and nonexempt employees, is a real-time written or electronic record of time worked for each program/grant. The total hours worked should agree with the total hours being paid. For employees that work on more than one program during a day, the time record should reflect all of the programs/grants on which the employee spent time as a program service, or on administrative or fundraising functions. Views of Responsible Officials: The Alliance has reinstituted an hourly timesheet format in order to account for positions with multiple funding sources.
Criteria: 2 CFR 200.430(i)(1)(viii) states that “budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that: (A) The system for establishing the estimates produces reasonable approximations of the activity actually performed; (B) Significant changes in the corresponding work activity (as defined by the non-Federal entity's written policies) are identified and entered into the records in a timely manner. Short term (such as one or two months) fluctuation between workload categories need not be considered as long as the distribution of salaries and wages is reasonable over the longer term; and (C) The non-Federal entity's system of internal controls includes processes to review after-the-fact interim changes made to a Federal award based on budget estimates. All necessary adjustments must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated.” Condition: Grant hours are not tracked on the employee monthly timesheet. Wages charged to the program are based on estimated hours worked. The Alliance does not have procedures in place to convert estimated to actual hours. Cause: Management used to record actual hours worked by grant. Based on instructions from a prior auditor, the accounting function stopped tracking actual hours and used estimated hours to apply wages and related costs to its various grants. Effect: Management is not in compliance with requirements for federal awards. Any costs disallowed by a federal agency, or a pass-through entity, could require repayment of those costs to the funding source. Repeat finding of 2022-003 Questioned costs: Not determined – For program personnel that worked solely on the federal award, their time worked was charged 100% to the federal award and there is a written time record of this, so there is no question about these costs. In addition, the Alliance incurred more costs for the program than were reimbursed under the major program federal award or reimbursed under matching funds. Perspective: Management was following a prior auditor’s incorrect advice that such detail of actual time spent on each grant and other functions was not necessary. Due to the predecessor auditor firm’s schedule, the 2022 audit was not complete until March of 2024. This did not allow management to implement their corrective action plan until 2024. Recommendation: Management should ensure that their procedures for recording time worked, for both exempt and nonexempt employees, is a real-time written or electronic record of time worked for each program/grant. The total hours worked should agree with the total hours being paid. For employees that work on more than one program during a day, the time record should reflect all of the programs/grants on which the employee spent time as a program service, or on administrative or fundraising functions. Views of Responsible Officials: The Alliance has reinstituted an hourly timesheet format in order to account for positions with multiple funding sources.
Criteria: 2 CFR 200.430(i)(1)(viii) states that “budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that: (A) The system for establishing the estimates produces reasonable approximations of the activity actually performed; (B) Significant changes in the corresponding work activity (as defined by the non-Federal entity's written policies) are identified and entered into the records in a timely manner. Short term (such as one or two months) fluctuation between workload categories need not be considered as long as the distribution of salaries and wages is reasonable over the longer term; and (C) The non-Federal entity's system of internal controls includes processes to review after-the-fact interim changes made to a Federal award based on budget estimates. All necessary adjustments must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated.” Condition: Grant hours are not tracked on the employee monthly timesheet. Wages charged to the program are based on estimated hours worked. The Alliance does not have procedures in place to convert estimated to actual hours. Cause: Management used to record actual hours worked by grant. Based on instructions from a prior auditor, the accounting function stopped tracking actual hours and used estimated hours to apply wages and related costs to its various grants. Effect: Management is not in compliance with requirements for federal awards. Any costs disallowed by a federal agency, or a pass-through entity, could require repayment of those costs to the funding source. Repeat finding of 2022-003 Questioned costs: Not determined – For program personnel that worked solely on the federal award, their time worked was charged 100% to the federal award and there is a written time record of this, so there is no question about these costs. In addition, the Alliance incurred more costs for the program than were reimbursed under the major program federal award or reimbursed under matching funds. Perspective: Management was following a prior auditor’s incorrect advice that such detail of actual time spent on each grant and other functions was not necessary. Due to the predecessor auditor firm’s schedule, the 2022 audit was not complete until March of 2024. This did not allow management to implement their corrective action plan until 2024. Recommendation: Management should ensure that their procedures for recording time worked, for both exempt and nonexempt employees, is a real-time written or electronic record of time worked for each program/grant. The total hours worked should agree with the total hours being paid. For employees that work on more than one program during a day, the time record should reflect all of the programs/grants on which the employee spent time as a program service, or on administrative or fundraising functions. Views of Responsible Officials: The Alliance has reinstituted an hourly timesheet format in order to account for positions with multiple funding sources.
Criteria: 2 CFR 200.430(i)(1)(viii) states that “budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that: (A) The system for establishing the estimates produces reasonable approximations of the activity actually performed; (B) Significant changes in the corresponding work activity (as defined by the non-Federal entity's written policies) are identified and entered into the records in a timely manner. Short term (such as one or two months) fluctuation between workload categories need not be considered as long as the distribution of salaries and wages is reasonable over the longer term; and (C) The non-Federal entity's system of internal controls includes processes to review after-the-fact interim changes made to a Federal award based on budget estimates. All necessary adjustments must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated.” Condition: Grant hours are not tracked on the employee monthly timesheet. Wages charged to the program are based on estimated hours worked. The Alliance does not have procedures in place to convert estimated to actual hours. Cause: Management used to record actual hours worked by grant. Based on instructions from a prior auditor, the accounting function stopped tracking actual hours and used estimated hours to apply wages and related costs to its various grants. Effect: Management is not in compliance with requirements for federal awards. Any costs disallowed by a federal agency, or a pass-through entity, could require repayment of those costs to the funding source. Repeat finding of 2022-003 Questioned costs: Not determined – For program personnel that worked solely on the federal award, their time worked was charged 100% to the federal award and there is a written time record of this, so there is no question about these costs. In addition, the Alliance incurred more costs for the program than were reimbursed under the major program federal award or reimbursed under matching funds. Perspective: Management was following a prior auditor’s incorrect advice that such detail of actual time spent on each grant and other functions was not necessary. Due to the predecessor auditor firm’s schedule, the 2022 audit was not complete until March of 2024. This did not allow management to implement their corrective action plan until 2024. Recommendation: Management should ensure that their procedures for recording time worked, for both exempt and nonexempt employees, is a real-time written or electronic record of time worked for each program/grant. The total hours worked should agree with the total hours being paid. For employees that work on more than one program during a day, the time record should reflect all of the programs/grants on which the employee spent time as a program service, or on administrative or fundraising functions. Views of Responsible Officials: The Alliance has reinstituted an hourly timesheet format in order to account for positions with multiple funding sources.
Criteria: 2 CFR 200.430(i)(1)(viii) states that “budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that: (A) The system for establishing the estimates produces reasonable approximations of the activity actually performed; (B) Significant changes in the corresponding work activity (as defined by the non-Federal entity's written policies) are identified and entered into the records in a timely manner. Short term (such as one or two months) fluctuation between workload categories need not be considered as long as the distribution of salaries and wages is reasonable over the longer term; and (C) The non-Federal entity's system of internal controls includes processes to review after-the-fact interim changes made to a Federal award based on budget estimates. All necessary adjustments must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated.” Condition: Grant hours are not tracked on the employee monthly timesheet. Wages charged to the program are based on estimated hours worked. The Alliance does not have procedures in place to convert estimated to actual hours. Cause: Management used to record actual hours worked by grant. Based on instructions from a prior auditor, the accounting function stopped tracking actual hours and used estimated hours to apply wages and related costs to its various grants. Effect: Management is not in compliance with requirements for federal awards. Any costs disallowed by a federal agency, or a pass-through entity, could require repayment of those costs to the funding source. Repeat finding of 2022-003 Questioned costs: Not determined – For program personnel that worked solely on the federal award, their time worked was charged 100% to the federal award and there is a written time record of this, so there is no question about these costs. In addition, the Alliance incurred more costs for the program than were reimbursed under the major program federal award or reimbursed under matching funds. Perspective: Management was following a prior auditor’s incorrect advice that such detail of actual time spent on each grant and other functions was not necessary. Due to the predecessor auditor firm’s schedule, the 2022 audit was not complete until March of 2024. This did not allow management to implement their corrective action plan until 2024. Recommendation: Management should ensure that their procedures for recording time worked, for both exempt and nonexempt employees, is a real-time written or electronic record of time worked for each program/grant. The total hours worked should agree with the total hours being paid. For employees that work on more than one program during a day, the time record should reflect all of the programs/grants on which the employee spent time as a program service, or on administrative or fundraising functions. Views of Responsible Officials: The Alliance has reinstituted an hourly timesheet format in order to account for positions with multiple funding sources.
2023 001 Activities Allowed or Unallowed and Allowable Costs/ Cost Principles U.S. Department of Homeland Security: Passed through the State of New Jersey, Department of Law and Public Safety: Disaster Grants – Public Assistance (Presidentially Declared Disasters) – ALN 97.036 Federal Grant Numbers and Years State of New Jersey pass-through number: UH1WX Project Worksheet #1822 – October 5, 2021 to March 5, 2022 (Application 553330) Statistically Valid Sample: The sample was not intended to be, and was not, a statistically valid sample. Prior Year Findings: None Criteria Compliance – Program Specific The Federal Emergency Management Agency (FEMA), as part of the U.S. Department of Homeland Security, evaluates the eligibility of all costs claimed by the applicant. Not all costs incurred as a result of the incident are eligible. (PAPPG v4) Chapter 4, page(s) 51-54; Chapter 6, page(s) 65 & 93-95. Cost must be: • Directly tied to the performance of eligible work; • Adequately documented (2 CFR section 200.403(g)); • Reduced by all applicable credits, such as insurance proceeds and salvage values (Stafford Act section 312, 42 USC section 5155, and 2 CFR section 200.406); • Authorized and not prohibited under federal, state, territorial, tribal, or local government laws or regulations; • Consistent with applicant’s internal policies, regulations, and procedures that apply uniformly to both federal awards and other activities of the applicant; and • Necessary and reasonable to accomplish the work properly and efficiently (2 CFR section 200.403). 1. Applicant (Force Account) Labor FEMA refers to the applicant’s personnel as “force account.” FEMA reimburses force account labor based on actual hourly rates plus the cost of the employee’s actual fringe benefits. FEMA calculates the fringe benefit cost based on a percentage of the hourly pay rate. Because certain items in a benefit package are not dependent on hours worked (e.g., health insurance), the percentage for overtime is usually different than the percentage for straight-time. Compliance – General Per 2 CFR Section 200.430, charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-federal entity, not exceeding 100% of compensated activities; (iv) Encompass federally assisted and all other activities compensated by the non-federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-federal entity's written policy; (v) Comply with the established accounting policies and practices of the non-federal entity. Internal Control Per 2 CFR section 200.303(a), a non-federal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition and Context The New Jersey Turnpike Authority (the “Authority”), through the State of New Jersey, Department of Homeland Security (the State), administers the federal Disaster Grants – Public Assistance (Presidentially Declared Disasters) program and is reimbursed for eligible expenditures when a presidentially declared disaster occurs. For the Authority’s force account labor costs, the Authority utilizes manual Daily Worksheets (timesheets) as the official records for time and effort worked during an event by the Authority’s personnel. These timesheets are then entered into the Authority’s information system (PeopleSoft) for review and approval, reconciling back to the information entered on the respective timesheet. For two of forty timesheets selected for testwork, the Authority was unable to provide the timesheets as the official record for the time and effort charged to the federal program. However, the Authority successfully demonstrated through PeopleSoft system that the time and effort charged to the federal program was properly reviewed and approved and reconciled to the amounts of reimbursement requested from the State. Cause The Authority did not maintain and make readily available certain timesheets used as the official record for the time and effort charged to the federal program in accordance with the Uniform Guidance. Effect The Authority did not comply with 2 CFR Section 200.430 related to incorporating the physical timesheets into the official records of the Authority. Questioned Costs None as the time and effort amounts charged were determined to be allowable. Recommendation We recommend that the Authority strengthen its processes to ensure that all timesheets for disaster related events that are federally funded are maintained and are made readily available if subject to audit or other inspection in accordance with the Uniform Guidance. Views of Responsible Officials Management agrees with the finding. We are committed to strengthening our processes to ensure that all physical timesheets related to FEMA-declared disaster events are properly maintained and readily accessible. To achieve this, we will implement enhanced procedures and controls to ensure full compliance with the Uniform Guidance requirements.
2023-001- Internal Control over Compliance and Compliance with Activities Allowed or Unallowed and Allowable Costs and Cost Principles Information on the Major Federal Program U.S. Department of Health and Human Services Center for Disease Control and Prevention Assistance Listing Number: 93.988 Assistance Listing Name: Cooperative Agreements for State-Based Diabetes Control Programs and Evaluation of Surveillance Systems Grant Award Number(s): 1 NU58DP007372-01-00 Award Period: June 30, 2023 to June 29, 2028 Criteria or Specific Requirement – The Uniform Guidance 2 CFR Section 200.303 requires non-Federal entities receiving Federal awards establish and maintain internal control to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. In addition, per 2 CFR Section 200.403, “Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity. d) Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost. e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part. f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally- financed program in either the current or a prior period. g) Be adequately documented. h) Cost must be incurred during the approved budget period. The Federal awarding agency is authorized, at its discretion, to waive prior written approvals to carry forward unobligated balances to subsequent budget periods pursuant to § 200.308(e)(3).” Furthermore, according to the Uniform Guidance (2 CFR Part 200), specifically §200.430(i), “charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated”. The records must also be supported by the approval of an individual with firsthand knowledge of the work performed. Condition - During our audit, within the tested sample of seven timesheets out of a population of twenty-six, three timesheets for employees charged to the federal program did not have proper approval in the system. The lack of signed approval indicates that the timesheets were not reviewed and approved by an individual with knowledge of the work performed, as required under the Uniform Guidance. ADA has documented expenditure policies and procedures. However, the review and approval process did not operate as designed. Cause – ADA did not adhere to its internal policies and procedures to ensure timesheets were properly reviewed and approved. Effect or Potential Effect – Without adequate internal controls in place to ensure costs are properly verified and approved, ADA could unallowably and inaccurately charge salary and wages expenditures to the federal program. Questioned Costs – None Context - This is a condition based on testing of ADA’s compliance. Based on tested samples, we noted four out of seven sampled timesheets were not properly approved in the system. The samples were selected using a non-statistical method. Repeat Finding - This finding is not a repeat finding. Recommendation - BDO recommends that ADA adhere to its documented policies and procedures to ensure all timesheets are reviewed and approved by authorized personnel with knowledge of the work performed. ADA should also provide training to all employees involved in the timesheet preparation and approval process to ensure compliance with the Uniform Guidance requirements. Views of Responsible Officials: The findings were primarily related to a change that ADA made to the Human Resources Information System. Going forward, ADA will adhere to our documented policies and procedures to ensure all timesheets are reviewed and approved by authorized personnel with knowledge of the work performed. Additionally, we will provide training to all employees involved in the timesheet preparation and approval process to ensure compliance with the Uniform Guidance requirements.