2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
Criteria: In accordance with 2 CFR 200.430, charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. Budget estimates alone do not qualify as support for charges to Federal awards. Condition: Salary and wages were charged based on budget estimates. UPS-AIDS does not have a system in place to corroborate the budgeted hours were the actual hours worked by allocated staff. Cause: The salaries and wages are not charged based on actual work performed. Effect: Unique-AIDS is not in compliance with 2 CFR 200.430. Questioned Costs: Undeterminable. Context: A random sampling of the federal expenditures. Repeat Finding: This finding was not corrected. See finding Item 2023-003 in the prior year findings. Recommendation: We recommend that Unique – AIDS establish a system to determine and document the time spent and amount charged to their programs.
Criteria: In accordance with 2 CFR 200.430, charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. Budget estimates alone do not qualify as support for charges to Federal awards. Condition: Salary and wages were charged based on budget estimates. UPS-AIDS does not have a system in place to corroborate the budgeted hours were the actual hours worked by allocated staff. Cause: The salaries and wages are not charged based on actual work performed. Effect: Unique-AIDS is not in compliance with 2 CFR 200.430. Questioned Costs: Undeterminable. Context: A random sampling of the federal expenditures. Repeat Finding: This finding was not corrected. See finding Item 2023-003 in the prior year findings. Recommendation: We recommend that Unique – AIDS establish a system to determine and document the time spent and amount charged to their programs.
Federal Agencies: Department of the Treasury Federal Assistance Listing Numbers: 21.023, 21.027 Programs: COVID-19 Emergency Rental Assistance Program, COVID-19 Coronavirus State and Local Fiscal Recovery Funds Award/Pass-Through Entity Identifying Numbers: COVID-19 HCS-21-37-2103-018(7), HCS-23-AR-2111-018, ARPA - HCS-22-AR-2104-018, COVID-19 - EL-22-AR-27-018, ARPA - EL-22-AR-35-018(1), ARPA - EL-21-AR-03-018(4), ARPA - EL-21-AR-04-018(5), ARPA - EL-22-AR-29-018(2), ARPA - HS-21-AR-01-018(2), BH-22-AR-02-018(1), HCS-23-67-2301-018, HCS-23-AR-2107-018, ARP – 19911, CRF-2024-01, Agreement, 3733, COVID-19 – Agreement, K501, K4893, K4786, K4560, K4862 Criteria: The Uniform Guidance in 2 CFR §200.303 requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Per 2 CFR §200.430 Compensation – personal services: (g) Standards for Documentation of Personnel Expenses. (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 the 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.” Per 2 CFR §200.465 Rental Costs of Real Property and Equipment: (b) “Rental costs under ‘sale and lease back’ arrangements are allowable only up to the amount that would have been allowed if the recipient or subrecipient had continued to own the property. This amount would include expenses such as depreciation, maintenance, taxes, and insurance. (c) Rental costs under “less-than-arm's-length” leases are allowable only up to the amount described in paragraph (b) of this section. For this purpose, a less-than-arm's-length lease is one under which one party to the lease agreement can control or substantially influence the actions of the other...” Condition: Policies and procedures were not adequately established to ensure allowability of rent charges and other cross-charges to federally funded programs. We noted the Organization’s subsidiary charges rent to the Organization’s programs to utilize office spaces for their operations and cross-charges certain other miscellaneous costs. The rent and certain other costs are based on budgeted costs plus a market rate, which is an unallowable method under the Uniform Grant Guidance. Since these transactions are less-than-arm’s-length due to the Organization’s control and significant influence over its subsidiary, costs charged should be based on actual costs incurred. • For the COVID-19 Emergency Rental Assistance Program: o 1 out of 25 selections was charged based on a market rate and budgeted costs. This selection was for a rent expense. • Allocated cost pool of IT costs: o 2 out of 25 selections were charged based on a market rate and/or budgeted costs. One of the selections was for a rent expense and the other was for building maintenance performed by an employee. Cause: The Organization’s policies and procedures lacked a step to reconcile and/or true-up budget and market rates to actual expenditures. Effect or Potential Effect: Without adequate controls in place to ensure expenditures represent actual costs, the Organization could incorrectly charge expenditures to the Federal program, or not request the appropriate reimbursement the Organization is entitled to under the grant. Questioned Costs: None above the $25,000 reporting threshold. Context: This is a condition identified per review of the Organization’s compliance with specified requirements not using a statistically valid sample. • For the COVID-19 Emergency Rental Assistance Program, nonpayroll costs were $1,166,466 and rent charged to the program was $12,743. • IT costs are accumulated and allocated to grants on an allowable basis. The total IT cost pool was $759,731,which was allocated across all programs (federal and nonfederal). Identification as a Repeat Finding: No similar finding noted in the prior year. Recommendation: We recommend that the Organization implements policies and procedures to timely reconcile and, if necessary, true-up rent charges to actual expenditures incurred. Views of Responsible Officials: Management agrees with the finding. Management is updating procedures for how certain costs are cross-charged to federal programs.
Federal Agencies: Department of the Treasury Federal Assistance Listing Numbers: 21.023, 21.027 Programs: COVID-19 Emergency Rental Assistance Program, COVID-19 Coronavirus State and Local Fiscal Recovery Funds Award/Pass-Through Entity Identifying Numbers: COVID-19 HCS-21-37-2103-018(7), HCS-23-AR-2111-018, ARPA - HCS-22-AR-2104-018, COVID-19 - EL-22-AR-27-018, ARPA - EL-22-AR-35-018(1), ARPA - EL-21-AR-03-018(4), ARPA - EL-21-AR-04-018(5), ARPA - EL-22-AR-29-018(2), ARPA - HS-21-AR-01-018(2), BH-22-AR-02-018(1), HCS-23-67-2301-018, HCS-23-AR-2107-018, ARP – 19911, CRF-2024-01, Agreement, 3733, COVID-19 – Agreement, K501, K4893, K4786, K4560, K4862 Criteria: The Uniform Guidance in 2 CFR §200.303 requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Per 2 CFR §200.430 Compensation – personal services: (g) Standards for Documentation of Personnel Expenses. (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 the 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.” Per 2 CFR §200.465 Rental Costs of Real Property and Equipment: (b) “Rental costs under ‘sale and lease back’ arrangements are allowable only up to the amount that would have been allowed if the recipient or subrecipient had continued to own the property. This amount would include expenses such as depreciation, maintenance, taxes, and insurance. (c) Rental costs under “less-than-arm's-length” leases are allowable only up to the amount described in paragraph (b) of this section. For this purpose, a less-than-arm's-length lease is one under which one party to the lease agreement can control or substantially influence the actions of the other...” Condition: Policies and procedures were not adequately established to ensure allowability of rent charges and other cross-charges to federally funded programs. We noted the Organization’s subsidiary charges rent to the Organization’s programs to utilize office spaces for their operations and cross-charges certain other miscellaneous costs. The rent and certain other costs are based on budgeted costs plus a market rate, which is an unallowable method under the Uniform Grant Guidance. Since these transactions are less-than-arm’s-length due to the Organization’s control and significant influence over its subsidiary, costs charged should be based on actual costs incurred. • For the COVID-19 Emergency Rental Assistance Program: o 1 out of 25 selections was charged based on a market rate and budgeted costs. This selection was for a rent expense. • Allocated cost pool of IT costs: o 2 out of 25 selections were charged based on a market rate and/or budgeted costs. One of the selections was for a rent expense and the other was for building maintenance performed by an employee. Cause: The Organization’s policies and procedures lacked a step to reconcile and/or true-up budget and market rates to actual expenditures. Effect or Potential Effect: Without adequate controls in place to ensure expenditures represent actual costs, the Organization could incorrectly charge expenditures to the Federal program, or not request the appropriate reimbursement the Organization is entitled to under the grant. Questioned Costs: None above the $25,000 reporting threshold. Context: This is a condition identified per review of the Organization’s compliance with specified requirements not using a statistically valid sample. • For the COVID-19 Emergency Rental Assistance Program, nonpayroll costs were $1,166,466 and rent charged to the program was $12,743. • IT costs are accumulated and allocated to grants on an allowable basis. The total IT cost pool was $759,731,which was allocated across all programs (federal and nonfederal). Identification as a Repeat Finding: No similar finding noted in the prior year. Recommendation: We recommend that the Organization implements policies and procedures to timely reconcile and, if necessary, true-up rent charges to actual expenditures incurred. Views of Responsible Officials: Management agrees with the finding. Management is updating procedures for how certain costs are cross-charged to federal programs.
Federal Agencies: Department of the Treasury Federal Assistance Listing Numbers: 21.023, 21.027 Programs: COVID-19 Emergency Rental Assistance Program, COVID-19 Coronavirus State and Local Fiscal Recovery Funds Award/Pass-Through Entity Identifying Numbers: COVID-19 HCS-21-37-2103-018(7), HCS-23-AR-2111-018, ARPA - HCS-22-AR-2104-018, COVID-19 - EL-22-AR-27-018, ARPA - EL-22-AR-35-018(1), ARPA - EL-21-AR-03-018(4), ARPA - EL-21-AR-04-018(5), ARPA - EL-22-AR-29-018(2), ARPA - HS-21-AR-01-018(2), BH-22-AR-02-018(1), HCS-23-67-2301-018, HCS-23-AR-2107-018, ARP – 19911, CRF-2024-01, Agreement, 3733, COVID-19 – Agreement, K501, K4893, K4786, K4560, K4862 Criteria: The Uniform Guidance in 2 CFR §200.303 requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Per 2 CFR §200.430 Compensation – personal services: (g) Standards for Documentation of Personnel Expenses. (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 the 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.” Per 2 CFR §200.465 Rental Costs of Real Property and Equipment: (b) “Rental costs under ‘sale and lease back’ arrangements are allowable only up to the amount that would have been allowed if the recipient or subrecipient had continued to own the property. This amount would include expenses such as depreciation, maintenance, taxes, and insurance. (c) Rental costs under “less-than-arm's-length” leases are allowable only up to the amount described in paragraph (b) of this section. For this purpose, a less-than-arm's-length lease is one under which one party to the lease agreement can control or substantially influence the actions of the other...” Condition: Policies and procedures were not adequately established to ensure allowability of rent charges and other cross-charges to federally funded programs. We noted the Organization’s subsidiary charges rent to the Organization’s programs to utilize office spaces for their operations and cross-charges certain other miscellaneous costs. The rent and certain other costs are based on budgeted costs plus a market rate, which is an unallowable method under the Uniform Grant Guidance. Since these transactions are less-than-arm’s-length due to the Organization’s control and significant influence over its subsidiary, costs charged should be based on actual costs incurred. • For the COVID-19 Emergency Rental Assistance Program: o 1 out of 25 selections was charged based on a market rate and budgeted costs. This selection was for a rent expense. • Allocated cost pool of IT costs: o 2 out of 25 selections were charged based on a market rate and/or budgeted costs. One of the selections was for a rent expense and the other was for building maintenance performed by an employee. Cause: The Organization’s policies and procedures lacked a step to reconcile and/or true-up budget and market rates to actual expenditures. Effect or Potential Effect: Without adequate controls in place to ensure expenditures represent actual costs, the Organization could incorrectly charge expenditures to the Federal program, or not request the appropriate reimbursement the Organization is entitled to under the grant. Questioned Costs: None above the $25,000 reporting threshold. Context: This is a condition identified per review of the Organization’s compliance with specified requirements not using a statistically valid sample. • For the COVID-19 Emergency Rental Assistance Program, nonpayroll costs were $1,166,466 and rent charged to the program was $12,743. • IT costs are accumulated and allocated to grants on an allowable basis. The total IT cost pool was $759,731,which was allocated across all programs (federal and nonfederal). Identification as a Repeat Finding: No similar finding noted in the prior year. Recommendation: We recommend that the Organization implements policies and procedures to timely reconcile and, if necessary, true-up rent charges to actual expenditures incurred. Views of Responsible Officials: Management agrees with the finding. Management is updating procedures for how certain costs are cross-charged to federal programs.
Federal Agencies: Department of the Treasury Federal Assistance Listing Numbers: 21.023, 21.027 Programs: COVID-19 Emergency Rental Assistance Program, COVID-19 Coronavirus State and Local Fiscal Recovery Funds Award/Pass-Through Entity Identifying Numbers: COVID-19 HCS-21-37-2103-018(7), HCS-23-AR-2111-018, ARPA - HCS-22-AR-2104-018, COVID-19 - EL-22-AR-27-018, ARPA - EL-22-AR-35-018(1), ARPA - EL-21-AR-03-018(4), ARPA - EL-21-AR-04-018(5), ARPA - EL-22-AR-29-018(2), ARPA - HS-21-AR-01-018(2), BH-22-AR-02-018(1), HCS-23-67-2301-018, HCS-23-AR-2107-018, ARP – 19911, CRF-2024-01, Agreement, 3733, COVID-19 – Agreement, K501, K4893, K4786, K4560, K4862 Criteria: The Uniform Guidance in 2 CFR §200.303 requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Per 2 CFR §200.430 Compensation – personal services: (g) Standards for Documentation of Personnel Expenses. (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 the 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.” Per 2 CFR §200.465 Rental Costs of Real Property and Equipment: (b) “Rental costs under ‘sale and lease back’ arrangements are allowable only up to the amount that would have been allowed if the recipient or subrecipient had continued to own the property. This amount would include expenses such as depreciation, maintenance, taxes, and insurance. (c) Rental costs under “less-than-arm's-length” leases are allowable only up to the amount described in paragraph (b) of this section. For this purpose, a less-than-arm's-length lease is one under which one party to the lease agreement can control or substantially influence the actions of the other...” Condition: Policies and procedures were not adequately established to ensure allowability of rent charges and other cross-charges to federally funded programs. We noted the Organization’s subsidiary charges rent to the Organization’s programs to utilize office spaces for their operations and cross-charges certain other miscellaneous costs. The rent and certain other costs are based on budgeted costs plus a market rate, which is an unallowable method under the Uniform Grant Guidance. Since these transactions are less-than-arm’s-length due to the Organization’s control and significant influence over its subsidiary, costs charged should be based on actual costs incurred. • For the COVID-19 Emergency Rental Assistance Program: o 1 out of 25 selections was charged based on a market rate and budgeted costs. This selection was for a rent expense. • Allocated cost pool of IT costs: o 2 out of 25 selections were charged based on a market rate and/or budgeted costs. One of the selections was for a rent expense and the other was for building maintenance performed by an employee. Cause: The Organization’s policies and procedures lacked a step to reconcile and/or true-up budget and market rates to actual expenditures. Effect or Potential Effect: Without adequate controls in place to ensure expenditures represent actual costs, the Organization could incorrectly charge expenditures to the Federal program, or not request the appropriate reimbursement the Organization is entitled to under the grant. Questioned Costs: None above the $25,000 reporting threshold. Context: This is a condition identified per review of the Organization’s compliance with specified requirements not using a statistically valid sample. • For the COVID-19 Emergency Rental Assistance Program, nonpayroll costs were $1,166,466 and rent charged to the program was $12,743. • IT costs are accumulated and allocated to grants on an allowable basis. The total IT cost pool was $759,731,which was allocated across all programs (federal and nonfederal). Identification as a Repeat Finding: No similar finding noted in the prior year. Recommendation: We recommend that the Organization implements policies and procedures to timely reconcile and, if necessary, true-up rent charges to actual expenditures incurred. Views of Responsible Officials: Management agrees with the finding. Management is updating procedures for how certain costs are cross-charged to federal programs.
Federal Agencies: Department of the Treasury Federal Assistance Listing Numbers: 21.023, 21.027 Programs: COVID-19 Emergency Rental Assistance Program, COVID-19 Coronavirus State and Local Fiscal Recovery Funds Award/Pass-Through Entity Identifying Numbers: COVID-19 HCS-21-37-2103-018(7), HCS-23-AR-2111-018, ARPA - HCS-22-AR-2104-018, COVID-19 - EL-22-AR-27-018, ARPA - EL-22-AR-35-018(1), ARPA - EL-21-AR-03-018(4), ARPA - EL-21-AR-04-018(5), ARPA - EL-22-AR-29-018(2), ARPA - HS-21-AR-01-018(2), BH-22-AR-02-018(1), HCS-23-67-2301-018, HCS-23-AR-2107-018, ARP – 19911, CRF-2024-01, Agreement, 3733, COVID-19 – Agreement, K501, K4893, K4786, K4560, K4862 Criteria: The Uniform Guidance in 2 CFR §200.303 requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Per 2 CFR §200.430 Compensation – personal services: (g) Standards for Documentation of Personnel Expenses. (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 the 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.” Per 2 CFR §200.465 Rental Costs of Real Property and Equipment: (b) “Rental costs under ‘sale and lease back’ arrangements are allowable only up to the amount that would have been allowed if the recipient or subrecipient had continued to own the property. This amount would include expenses such as depreciation, maintenance, taxes, and insurance. (c) Rental costs under “less-than-arm's-length” leases are allowable only up to the amount described in paragraph (b) of this section. For this purpose, a less-than-arm's-length lease is one under which one party to the lease agreement can control or substantially influence the actions of the other...” Condition: Policies and procedures were not adequately established to ensure allowability of rent charges and other cross-charges to federally funded programs. We noted the Organization’s subsidiary charges rent to the Organization’s programs to utilize office spaces for their operations and cross-charges certain other miscellaneous costs. The rent and certain other costs are based on budgeted costs plus a market rate, which is an unallowable method under the Uniform Grant Guidance. Since these transactions are less-than-arm’s-length due to the Organization’s control and significant influence over its subsidiary, costs charged should be based on actual costs incurred. • For the COVID-19 Emergency Rental Assistance Program: o 1 out of 25 selections was charged based on a market rate and budgeted costs. This selection was for a rent expense. • Allocated cost pool of IT costs: o 2 out of 25 selections were charged based on a market rate and/or budgeted costs. One of the selections was for a rent expense and the other was for building maintenance performed by an employee. Cause: The Organization’s policies and procedures lacked a step to reconcile and/or true-up budget and market rates to actual expenditures. Effect or Potential Effect: Without adequate controls in place to ensure expenditures represent actual costs, the Organization could incorrectly charge expenditures to the Federal program, or not request the appropriate reimbursement the Organization is entitled to under the grant. Questioned Costs: None above the $25,000 reporting threshold. Context: This is a condition identified per review of the Organization’s compliance with specified requirements not using a statistically valid sample. • For the COVID-19 Emergency Rental Assistance Program, nonpayroll costs were $1,166,466 and rent charged to the program was $12,743. • IT costs are accumulated and allocated to grants on an allowable basis. The total IT cost pool was $759,731,which was allocated across all programs (federal and nonfederal). Identification as a Repeat Finding: No similar finding noted in the prior year. Recommendation: We recommend that the Organization implements policies and procedures to timely reconcile and, if necessary, true-up rent charges to actual expenditures incurred. Views of Responsible Officials: Management agrees with the finding. Management is updating procedures for how certain costs are cross-charged to federal programs.
Federal Agencies: Department of the Treasury Federal Assistance Listing Numbers: 21.023, 21.027 Programs: COVID-19 Emergency Rental Assistance Program, COVID-19 Coronavirus State and Local Fiscal Recovery Funds Award/Pass-Through Entity Identifying Numbers: COVID-19 HCS-21-37-2103-018(7), HCS-23-AR-2111-018, ARPA - HCS-22-AR-2104-018, COVID-19 - EL-22-AR-27-018, ARPA - EL-22-AR-35-018(1), ARPA - EL-21-AR-03-018(4), ARPA - EL-21-AR-04-018(5), ARPA - EL-22-AR-29-018(2), ARPA - HS-21-AR-01-018(2), BH-22-AR-02-018(1), HCS-23-67-2301-018, HCS-23-AR-2107-018, ARP – 19911, CRF-2024-01, Agreement, 3733, COVID-19 – Agreement, K501, K4893, K4786, K4560, K4862 Criteria: The Uniform Guidance in 2 CFR §200.303 requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Per 2 CFR §200.430 Compensation – personal services: (g) Standards for Documentation of Personnel Expenses. (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 the 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.” Per 2 CFR §200.465 Rental Costs of Real Property and Equipment: (b) “Rental costs under ‘sale and lease back’ arrangements are allowable only up to the amount that would have been allowed if the recipient or subrecipient had continued to own the property. This amount would include expenses such as depreciation, maintenance, taxes, and insurance. (c) Rental costs under “less-than-arm's-length” leases are allowable only up to the amount described in paragraph (b) of this section. For this purpose, a less-than-arm's-length lease is one under which one party to the lease agreement can control or substantially influence the actions of the other...” Condition: Policies and procedures were not adequately established to ensure allowability of rent charges and other cross-charges to federally funded programs. We noted the Organization’s subsidiary charges rent to the Organization’s programs to utilize office spaces for their operations and cross-charges certain other miscellaneous costs. The rent and certain other costs are based on budgeted costs plus a market rate, which is an unallowable method under the Uniform Grant Guidance. Since these transactions are less-than-arm’s-length due to the Organization’s control and significant influence over its subsidiary, costs charged should be based on actual costs incurred. • For the COVID-19 Emergency Rental Assistance Program: o 1 out of 25 selections was charged based on a market rate and budgeted costs. This selection was for a rent expense. • Allocated cost pool of IT costs: o 2 out of 25 selections were charged based on a market rate and/or budgeted costs. One of the selections was for a rent expense and the other was for building maintenance performed by an employee. Cause: The Organization’s policies and procedures lacked a step to reconcile and/or true-up budget and market rates to actual expenditures. Effect or Potential Effect: Without adequate controls in place to ensure expenditures represent actual costs, the Organization could incorrectly charge expenditures to the Federal program, or not request the appropriate reimbursement the Organization is entitled to under the grant. Questioned Costs: None above the $25,000 reporting threshold. Context: This is a condition identified per review of the Organization’s compliance with specified requirements not using a statistically valid sample. • For the COVID-19 Emergency Rental Assistance Program, nonpayroll costs were $1,166,466 and rent charged to the program was $12,743. • IT costs are accumulated and allocated to grants on an allowable basis. The total IT cost pool was $759,731,which was allocated across all programs (federal and nonfederal). Identification as a Repeat Finding: No similar finding noted in the prior year. Recommendation: We recommend that the Organization implements policies and procedures to timely reconcile and, if necessary, true-up rent charges to actual expenditures incurred. Views of Responsible Officials: Management agrees with the finding. Management is updating procedures for how certain costs are cross-charged to federal programs.
Federal Agencies: Department of the Treasury Federal Assistance Listing Numbers: 21.023, 21.027 Programs: COVID-19 Emergency Rental Assistance Program, COVID-19 Coronavirus State and Local Fiscal Recovery Funds Award/Pass-Through Entity Identifying Numbers: COVID-19 HCS-21-37-2103-018(7), HCS-23-AR-2111-018, ARPA - HCS-22-AR-2104-018, COVID-19 - EL-22-AR-27-018, ARPA - EL-22-AR-35-018(1), ARPA - EL-21-AR-03-018(4), ARPA - EL-21-AR-04-018(5), ARPA - EL-22-AR-29-018(2), ARPA - HS-21-AR-01-018(2), BH-22-AR-02-018(1), HCS-23-67-2301-018, HCS-23-AR-2107-018, ARP – 19911, CRF-2024-01, Agreement, 3733, COVID-19 – Agreement, K501, K4893, K4786, K4560, K4862 Criteria: The Uniform Guidance in 2 CFR §200.303 requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Per 2 CFR §200.430 Compensation – personal services: (g) Standards for Documentation of Personnel Expenses. (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 the 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.” Per 2 CFR §200.465 Rental Costs of Real Property and Equipment: (b) “Rental costs under ‘sale and lease back’ arrangements are allowable only up to the amount that would have been allowed if the recipient or subrecipient had continued to own the property. This amount would include expenses such as depreciation, maintenance, taxes, and insurance. (c) Rental costs under “less-than-arm's-length” leases are allowable only up to the amount described in paragraph (b) of this section. For this purpose, a less-than-arm's-length lease is one under which one party to the lease agreement can control or substantially influence the actions of the other...” Condition: Policies and procedures were not adequately established to ensure allowability of rent charges and other cross-charges to federally funded programs. We noted the Organization’s subsidiary charges rent to the Organization’s programs to utilize office spaces for their operations and cross-charges certain other miscellaneous costs. The rent and certain other costs are based on budgeted costs plus a market rate, which is an unallowable method under the Uniform Grant Guidance. Since these transactions are less-than-arm’s-length due to the Organization’s control and significant influence over its subsidiary, costs charged should be based on actual costs incurred. • For the COVID-19 Emergency Rental Assistance Program: o 1 out of 25 selections was charged based on a market rate and budgeted costs. This selection was for a rent expense. • Allocated cost pool of IT costs: o 2 out of 25 selections were charged based on a market rate and/or budgeted costs. One of the selections was for a rent expense and the other was for building maintenance performed by an employee. Cause: The Organization’s policies and procedures lacked a step to reconcile and/or true-up budget and market rates to actual expenditures. Effect or Potential Effect: Without adequate controls in place to ensure expenditures represent actual costs, the Organization could incorrectly charge expenditures to the Federal program, or not request the appropriate reimbursement the Organization is entitled to under the grant. Questioned Costs: None above the $25,000 reporting threshold. Context: This is a condition identified per review of the Organization’s compliance with specified requirements not using a statistically valid sample. • For the COVID-19 Emergency Rental Assistance Program, nonpayroll costs were $1,166,466 and rent charged to the program was $12,743. • IT costs are accumulated and allocated to grants on an allowable basis. The total IT cost pool was $759,731,which was allocated across all programs (federal and nonfederal). Identification as a Repeat Finding: No similar finding noted in the prior year. Recommendation: We recommend that the Organization implements policies and procedures to timely reconcile and, if necessary, true-up rent charges to actual expenditures incurred. Views of Responsible Officials: Management agrees with the finding. Management is updating procedures for how certain costs are cross-charged to federal programs.
Federal Agencies: Department of the Treasury Federal Assistance Listing Numbers: 21.023, 21.027 Programs: COVID-19 Emergency Rental Assistance Program, COVID-19 Coronavirus State and Local Fiscal Recovery Funds Award/Pass-Through Entity Identifying Numbers: COVID-19 HCS-21-37-2103-018(7), HCS-23-AR-2111-018, ARPA - HCS-22-AR-2104-018, COVID-19 - EL-22-AR-27-018, ARPA - EL-22-AR-35-018(1), ARPA - EL-21-AR-03-018(4), ARPA - EL-21-AR-04-018(5), ARPA - EL-22-AR-29-018(2), ARPA - HS-21-AR-01-018(2), BH-22-AR-02-018(1), HCS-23-67-2301-018, HCS-23-AR-2107-018, ARP – 19911, CRF-2024-01, Agreement, 3733, COVID-19 – Agreement, K501, K4893, K4786, K4560, K4862 Criteria: The Uniform Guidance in 2 CFR §200.303 requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Per 2 CFR §200.430 Compensation – personal services: (g) Standards for Documentation of Personnel Expenses. (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 the 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.” Per 2 CFR §200.465 Rental Costs of Real Property and Equipment: (b) “Rental costs under ‘sale and lease back’ arrangements are allowable only up to the amount that would have been allowed if the recipient or subrecipient had continued to own the property. This amount would include expenses such as depreciation, maintenance, taxes, and insurance. (c) Rental costs under “less-than-arm's-length” leases are allowable only up to the amount described in paragraph (b) of this section. For this purpose, a less-than-arm's-length lease is one under which one party to the lease agreement can control or substantially influence the actions of the other...” Condition: Policies and procedures were not adequately established to ensure allowability of rent charges and other cross-charges to federally funded programs. We noted the Organization’s subsidiary charges rent to the Organization’s programs to utilize office spaces for their operations and cross-charges certain other miscellaneous costs. The rent and certain other costs are based on budgeted costs plus a market rate, which is an unallowable method under the Uniform Grant Guidance. Since these transactions are less-than-arm’s-length due to the Organization’s control and significant influence over its subsidiary, costs charged should be based on actual costs incurred. • For the COVID-19 Emergency Rental Assistance Program: o 1 out of 25 selections was charged based on a market rate and budgeted costs. This selection was for a rent expense. • Allocated cost pool of IT costs: o 2 out of 25 selections were charged based on a market rate and/or budgeted costs. One of the selections was for a rent expense and the other was for building maintenance performed by an employee. Cause: The Organization’s policies and procedures lacked a step to reconcile and/or true-up budget and market rates to actual expenditures. Effect or Potential Effect: Without adequate controls in place to ensure expenditures represent actual costs, the Organization could incorrectly charge expenditures to the Federal program, or not request the appropriate reimbursement the Organization is entitled to under the grant. Questioned Costs: None above the $25,000 reporting threshold. Context: This is a condition identified per review of the Organization’s compliance with specified requirements not using a statistically valid sample. • For the COVID-19 Emergency Rental Assistance Program, nonpayroll costs were $1,166,466 and rent charged to the program was $12,743. • IT costs are accumulated and allocated to grants on an allowable basis. The total IT cost pool was $759,731,which was allocated across all programs (federal and nonfederal). Identification as a Repeat Finding: No similar finding noted in the prior year. Recommendation: We recommend that the Organization implements policies and procedures to timely reconcile and, if necessary, true-up rent charges to actual expenditures incurred. Views of Responsible Officials: Management agrees with the finding. Management is updating procedures for how certain costs are cross-charged to federal programs.
Federal Agencies: Department of the Treasury Federal Assistance Listing Numbers: 21.023, 21.027 Programs: COVID-19 Emergency Rental Assistance Program, COVID-19 Coronavirus State and Local Fiscal Recovery Funds Award/Pass-Through Entity Identifying Numbers: COVID-19 HCS-21-37-2103-018(7), HCS-23-AR-2111-018, ARPA - HCS-22-AR-2104-018, COVID-19 - EL-22-AR-27-018, ARPA - EL-22-AR-35-018(1), ARPA - EL-21-AR-03-018(4), ARPA - EL-21-AR-04-018(5), ARPA - EL-22-AR-29-018(2), ARPA - HS-21-AR-01-018(2), BH-22-AR-02-018(1), HCS-23-67-2301-018, HCS-23-AR-2107-018, ARP – 19911, CRF-2024-01, Agreement, 3733, COVID-19 – Agreement, K501, K4893, K4786, K4560, K4862 Criteria: The Uniform Guidance in 2 CFR §200.303 requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Per 2 CFR §200.430 Compensation – personal services: (g) Standards for Documentation of Personnel Expenses. (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 the 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.” Per 2 CFR §200.465 Rental Costs of Real Property and Equipment: (b) “Rental costs under ‘sale and lease back’ arrangements are allowable only up to the amount that would have been allowed if the recipient or subrecipient had continued to own the property. This amount would include expenses such as depreciation, maintenance, taxes, and insurance. (c) Rental costs under “less-than-arm's-length” leases are allowable only up to the amount described in paragraph (b) of this section. For this purpose, a less-than-arm's-length lease is one under which one party to the lease agreement can control or substantially influence the actions of the other...” Condition: Policies and procedures were not adequately established to ensure allowability of rent charges and other cross-charges to federally funded programs. We noted the Organization’s subsidiary charges rent to the Organization’s programs to utilize office spaces for their operations and cross-charges certain other miscellaneous costs. The rent and certain other costs are based on budgeted costs plus a market rate, which is an unallowable method under the Uniform Grant Guidance. Since these transactions are less-than-arm’s-length due to the Organization’s control and significant influence over its subsidiary, costs charged should be based on actual costs incurred. • For the COVID-19 Emergency Rental Assistance Program: o 1 out of 25 selections was charged based on a market rate and budgeted costs. This selection was for a rent expense. • Allocated cost pool of IT costs: o 2 out of 25 selections were charged based on a market rate and/or budgeted costs. One of the selections was for a rent expense and the other was for building maintenance performed by an employee. Cause: The Organization’s policies and procedures lacked a step to reconcile and/or true-up budget and market rates to actual expenditures. Effect or Potential Effect: Without adequate controls in place to ensure expenditures represent actual costs, the Organization could incorrectly charge expenditures to the Federal program, or not request the appropriate reimbursement the Organization is entitled to under the grant. Questioned Costs: None above the $25,000 reporting threshold. Context: This is a condition identified per review of the Organization’s compliance with specified requirements not using a statistically valid sample. • For the COVID-19 Emergency Rental Assistance Program, nonpayroll costs were $1,166,466 and rent charged to the program was $12,743. • IT costs are accumulated and allocated to grants on an allowable basis. The total IT cost pool was $759,731,which was allocated across all programs (federal and nonfederal). Identification as a Repeat Finding: No similar finding noted in the prior year. Recommendation: We recommend that the Organization implements policies and procedures to timely reconcile and, if necessary, true-up rent charges to actual expenditures incurred. Views of Responsible Officials: Management agrees with the finding. Management is updating procedures for how certain costs are cross-charged to federal programs.
Federal Agencies: Department of the Treasury Federal Assistance Listing Numbers: 21.023, 21.027 Programs: COVID-19 Emergency Rental Assistance Program, COVID-19 Coronavirus State and Local Fiscal Recovery Funds Award/Pass-Through Entity Identifying Numbers: COVID-19 HCS-21-37-2103-018(7), HCS-23-AR-2111-018, ARPA - HCS-22-AR-2104-018, COVID-19 - EL-22-AR-27-018, ARPA - EL-22-AR-35-018(1), ARPA - EL-21-AR-03-018(4), ARPA - EL-21-AR-04-018(5), ARPA - EL-22-AR-29-018(2), ARPA - HS-21-AR-01-018(2), BH-22-AR-02-018(1), HCS-23-67-2301-018, HCS-23-AR-2107-018, ARP – 19911, CRF-2024-01, Agreement, 3733, COVID-19 – Agreement, K501, K4893, K4786, K4560, K4862 Criteria: The Uniform Guidance in 2 CFR §200.303 requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Per 2 CFR §200.430 Compensation – personal services: (g) Standards for Documentation of Personnel Expenses. (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 the 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.” Per 2 CFR §200.465 Rental Costs of Real Property and Equipment: (b) “Rental costs under ‘sale and lease back’ arrangements are allowable only up to the amount that would have been allowed if the recipient or subrecipient had continued to own the property. This amount would include expenses such as depreciation, maintenance, taxes, and insurance. (c) Rental costs under “less-than-arm's-length” leases are allowable only up to the amount described in paragraph (b) of this section. For this purpose, a less-than-arm's-length lease is one under which one party to the lease agreement can control or substantially influence the actions of the other...” Condition: Policies and procedures were not adequately established to ensure allowability of rent charges and other cross-charges to federally funded programs. We noted the Organization’s subsidiary charges rent to the Organization’s programs to utilize office spaces for their operations and cross-charges certain other miscellaneous costs. The rent and certain other costs are based on budgeted costs plus a market rate, which is an unallowable method under the Uniform Grant Guidance. Since these transactions are less-than-arm’s-length due to the Organization’s control and significant influence over its subsidiary, costs charged should be based on actual costs incurred. • For the COVID-19 Emergency Rental Assistance Program: o 1 out of 25 selections was charged based on a market rate and budgeted costs. This selection was for a rent expense. • Allocated cost pool of IT costs: o 2 out of 25 selections were charged based on a market rate and/or budgeted costs. One of the selections was for a rent expense and the other was for building maintenance performed by an employee. Cause: The Organization’s policies and procedures lacked a step to reconcile and/or true-up budget and market rates to actual expenditures. Effect or Potential Effect: Without adequate controls in place to ensure expenditures represent actual costs, the Organization could incorrectly charge expenditures to the Federal program, or not request the appropriate reimbursement the Organization is entitled to under the grant. Questioned Costs: None above the $25,000 reporting threshold. Context: This is a condition identified per review of the Organization’s compliance with specified requirements not using a statistically valid sample. • For the COVID-19 Emergency Rental Assistance Program, nonpayroll costs were $1,166,466 and rent charged to the program was $12,743. • IT costs are accumulated and allocated to grants on an allowable basis. The total IT cost pool was $759,731,which was allocated across all programs (federal and nonfederal). Identification as a Repeat Finding: No similar finding noted in the prior year. Recommendation: We recommend that the Organization implements policies and procedures to timely reconcile and, if necessary, true-up rent charges to actual expenditures incurred. Views of Responsible Officials: Management agrees with the finding. Management is updating procedures for how certain costs are cross-charged to federal programs.
Federal Agencies: Department of the Treasury Federal Assistance Listing Numbers: 21.023, 21.027 Programs: COVID-19 Emergency Rental Assistance Program, COVID-19 Coronavirus State and Local Fiscal Recovery Funds Award/Pass-Through Entity Identifying Numbers: COVID-19 HCS-21-37-2103-018(7), HCS-23-AR-2111-018, ARPA - HCS-22-AR-2104-018, COVID-19 - EL-22-AR-27-018, ARPA - EL-22-AR-35-018(1), ARPA - EL-21-AR-03-018(4), ARPA - EL-21-AR-04-018(5), ARPA - EL-22-AR-29-018(2), ARPA - HS-21-AR-01-018(2), BH-22-AR-02-018(1), HCS-23-67-2301-018, HCS-23-AR-2107-018, ARP – 19911, CRF-2024-01, Agreement, 3733, COVID-19 – Agreement, K501, K4893, K4786, K4560, K4862 Criteria: The Uniform Guidance in 2 CFR §200.303 requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Per 2 CFR §200.430 Compensation – personal services: (g) Standards for Documentation of Personnel Expenses. (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 the 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.” Per 2 CFR §200.465 Rental Costs of Real Property and Equipment: (b) “Rental costs under ‘sale and lease back’ arrangements are allowable only up to the amount that would have been allowed if the recipient or subrecipient had continued to own the property. This amount would include expenses such as depreciation, maintenance, taxes, and insurance. (c) Rental costs under “less-than-arm's-length” leases are allowable only up to the amount described in paragraph (b) of this section. For this purpose, a less-than-arm's-length lease is one under which one party to the lease agreement can control or substantially influence the actions of the other...” Condition: Policies and procedures were not adequately established to ensure allowability of rent charges and other cross-charges to federally funded programs. We noted the Organization’s subsidiary charges rent to the Organization’s programs to utilize office spaces for their operations and cross-charges certain other miscellaneous costs. The rent and certain other costs are based on budgeted costs plus a market rate, which is an unallowable method under the Uniform Grant Guidance. Since these transactions are less-than-arm’s-length due to the Organization’s control and significant influence over its subsidiary, costs charged should be based on actual costs incurred. • For the COVID-19 Emergency Rental Assistance Program: o 1 out of 25 selections was charged based on a market rate and budgeted costs. This selection was for a rent expense. • Allocated cost pool of IT costs: o 2 out of 25 selections were charged based on a market rate and/or budgeted costs. One of the selections was for a rent expense and the other was for building maintenance performed by an employee. Cause: The Organization’s policies and procedures lacked a step to reconcile and/or true-up budget and market rates to actual expenditures. Effect or Potential Effect: Without adequate controls in place to ensure expenditures represent actual costs, the Organization could incorrectly charge expenditures to the Federal program, or not request the appropriate reimbursement the Organization is entitled to under the grant. Questioned Costs: None above the $25,000 reporting threshold. Context: This is a condition identified per review of the Organization’s compliance with specified requirements not using a statistically valid sample. • For the COVID-19 Emergency Rental Assistance Program, nonpayroll costs were $1,166,466 and rent charged to the program was $12,743. • IT costs are accumulated and allocated to grants on an allowable basis. The total IT cost pool was $759,731,which was allocated across all programs (federal and nonfederal). Identification as a Repeat Finding: No similar finding noted in the prior year. Recommendation: We recommend that the Organization implements policies and procedures to timely reconcile and, if necessary, true-up rent charges to actual expenditures incurred. Views of Responsible Officials: Management agrees with the finding. Management is updating procedures for how certain costs are cross-charged to federal programs.
Federal Agencies: Department of the Treasury Federal Assistance Listing Numbers: 21.023, 21.027 Programs: COVID-19 Emergency Rental Assistance Program, COVID-19 Coronavirus State and Local Fiscal Recovery Funds Award/Pass-Through Entity Identifying Numbers: COVID-19 HCS-21-37-2103-018(7), HCS-23-AR-2111-018, ARPA - HCS-22-AR-2104-018, COVID-19 - EL-22-AR-27-018, ARPA - EL-22-AR-35-018(1), ARPA - EL-21-AR-03-018(4), ARPA - EL-21-AR-04-018(5), ARPA - EL-22-AR-29-018(2), ARPA - HS-21-AR-01-018(2), BH-22-AR-02-018(1), HCS-23-67-2301-018, HCS-23-AR-2107-018, ARP – 19911, CRF-2024-01, Agreement, 3733, COVID-19 – Agreement, K501, K4893, K4786, K4560, K4862 Criteria: The Uniform Guidance in 2 CFR §200.303 requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Per 2 CFR §200.430 Compensation – personal services: (g) Standards for Documentation of Personnel Expenses. (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 the 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.” Per 2 CFR §200.465 Rental Costs of Real Property and Equipment: (b) “Rental costs under ‘sale and lease back’ arrangements are allowable only up to the amount that would have been allowed if the recipient or subrecipient had continued to own the property. This amount would include expenses such as depreciation, maintenance, taxes, and insurance. (c) Rental costs under “less-than-arm's-length” leases are allowable only up to the amount described in paragraph (b) of this section. For this purpose, a less-than-arm's-length lease is one under which one party to the lease agreement can control or substantially influence the actions of the other...” Condition: Policies and procedures were not adequately established to ensure allowability of rent charges and other cross-charges to federally funded programs. We noted the Organization’s subsidiary charges rent to the Organization’s programs to utilize office spaces for their operations and cross-charges certain other miscellaneous costs. The rent and certain other costs are based on budgeted costs plus a market rate, which is an unallowable method under the Uniform Grant Guidance. Since these transactions are less-than-arm’s-length due to the Organization’s control and significant influence over its subsidiary, costs charged should be based on actual costs incurred. • For the COVID-19 Emergency Rental Assistance Program: o 1 out of 25 selections was charged based on a market rate and budgeted costs. This selection was for a rent expense. • Allocated cost pool of IT costs: o 2 out of 25 selections were charged based on a market rate and/or budgeted costs. One of the selections was for a rent expense and the other was for building maintenance performed by an employee. Cause: The Organization’s policies and procedures lacked a step to reconcile and/or true-up budget and market rates to actual expenditures. Effect or Potential Effect: Without adequate controls in place to ensure expenditures represent actual costs, the Organization could incorrectly charge expenditures to the Federal program, or not request the appropriate reimbursement the Organization is entitled to under the grant. Questioned Costs: None above the $25,000 reporting threshold. Context: This is a condition identified per review of the Organization’s compliance with specified requirements not using a statistically valid sample. • For the COVID-19 Emergency Rental Assistance Program, nonpayroll costs were $1,166,466 and rent charged to the program was $12,743. • IT costs are accumulated and allocated to grants on an allowable basis. The total IT cost pool was $759,731,which was allocated across all programs (federal and nonfederal). Identification as a Repeat Finding: No similar finding noted in the prior year. Recommendation: We recommend that the Organization implements policies and procedures to timely reconcile and, if necessary, true-up rent charges to actual expenditures incurred. Views of Responsible Officials: Management agrees with the finding. Management is updating procedures for how certain costs are cross-charged to federal programs.
Federal Agencies: Department of the Treasury Federal Assistance Listing Numbers: 21.023, 21.027 Programs: COVID-19 Emergency Rental Assistance Program, COVID-19 Coronavirus State and Local Fiscal Recovery Funds Award/Pass-Through Entity Identifying Numbers: COVID-19 HCS-21-37-2103-018(7), HCS-23-AR-2111-018, ARPA - HCS-22-AR-2104-018, COVID-19 - EL-22-AR-27-018, ARPA - EL-22-AR-35-018(1), ARPA - EL-21-AR-03-018(4), ARPA - EL-21-AR-04-018(5), ARPA - EL-22-AR-29-018(2), ARPA - HS-21-AR-01-018(2), BH-22-AR-02-018(1), HCS-23-67-2301-018, HCS-23-AR-2107-018, ARP – 19911, CRF-2024-01, Agreement, 3733, COVID-19 – Agreement, K501, K4893, K4786, K4560, K4862 Criteria: The Uniform Guidance in 2 CFR §200.303 requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Per 2 CFR §200.430 Compensation – personal services: (g) Standards for Documentation of Personnel Expenses. (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 the 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.” Per 2 CFR §200.465 Rental Costs of Real Property and Equipment: (b) “Rental costs under ‘sale and lease back’ arrangements are allowable only up to the amount that would have been allowed if the recipient or subrecipient had continued to own the property. This amount would include expenses such as depreciation, maintenance, taxes, and insurance. (c) Rental costs under “less-than-arm's-length” leases are allowable only up to the amount described in paragraph (b) of this section. For this purpose, a less-than-arm's-length lease is one under which one party to the lease agreement can control or substantially influence the actions of the other...” Condition: Policies and procedures were not adequately established to ensure allowability of rent charges and other cross-charges to federally funded programs. We noted the Organization’s subsidiary charges rent to the Organization’s programs to utilize office spaces for their operations and cross-charges certain other miscellaneous costs. The rent and certain other costs are based on budgeted costs plus a market rate, which is an unallowable method under the Uniform Grant Guidance. Since these transactions are less-than-arm’s-length due to the Organization’s control and significant influence over its subsidiary, costs charged should be based on actual costs incurred. • For the COVID-19 Emergency Rental Assistance Program: o 1 out of 25 selections was charged based on a market rate and budgeted costs. This selection was for a rent expense. • Allocated cost pool of IT costs: o 2 out of 25 selections were charged based on a market rate and/or budgeted costs. One of the selections was for a rent expense and the other was for building maintenance performed by an employee. Cause: The Organization’s policies and procedures lacked a step to reconcile and/or true-up budget and market rates to actual expenditures. Effect or Potential Effect: Without adequate controls in place to ensure expenditures represent actual costs, the Organization could incorrectly charge expenditures to the Federal program, or not request the appropriate reimbursement the Organization is entitled to under the grant. Questioned Costs: None above the $25,000 reporting threshold. Context: This is a condition identified per review of the Organization’s compliance with specified requirements not using a statistically valid sample. • For the COVID-19 Emergency Rental Assistance Program, nonpayroll costs were $1,166,466 and rent charged to the program was $12,743. • IT costs are accumulated and allocated to grants on an allowable basis. The total IT cost pool was $759,731,which was allocated across all programs (federal and nonfederal). Identification as a Repeat Finding: No similar finding noted in the prior year. Recommendation: We recommend that the Organization implements policies and procedures to timely reconcile and, if necessary, true-up rent charges to actual expenditures incurred. Views of Responsible Officials: Management agrees with the finding. Management is updating procedures for how certain costs are cross-charged to federal programs.
Federal Agencies: Department of the Treasury Federal Assistance Listing Numbers: 21.023, 21.027 Programs: COVID-19 Emergency Rental Assistance Program, COVID-19 Coronavirus State and Local Fiscal Recovery Funds Award/Pass-Through Entity Identifying Numbers: COVID-19 HCS-21-37-2103-018(7), HCS-23-AR-2111-018, ARPA - HCS-22-AR-2104-018, COVID-19 - EL-22-AR-27-018, ARPA - EL-22-AR-35-018(1), ARPA - EL-21-AR-03-018(4), ARPA - EL-21-AR-04-018(5), ARPA - EL-22-AR-29-018(2), ARPA - HS-21-AR-01-018(2), BH-22-AR-02-018(1), HCS-23-67-2301-018, HCS-23-AR-2107-018, ARP – 19911, CRF-2024-01, Agreement, 3733, COVID-19 – Agreement, K501, K4893, K4786, K4560, K4862 Criteria: The Uniform Guidance in 2 CFR §200.303 requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Per 2 CFR §200.430 Compensation – personal services: (g) Standards for Documentation of Personnel Expenses. (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 the 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.” Per 2 CFR §200.465 Rental Costs of Real Property and Equipment: (b) “Rental costs under ‘sale and lease back’ arrangements are allowable only up to the amount that would have been allowed if the recipient or subrecipient had continued to own the property. This amount would include expenses such as depreciation, maintenance, taxes, and insurance. (c) Rental costs under “less-than-arm's-length” leases are allowable only up to the amount described in paragraph (b) of this section. For this purpose, a less-than-arm's-length lease is one under which one party to the lease agreement can control or substantially influence the actions of the other...” Condition: Policies and procedures were not adequately established to ensure allowability of rent charges and other cross-charges to federally funded programs. We noted the Organization’s subsidiary charges rent to the Organization’s programs to utilize office spaces for their operations and cross-charges certain other miscellaneous costs. The rent and certain other costs are based on budgeted costs plus a market rate, which is an unallowable method under the Uniform Grant Guidance. Since these transactions are less-than-arm’s-length due to the Organization’s control and significant influence over its subsidiary, costs charged should be based on actual costs incurred. • For the COVID-19 Emergency Rental Assistance Program: o 1 out of 25 selections was charged based on a market rate and budgeted costs. This selection was for a rent expense. • Allocated cost pool of IT costs: o 2 out of 25 selections were charged based on a market rate and/or budgeted costs. One of the selections was for a rent expense and the other was for building maintenance performed by an employee. Cause: The Organization’s policies and procedures lacked a step to reconcile and/or true-up budget and market rates to actual expenditures. Effect or Potential Effect: Without adequate controls in place to ensure expenditures represent actual costs, the Organization could incorrectly charge expenditures to the Federal program, or not request the appropriate reimbursement the Organization is entitled to under the grant. Questioned Costs: None above the $25,000 reporting threshold. Context: This is a condition identified per review of the Organization’s compliance with specified requirements not using a statistically valid sample. • For the COVID-19 Emergency Rental Assistance Program, nonpayroll costs were $1,166,466 and rent charged to the program was $12,743. • IT costs are accumulated and allocated to grants on an allowable basis. The total IT cost pool was $759,731,which was allocated across all programs (federal and nonfederal). Identification as a Repeat Finding: No similar finding noted in the prior year. Recommendation: We recommend that the Organization implements policies and procedures to timely reconcile and, if necessary, true-up rent charges to actual expenditures incurred. Views of Responsible Officials: Management agrees with the finding. Management is updating procedures for how certain costs are cross-charged to federal programs.
Federal Agencies: Department of the Treasury Federal Assistance Listing Numbers: 21.023, 21.027 Programs: COVID-19 Emergency Rental Assistance Program, COVID-19 Coronavirus State and Local Fiscal Recovery Funds Award/Pass-Through Entity Identifying Numbers: COVID-19 HCS-21-37-2103-018(7), HCS-23-AR-2111-018, ARPA - HCS-22-AR-2104-018, COVID-19 - EL-22-AR-27-018, ARPA - EL-22-AR-35-018(1), ARPA - EL-21-AR-03-018(4), ARPA - EL-21-AR-04-018(5), ARPA - EL-22-AR-29-018(2), ARPA - HS-21-AR-01-018(2), BH-22-AR-02-018(1), HCS-23-67-2301-018, HCS-23-AR-2107-018, ARP – 19911, CRF-2024-01, Agreement, 3733, COVID-19 – Agreement, K501, K4893, K4786, K4560, K4862 Criteria: The Uniform Guidance in 2 CFR §200.303 requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Per 2 CFR §200.430 Compensation – personal services: (g) Standards for Documentation of Personnel Expenses. (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 the 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.” Per 2 CFR §200.465 Rental Costs of Real Property and Equipment: (b) “Rental costs under ‘sale and lease back’ arrangements are allowable only up to the amount that would have been allowed if the recipient or subrecipient had continued to own the property. This amount would include expenses such as depreciation, maintenance, taxes, and insurance. (c) Rental costs under “less-than-arm's-length” leases are allowable only up to the amount described in paragraph (b) of this section. For this purpose, a less-than-arm's-length lease is one under which one party to the lease agreement can control or substantially influence the actions of the other...” Condition: Policies and procedures were not adequately established to ensure allowability of rent charges and other cross-charges to federally funded programs. We noted the Organization’s subsidiary charges rent to the Organization’s programs to utilize office spaces for their operations and cross-charges certain other miscellaneous costs. The rent and certain other costs are based on budgeted costs plus a market rate, which is an unallowable method under the Uniform Grant Guidance. Since these transactions are less-than-arm’s-length due to the Organization’s control and significant influence over its subsidiary, costs charged should be based on actual costs incurred. • For the COVID-19 Emergency Rental Assistance Program: o 1 out of 25 selections was charged based on a market rate and budgeted costs. This selection was for a rent expense. • Allocated cost pool of IT costs: o 2 out of 25 selections were charged based on a market rate and/or budgeted costs. One of the selections was for a rent expense and the other was for building maintenance performed by an employee. Cause: The Organization’s policies and procedures lacked a step to reconcile and/or true-up budget and market rates to actual expenditures. Effect or Potential Effect: Without adequate controls in place to ensure expenditures represent actual costs, the Organization could incorrectly charge expenditures to the Federal program, or not request the appropriate reimbursement the Organization is entitled to under the grant. Questioned Costs: None above the $25,000 reporting threshold. Context: This is a condition identified per review of the Organization’s compliance with specified requirements not using a statistically valid sample. • For the COVID-19 Emergency Rental Assistance Program, nonpayroll costs were $1,166,466 and rent charged to the program was $12,743. • IT costs are accumulated and allocated to grants on an allowable basis. The total IT cost pool was $759,731,which was allocated across all programs (federal and nonfederal). Identification as a Repeat Finding: No similar finding noted in the prior year. Recommendation: We recommend that the Organization implements policies and procedures to timely reconcile and, if necessary, true-up rent charges to actual expenditures incurred. Views of Responsible Officials: Management agrees with the finding. Management is updating procedures for how certain costs are cross-charged to federal programs.
Federal Agencies: Department of the Treasury Federal Assistance Listing Numbers: 21.023, 21.027 Programs: COVID-19 Emergency Rental Assistance Program, COVID-19 Coronavirus State and Local Fiscal Recovery Funds Award/Pass-Through Entity Identifying Numbers: COVID-19 HCS-21-37-2103-018(7), HCS-23-AR-2111-018, ARPA - HCS-22-AR-2104-018, COVID-19 - EL-22-AR-27-018, ARPA - EL-22-AR-35-018(1), ARPA - EL-21-AR-03-018(4), ARPA - EL-21-AR-04-018(5), ARPA - EL-22-AR-29-018(2), ARPA - HS-21-AR-01-018(2), BH-22-AR-02-018(1), HCS-23-67-2301-018, HCS-23-AR-2107-018, ARP – 19911, CRF-2024-01, Agreement, 3733, COVID-19 – Agreement, K501, K4893, K4786, K4560, K4862 Criteria: The Uniform Guidance in 2 CFR §200.303 requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Per 2 CFR §200.430 Compensation – personal services: (g) Standards for Documentation of Personnel Expenses. (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 the 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.” Per 2 CFR §200.465 Rental Costs of Real Property and Equipment: (b) “Rental costs under ‘sale and lease back’ arrangements are allowable only up to the amount that would have been allowed if the recipient or subrecipient had continued to own the property. This amount would include expenses such as depreciation, maintenance, taxes, and insurance. (c) Rental costs under “less-than-arm's-length” leases are allowable only up to the amount described in paragraph (b) of this section. For this purpose, a less-than-arm's-length lease is one under which one party to the lease agreement can control or substantially influence the actions of the other...” Condition: Policies and procedures were not adequately established to ensure allowability of rent charges and other cross-charges to federally funded programs. We noted the Organization’s subsidiary charges rent to the Organization’s programs to utilize office spaces for their operations and cross-charges certain other miscellaneous costs. The rent and certain other costs are based on budgeted costs plus a market rate, which is an unallowable method under the Uniform Grant Guidance. Since these transactions are less-than-arm’s-length due to the Organization’s control and significant influence over its subsidiary, costs charged should be based on actual costs incurred. • For the COVID-19 Emergency Rental Assistance Program: o 1 out of 25 selections was charged based on a market rate and budgeted costs. This selection was for a rent expense. • Allocated cost pool of IT costs: o 2 out of 25 selections were charged based on a market rate and/or budgeted costs. One of the selections was for a rent expense and the other was for building maintenance performed by an employee. Cause: The Organization’s policies and procedures lacked a step to reconcile and/or true-up budget and market rates to actual expenditures. Effect or Potential Effect: Without adequate controls in place to ensure expenditures represent actual costs, the Organization could incorrectly charge expenditures to the Federal program, or not request the appropriate reimbursement the Organization is entitled to under the grant. Questioned Costs: None above the $25,000 reporting threshold. Context: This is a condition identified per review of the Organization’s compliance with specified requirements not using a statistically valid sample. • For the COVID-19 Emergency Rental Assistance Program, nonpayroll costs were $1,166,466 and rent charged to the program was $12,743. • IT costs are accumulated and allocated to grants on an allowable basis. The total IT cost pool was $759,731,which was allocated across all programs (federal and nonfederal). Identification as a Repeat Finding: No similar finding noted in the prior year. Recommendation: We recommend that the Organization implements policies and procedures to timely reconcile and, if necessary, true-up rent charges to actual expenditures incurred. Views of Responsible Officials: Management agrees with the finding. Management is updating procedures for how certain costs are cross-charged to federal programs.
Federal Agencies: Department of the Treasury Federal Assistance Listing Numbers: 21.023, 21.027 Programs: COVID-19 Emergency Rental Assistance Program, COVID-19 Coronavirus State and Local Fiscal Recovery Funds Award/Pass-Through Entity Identifying Numbers: COVID-19 HCS-21-37-2103-018(7), HCS-23-AR-2111-018, ARPA - HCS-22-AR-2104-018, COVID-19 - EL-22-AR-27-018, ARPA - EL-22-AR-35-018(1), ARPA - EL-21-AR-03-018(4), ARPA - EL-21-AR-04-018(5), ARPA - EL-22-AR-29-018(2), ARPA - HS-21-AR-01-018(2), BH-22-AR-02-018(1), HCS-23-67-2301-018, HCS-23-AR-2107-018, ARP – 19911, CRF-2024-01, Agreement, 3733, COVID-19 – Agreement, K501, K4893, K4786, K4560, K4862 Criteria: The Uniform Guidance in 2 CFR §200.303 requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Per 2 CFR §200.430 Compensation – personal services: (g) Standards for Documentation of Personnel Expenses. (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 the 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.” Per 2 CFR §200.465 Rental Costs of Real Property and Equipment: (b) “Rental costs under ‘sale and lease back’ arrangements are allowable only up to the amount that would have been allowed if the recipient or subrecipient had continued to own the property. This amount would include expenses such as depreciation, maintenance, taxes, and insurance. (c) Rental costs under “less-than-arm's-length” leases are allowable only up to the amount described in paragraph (b) of this section. For this purpose, a less-than-arm's-length lease is one under which one party to the lease agreement can control or substantially influence the actions of the other...” Condition: Policies and procedures were not adequately established to ensure allowability of rent charges and other cross-charges to federally funded programs. We noted the Organization’s subsidiary charges rent to the Organization’s programs to utilize office spaces for their operations and cross-charges certain other miscellaneous costs. The rent and certain other costs are based on budgeted costs plus a market rate, which is an unallowable method under the Uniform Grant Guidance. Since these transactions are less-than-arm’s-length due to the Organization’s control and significant influence over its subsidiary, costs charged should be based on actual costs incurred. • For the COVID-19 Emergency Rental Assistance Program: o 1 out of 25 selections was charged based on a market rate and budgeted costs. This selection was for a rent expense. • Allocated cost pool of IT costs: o 2 out of 25 selections were charged based on a market rate and/or budgeted costs. One of the selections was for a rent expense and the other was for building maintenance performed by an employee. Cause: The Organization’s policies and procedures lacked a step to reconcile and/or true-up budget and market rates to actual expenditures. Effect or Potential Effect: Without adequate controls in place to ensure expenditures represent actual costs, the Organization could incorrectly charge expenditures to the Federal program, or not request the appropriate reimbursement the Organization is entitled to under the grant. Questioned Costs: None above the $25,000 reporting threshold. Context: This is a condition identified per review of the Organization’s compliance with specified requirements not using a statistically valid sample. • For the COVID-19 Emergency Rental Assistance Program, nonpayroll costs were $1,166,466 and rent charged to the program was $12,743. • IT costs are accumulated and allocated to grants on an allowable basis. The total IT cost pool was $759,731,which was allocated across all programs (federal and nonfederal). Identification as a Repeat Finding: No similar finding noted in the prior year. Recommendation: We recommend that the Organization implements policies and procedures to timely reconcile and, if necessary, true-up rent charges to actual expenditures incurred. Views of Responsible Officials: Management agrees with the finding. Management is updating procedures for how certain costs are cross-charged to federal programs.
Federal Agencies: Department of the Treasury Federal Assistance Listing Numbers: 21.023, 21.027 Programs: COVID-19 Emergency Rental Assistance Program, COVID-19 Coronavirus State and Local Fiscal Recovery Funds Award/Pass-Through Entity Identifying Numbers: COVID-19 HCS-21-37-2103-018(7), HCS-23-AR-2111-018, ARPA - HCS-22-AR-2104-018, COVID-19 - EL-22-AR-27-018, ARPA - EL-22-AR-35-018(1), ARPA - EL-21-AR-03-018(4), ARPA - EL-21-AR-04-018(5), ARPA - EL-22-AR-29-018(2), ARPA - HS-21-AR-01-018(2), BH-22-AR-02-018(1), HCS-23-67-2301-018, HCS-23-AR-2107-018, ARP – 19911, CRF-2024-01, Agreement, 3733, COVID-19 – Agreement, K501, K4893, K4786, K4560, K4862 Criteria: The Uniform Guidance in 2 CFR §200.303 requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Per 2 CFR §200.430 Compensation – personal services: (g) Standards for Documentation of Personnel Expenses. (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 the 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.” Per 2 CFR §200.465 Rental Costs of Real Property and Equipment: (b) “Rental costs under ‘sale and lease back’ arrangements are allowable only up to the amount that would have been allowed if the recipient or subrecipient had continued to own the property. This amount would include expenses such as depreciation, maintenance, taxes, and insurance. (c) Rental costs under “less-than-arm's-length” leases are allowable only up to the amount described in paragraph (b) of this section. For this purpose, a less-than-arm's-length lease is one under which one party to the lease agreement can control or substantially influence the actions of the other...” Condition: Policies and procedures were not adequately established to ensure allowability of rent charges and other cross-charges to federally funded programs. We noted the Organization’s subsidiary charges rent to the Organization’s programs to utilize office spaces for their operations and cross-charges certain other miscellaneous costs. The rent and certain other costs are based on budgeted costs plus a market rate, which is an unallowable method under the Uniform Grant Guidance. Since these transactions are less-than-arm’s-length due to the Organization’s control and significant influence over its subsidiary, costs charged should be based on actual costs incurred. • For the COVID-19 Emergency Rental Assistance Program: o 1 out of 25 selections was charged based on a market rate and budgeted costs. This selection was for a rent expense. • Allocated cost pool of IT costs: o 2 out of 25 selections were charged based on a market rate and/or budgeted costs. One of the selections was for a rent expense and the other was for building maintenance performed by an employee. Cause: The Organization’s policies and procedures lacked a step to reconcile and/or true-up budget and market rates to actual expenditures. Effect or Potential Effect: Without adequate controls in place to ensure expenditures represent actual costs, the Organization could incorrectly charge expenditures to the Federal program, or not request the appropriate reimbursement the Organization is entitled to under the grant. Questioned Costs: None above the $25,000 reporting threshold. Context: This is a condition identified per review of the Organization’s compliance with specified requirements not using a statistically valid sample. • For the COVID-19 Emergency Rental Assistance Program, nonpayroll costs were $1,166,466 and rent charged to the program was $12,743. • IT costs are accumulated and allocated to grants on an allowable basis. The total IT cost pool was $759,731,which was allocated across all programs (federal and nonfederal). Identification as a Repeat Finding: No similar finding noted in the prior year. Recommendation: We recommend that the Organization implements policies and procedures to timely reconcile and, if necessary, true-up rent charges to actual expenditures incurred. Views of Responsible Officials: Management agrees with the finding. Management is updating procedures for how certain costs are cross-charged to federal programs.
Federal Agencies: Department of the Treasury Federal Assistance Listing Numbers: 21.023, 21.027 Programs: COVID-19 Emergency Rental Assistance Program, COVID-19 Coronavirus State and Local Fiscal Recovery Funds Award/Pass-Through Entity Identifying Numbers: COVID-19 HCS-21-37-2103-018(7), HCS-23-AR-2111-018, ARPA - HCS-22-AR-2104-018, COVID-19 - EL-22-AR-27-018, ARPA - EL-22-AR-35-018(1), ARPA - EL-21-AR-03-018(4), ARPA - EL-21-AR-04-018(5), ARPA - EL-22-AR-29-018(2), ARPA - HS-21-AR-01-018(2), BH-22-AR-02-018(1), HCS-23-67-2301-018, HCS-23-AR-2107-018, ARP – 19911, CRF-2024-01, Agreement, 3733, COVID-19 – Agreement, K501, K4893, K4786, K4560, K4862 Criteria: The Uniform Guidance in 2 CFR §200.303 requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Per 2 CFR §200.430 Compensation – personal services: (g) Standards for Documentation of Personnel Expenses. (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 the 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.” Per 2 CFR §200.465 Rental Costs of Real Property and Equipment: (b) “Rental costs under ‘sale and lease back’ arrangements are allowable only up to the amount that would have been allowed if the recipient or subrecipient had continued to own the property. This amount would include expenses such as depreciation, maintenance, taxes, and insurance. (c) Rental costs under “less-than-arm's-length” leases are allowable only up to the amount described in paragraph (b) of this section. For this purpose, a less-than-arm's-length lease is one under which one party to the lease agreement can control or substantially influence the actions of the other...” Condition: Policies and procedures were not adequately established to ensure allowability of rent charges and other cross-charges to federally funded programs. We noted the Organization’s subsidiary charges rent to the Organization’s programs to utilize office spaces for their operations and cross-charges certain other miscellaneous costs. The rent and certain other costs are based on budgeted costs plus a market rate, which is an unallowable method under the Uniform Grant Guidance. Since these transactions are less-than-arm’s-length due to the Organization’s control and significant influence over its subsidiary, costs charged should be based on actual costs incurred. • For the COVID-19 Emergency Rental Assistance Program: o 1 out of 25 selections was charged based on a market rate and budgeted costs. This selection was for a rent expense. • Allocated cost pool of IT costs: o 2 out of 25 selections were charged based on a market rate and/or budgeted costs. One of the selections was for a rent expense and the other was for building maintenance performed by an employee. Cause: The Organization’s policies and procedures lacked a step to reconcile and/or true-up budget and market rates to actual expenditures. Effect or Potential Effect: Without adequate controls in place to ensure expenditures represent actual costs, the Organization could incorrectly charge expenditures to the Federal program, or not request the appropriate reimbursement the Organization is entitled to under the grant. Questioned Costs: None above the $25,000 reporting threshold. Context: This is a condition identified per review of the Organization’s compliance with specified requirements not using a statistically valid sample. • For the COVID-19 Emergency Rental Assistance Program, nonpayroll costs were $1,166,466 and rent charged to the program was $12,743. • IT costs are accumulated and allocated to grants on an allowable basis. The total IT cost pool was $759,731,which was allocated across all programs (federal and nonfederal). Identification as a Repeat Finding: No similar finding noted in the prior year. Recommendation: We recommend that the Organization implements policies and procedures to timely reconcile and, if necessary, true-up rent charges to actual expenditures incurred. Views of Responsible Officials: Management agrees with the finding. Management is updating procedures for how certain costs are cross-charged to federal programs.
Federal Agencies: Department of the Treasury Federal Assistance Listing Numbers: 21.023, 21.027 Programs: COVID-19 Emergency Rental Assistance Program, COVID-19 Coronavirus State and Local Fiscal Recovery Funds Award/Pass-Through Entity Identifying Numbers: COVID-19 HCS-21-37-2103-018(7), HCS-23-AR-2111-018, ARPA - HCS-22-AR-2104-018, COVID-19 - EL-22-AR-27-018, ARPA - EL-22-AR-35-018(1), ARPA - EL-21-AR-03-018(4), ARPA - EL-21-AR-04-018(5), ARPA - EL-22-AR-29-018(2), ARPA - HS-21-AR-01-018(2), BH-22-AR-02-018(1), HCS-23-67-2301-018, HCS-23-AR-2107-018, ARP – 19911, CRF-2024-01, Agreement, 3733, COVID-19 – Agreement, K501, K4893, K4786, K4560, K4862 Criteria: The Uniform Guidance in 2 CFR §200.303 requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Per 2 CFR §200.430 Compensation – personal services: (g) Standards for Documentation of Personnel Expenses. (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 the 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.” Per 2 CFR §200.465 Rental Costs of Real Property and Equipment: (b) “Rental costs under ‘sale and lease back’ arrangements are allowable only up to the amount that would have been allowed if the recipient or subrecipient had continued to own the property. This amount would include expenses such as depreciation, maintenance, taxes, and insurance. (c) Rental costs under “less-than-arm's-length” leases are allowable only up to the amount described in paragraph (b) of this section. For this purpose, a less-than-arm's-length lease is one under which one party to the lease agreement can control or substantially influence the actions of the other...” Condition: Policies and procedures were not adequately established to ensure allowability of rent charges and other cross-charges to federally funded programs. We noted the Organization’s subsidiary charges rent to the Organization’s programs to utilize office spaces for their operations and cross-charges certain other miscellaneous costs. The rent and certain other costs are based on budgeted costs plus a market rate, which is an unallowable method under the Uniform Grant Guidance. Since these transactions are less-than-arm’s-length due to the Organization’s control and significant influence over its subsidiary, costs charged should be based on actual costs incurred. • For the COVID-19 Emergency Rental Assistance Program: o 1 out of 25 selections was charged based on a market rate and budgeted costs. This selection was for a rent expense. • Allocated cost pool of IT costs: o 2 out of 25 selections were charged based on a market rate and/or budgeted costs. One of the selections was for a rent expense and the other was for building maintenance performed by an employee. Cause: The Organization’s policies and procedures lacked a step to reconcile and/or true-up budget and market rates to actual expenditures. Effect or Potential Effect: Without adequate controls in place to ensure expenditures represent actual costs, the Organization could incorrectly charge expenditures to the Federal program, or not request the appropriate reimbursement the Organization is entitled to under the grant. Questioned Costs: None above the $25,000 reporting threshold. Context: This is a condition identified per review of the Organization’s compliance with specified requirements not using a statistically valid sample. • For the COVID-19 Emergency Rental Assistance Program, nonpayroll costs were $1,166,466 and rent charged to the program was $12,743. • IT costs are accumulated and allocated to grants on an allowable basis. The total IT cost pool was $759,731,which was allocated across all programs (federal and nonfederal). Identification as a Repeat Finding: No similar finding noted in the prior year. Recommendation: We recommend that the Organization implements policies and procedures to timely reconcile and, if necessary, true-up rent charges to actual expenditures incurred. Views of Responsible Officials: Management agrees with the finding. Management is updating procedures for how certain costs are cross-charged to federal programs.
Federal Agencies: Department of the Treasury Federal Assistance Listing Numbers: 21.023, 21.027 Programs: COVID-19 Emergency Rental Assistance Program, COVID-19 Coronavirus State and Local Fiscal Recovery Funds Award/Pass-Through Entity Identifying Numbers: COVID-19 HCS-21-37-2103-018(7), HCS-23-AR-2111-018, ARPA - HCS-22-AR-2104-018, COVID-19 - EL-22-AR-27-018, ARPA - EL-22-AR-35-018(1), ARPA - EL-21-AR-03-018(4), ARPA - EL-21-AR-04-018(5), ARPA - EL-22-AR-29-018(2), ARPA - HS-21-AR-01-018(2), BH-22-AR-02-018(1), HCS-23-67-2301-018, HCS-23-AR-2107-018, ARP – 19911, CRF-2024-01, Agreement, 3733, COVID-19 – Agreement, K501, K4893, K4786, K4560, K4862 Criteria: The Uniform Guidance in 2 CFR §200.303 requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Per 2 CFR §200.430 Compensation – personal services: (g) Standards for Documentation of Personnel Expenses. (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 the 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.” Per 2 CFR §200.465 Rental Costs of Real Property and Equipment: (b) “Rental costs under ‘sale and lease back’ arrangements are allowable only up to the amount that would have been allowed if the recipient or subrecipient had continued to own the property. This amount would include expenses such as depreciation, maintenance, taxes, and insurance. (c) Rental costs under “less-than-arm's-length” leases are allowable only up to the amount described in paragraph (b) of this section. For this purpose, a less-than-arm's-length lease is one under which one party to the lease agreement can control or substantially influence the actions of the other...” Condition: Policies and procedures were not adequately established to ensure allowability of rent charges and other cross-charges to federally funded programs. We noted the Organization’s subsidiary charges rent to the Organization’s programs to utilize office spaces for their operations and cross-charges certain other miscellaneous costs. The rent and certain other costs are based on budgeted costs plus a market rate, which is an unallowable method under the Uniform Grant Guidance. Since these transactions are less-than-arm’s-length due to the Organization’s control and significant influence over its subsidiary, costs charged should be based on actual costs incurred. • For the COVID-19 Emergency Rental Assistance Program: o 1 out of 25 selections was charged based on a market rate and budgeted costs. This selection was for a rent expense. • Allocated cost pool of IT costs: o 2 out of 25 selections were charged based on a market rate and/or budgeted costs. One of the selections was for a rent expense and the other was for building maintenance performed by an employee. Cause: The Organization’s policies and procedures lacked a step to reconcile and/or true-up budget and market rates to actual expenditures. Effect or Potential Effect: Without adequate controls in place to ensure expenditures represent actual costs, the Organization could incorrectly charge expenditures to the Federal program, or not request the appropriate reimbursement the Organization is entitled to under the grant. Questioned Costs: None above the $25,000 reporting threshold. Context: This is a condition identified per review of the Organization’s compliance with specified requirements not using a statistically valid sample. • For the COVID-19 Emergency Rental Assistance Program, nonpayroll costs were $1,166,466 and rent charged to the program was $12,743. • IT costs are accumulated and allocated to grants on an allowable basis. The total IT cost pool was $759,731,which was allocated across all programs (federal and nonfederal). Identification as a Repeat Finding: No similar finding noted in the prior year. Recommendation: We recommend that the Organization implements policies and procedures to timely reconcile and, if necessary, true-up rent charges to actual expenditures incurred. Views of Responsible Officials: Management agrees with the finding. Management is updating procedures for how certain costs are cross-charged to federal programs.
Federal Agencies: Department of the Treasury Federal Assistance Listing Numbers: 21.023, 21.027 Programs: COVID-19 Emergency Rental Assistance Program, COVID-19 Coronavirus State and Local Fiscal Recovery Funds Award/Pass-Through Entity Identifying Numbers: COVID-19 HCS-21-37-2103-018(7), HCS-23-AR-2111-018, ARPA - HCS-22-AR-2104-018, COVID-19 - EL-22-AR-27-018, ARPA - EL-22-AR-35-018(1), ARPA - EL-21-AR-03-018(4), ARPA - EL-21-AR-04-018(5), ARPA - EL-22-AR-29-018(2), ARPA - HS-21-AR-01-018(2), BH-22-AR-02-018(1), HCS-23-67-2301-018, HCS-23-AR-2107-018, ARP – 19911, CRF-2024-01, Agreement, 3733, COVID-19 – Agreement, K501, K4893, K4786, K4560, K4862 Criteria: The Uniform Guidance in 2 CFR §200.303 requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Per 2 CFR §200.430 Compensation – personal services: (g) Standards for Documentation of Personnel Expenses. (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 the 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.” Per 2 CFR §200.465 Rental Costs of Real Property and Equipment: (b) “Rental costs under ‘sale and lease back’ arrangements are allowable only up to the amount that would have been allowed if the recipient or subrecipient had continued to own the property. This amount would include expenses such as depreciation, maintenance, taxes, and insurance. (c) Rental costs under “less-than-arm's-length” leases are allowable only up to the amount described in paragraph (b) of this section. For this purpose, a less-than-arm's-length lease is one under which one party to the lease agreement can control or substantially influence the actions of the other...” Condition: Policies and procedures were not adequately established to ensure allowability of rent charges and other cross-charges to federally funded programs. We noted the Organization’s subsidiary charges rent to the Organization’s programs to utilize office spaces for their operations and cross-charges certain other miscellaneous costs. The rent and certain other costs are based on budgeted costs plus a market rate, which is an unallowable method under the Uniform Grant Guidance. Since these transactions are less-than-arm’s-length due to the Organization’s control and significant influence over its subsidiary, costs charged should be based on actual costs incurred. • For the COVID-19 Emergency Rental Assistance Program: o 1 out of 25 selections was charged based on a market rate and budgeted costs. This selection was for a rent expense. • Allocated cost pool of IT costs: o 2 out of 25 selections were charged based on a market rate and/or budgeted costs. One of the selections was for a rent expense and the other was for building maintenance performed by an employee. Cause: The Organization’s policies and procedures lacked a step to reconcile and/or true-up budget and market rates to actual expenditures. Effect or Potential Effect: Without adequate controls in place to ensure expenditures represent actual costs, the Organization could incorrectly charge expenditures to the Federal program, or not request the appropriate reimbursement the Organization is entitled to under the grant. Questioned Costs: None above the $25,000 reporting threshold. Context: This is a condition identified per review of the Organization’s compliance with specified requirements not using a statistically valid sample. • For the COVID-19 Emergency Rental Assistance Program, nonpayroll costs were $1,166,466 and rent charged to the program was $12,743. • IT costs are accumulated and allocated to grants on an allowable basis. The total IT cost pool was $759,731,which was allocated across all programs (federal and nonfederal). Identification as a Repeat Finding: No similar finding noted in the prior year. Recommendation: We recommend that the Organization implements policies and procedures to timely reconcile and, if necessary, true-up rent charges to actual expenditures incurred. Views of Responsible Officials: Management agrees with the finding. Management is updating procedures for how certain costs are cross-charged to federal programs.
Federal Agencies: Department of the Treasury Federal Assistance Listing Numbers: COVID-19 Coronavirus State and Local Fiscal Recovery Funds Programs: 21.027 Award/Pass-Through Entity Identifying Numbers: HCS-23-AR-2111-018, ARPA - HCS-22-AR-2104-018, COVID-19 - EL-22-AR-27-018, ARPA - EL-22-AR-35-018(1), ARPA - EL-21-AR-03-018(4), ARPA - EL-21-AR-04-018(5), ARPA - EL-22-AR-29-018(2), ARPA - HS-21-AR-01-018(2), BH-22-AR-02-018(1), HCS-23-67-2301-018, HCS-23-AR-2107-018, ARP – 19911, CRF-2024-01, Agreement, 3733, COVID-19 – Agreement, K501, K4893, K4786, K4560, K4862 Criteria: The Uniform Guidance in 2 CFR §200.303 requires that non Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Per 2 CFR §200.430 Compensation – Personal Services: “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 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) [Reserved] (vii) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities, which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, 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: We noted that the Organization allocated payroll expenditures using timecards that were not fully reviewed and approved. Two out of 43 selections for the Coronavirus State and Local Fiscal Recovery Funds program did not have employee and/or supervisor approvals. Cause: The Organization did not have adequate policies/procedures in place to ensure timesheet allocations are obtained for all employees charging time to federal grants and that they are appropriately reviewed. Effect or Potential Effect: Without adequate controls to ensure that costs allocated to federal programs are supported, the Organization could incorrectly charge expenditures to the federal program. Questioned Costs: None above the $25,000 reporting threshold. Context: This is a condition identified per review of the Organization’s compliance with specified requirements not using a statistically valid sample. Payroll costs charged to the Coronavirus State and Local Fiscal Recovery Funds program were $1,320,137 in fiscal year 2024. Any costs not adequately supported by approved timesheet or subsequent attestation are considered questioned costs. Identification as a Repeat Finding: No similar finding noted in the prior year. Recommendation: The Organization should consistently obtain and retain timesheet approvals from both employees and supervisors for each pay period requested for reimbursement. Subsequent attestations of time worked should be timely obtained if detective controls identify missing timesheet approvals. Views of Responsible Officials: Management agrees with the finding. Management is updating and implementing mitigating controls to ensure approvals are sufficiently documented.
Federal Agencies: Department of the Treasury Federal Assistance Listing Numbers: COVID-19 Coronavirus State and Local Fiscal Recovery Funds Programs: 21.027 Award/Pass-Through Entity Identifying Numbers: HCS-23-AR-2111-018, ARPA - HCS-22-AR-2104-018, COVID-19 - EL-22-AR-27-018, ARPA - EL-22-AR-35-018(1), ARPA - EL-21-AR-03-018(4), ARPA - EL-21-AR-04-018(5), ARPA - EL-22-AR-29-018(2), ARPA - HS-21-AR-01-018(2), BH-22-AR-02-018(1), HCS-23-67-2301-018, HCS-23-AR-2107-018, ARP – 19911, CRF-2024-01, Agreement, 3733, COVID-19 – Agreement, K501, K4893, K4786, K4560, K4862 Criteria: The Uniform Guidance in 2 CFR §200.303 requires that non Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Per 2 CFR §200.430 Compensation – Personal Services: “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 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) [Reserved] (vii) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities, which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, 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: We noted that the Organization allocated payroll expenditures using timecards that were not fully reviewed and approved. Two out of 43 selections for the Coronavirus State and Local Fiscal Recovery Funds program did not have employee and/or supervisor approvals. Cause: The Organization did not have adequate policies/procedures in place to ensure timesheet allocations are obtained for all employees charging time to federal grants and that they are appropriately reviewed. Effect or Potential Effect: Without adequate controls to ensure that costs allocated to federal programs are supported, the Organization could incorrectly charge expenditures to the federal program. Questioned Costs: None above the $25,000 reporting threshold. Context: This is a condition identified per review of the Organization’s compliance with specified requirements not using a statistically valid sample. Payroll costs charged to the Coronavirus State and Local Fiscal Recovery Funds program were $1,320,137 in fiscal year 2024. Any costs not adequately supported by approved timesheet or subsequent attestation are considered questioned costs. Identification as a Repeat Finding: No similar finding noted in the prior year. Recommendation: The Organization should consistently obtain and retain timesheet approvals from both employees and supervisors for each pay period requested for reimbursement. Subsequent attestations of time worked should be timely obtained if detective controls identify missing timesheet approvals. Views of Responsible Officials: Management agrees with the finding. Management is updating and implementing mitigating controls to ensure approvals are sufficiently documented.
Federal Agencies: Department of the Treasury Federal Assistance Listing Numbers: COVID-19 Coronavirus State and Local Fiscal Recovery Funds Programs: 21.027 Award/Pass-Through Entity Identifying Numbers: HCS-23-AR-2111-018, ARPA - HCS-22-AR-2104-018, COVID-19 - EL-22-AR-27-018, ARPA - EL-22-AR-35-018(1), ARPA - EL-21-AR-03-018(4), ARPA - EL-21-AR-04-018(5), ARPA - EL-22-AR-29-018(2), ARPA - HS-21-AR-01-018(2), BH-22-AR-02-018(1), HCS-23-67-2301-018, HCS-23-AR-2107-018, ARP – 19911, CRF-2024-01, Agreement, 3733, COVID-19 – Agreement, K501, K4893, K4786, K4560, K4862 Criteria: The Uniform Guidance in 2 CFR §200.303 requires that non Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Per 2 CFR §200.430 Compensation – Personal Services: “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 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) [Reserved] (vii) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities, which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, 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: We noted that the Organization allocated payroll expenditures using timecards that were not fully reviewed and approved. Two out of 43 selections for the Coronavirus State and Local Fiscal Recovery Funds program did not have employee and/or supervisor approvals. Cause: The Organization did not have adequate policies/procedures in place to ensure timesheet allocations are obtained for all employees charging time to federal grants and that they are appropriately reviewed. Effect or Potential Effect: Without adequate controls to ensure that costs allocated to federal programs are supported, the Organization could incorrectly charge expenditures to the federal program. Questioned Costs: None above the $25,000 reporting threshold. Context: This is a condition identified per review of the Organization’s compliance with specified requirements not using a statistically valid sample. Payroll costs charged to the Coronavirus State and Local Fiscal Recovery Funds program were $1,320,137 in fiscal year 2024. Any costs not adequately supported by approved timesheet or subsequent attestation are considered questioned costs. Identification as a Repeat Finding: No similar finding noted in the prior year. Recommendation: The Organization should consistently obtain and retain timesheet approvals from both employees and supervisors for each pay period requested for reimbursement. Subsequent attestations of time worked should be timely obtained if detective controls identify missing timesheet approvals. Views of Responsible Officials: Management agrees with the finding. Management is updating and implementing mitigating controls to ensure approvals are sufficiently documented.
Federal Agencies: Department of the Treasury Federal Assistance Listing Numbers: COVID-19 Coronavirus State and Local Fiscal Recovery Funds Programs: 21.027 Award/Pass-Through Entity Identifying Numbers: HCS-23-AR-2111-018, ARPA - HCS-22-AR-2104-018, COVID-19 - EL-22-AR-27-018, ARPA - EL-22-AR-35-018(1), ARPA - EL-21-AR-03-018(4), ARPA - EL-21-AR-04-018(5), ARPA - EL-22-AR-29-018(2), ARPA - HS-21-AR-01-018(2), BH-22-AR-02-018(1), HCS-23-67-2301-018, HCS-23-AR-2107-018, ARP – 19911, CRF-2024-01, Agreement, 3733, COVID-19 – Agreement, K501, K4893, K4786, K4560, K4862 Criteria: The Uniform Guidance in 2 CFR §200.303 requires that non Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Per 2 CFR §200.430 Compensation – Personal Services: “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 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) [Reserved] (vii) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities, which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, 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: We noted that the Organization allocated payroll expenditures using timecards that were not fully reviewed and approved. Two out of 43 selections for the Coronavirus State and Local Fiscal Recovery Funds program did not have employee and/or supervisor approvals. Cause: The Organization did not have adequate policies/procedures in place to ensure timesheet allocations are obtained for all employees charging time to federal grants and that they are appropriately reviewed. Effect or Potential Effect: Without adequate controls to ensure that costs allocated to federal programs are supported, the Organization could incorrectly charge expenditures to the federal program. Questioned Costs: None above the $25,000 reporting threshold. Context: This is a condition identified per review of the Organization’s compliance with specified requirements not using a statistically valid sample. Payroll costs charged to the Coronavirus State and Local Fiscal Recovery Funds program were $1,320,137 in fiscal year 2024. Any costs not adequately supported by approved timesheet or subsequent attestation are considered questioned costs. Identification as a Repeat Finding: No similar finding noted in the prior year. Recommendation: The Organization should consistently obtain and retain timesheet approvals from both employees and supervisors for each pay period requested for reimbursement. Subsequent attestations of time worked should be timely obtained if detective controls identify missing timesheet approvals. Views of Responsible Officials: Management agrees with the finding. Management is updating and implementing mitigating controls to ensure approvals are sufficiently documented.
Federal Agencies: Department of the Treasury Federal Assistance Listing Numbers: COVID-19 Coronavirus State and Local Fiscal Recovery Funds Programs: 21.027 Award/Pass-Through Entity Identifying Numbers: HCS-23-AR-2111-018, ARPA - HCS-22-AR-2104-018, COVID-19 - EL-22-AR-27-018, ARPA - EL-22-AR-35-018(1), ARPA - EL-21-AR-03-018(4), ARPA - EL-21-AR-04-018(5), ARPA - EL-22-AR-29-018(2), ARPA - HS-21-AR-01-018(2), BH-22-AR-02-018(1), HCS-23-67-2301-018, HCS-23-AR-2107-018, ARP – 19911, CRF-2024-01, Agreement, 3733, COVID-19 – Agreement, K501, K4893, K4786, K4560, K4862 Criteria: The Uniform Guidance in 2 CFR §200.303 requires that non Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Per 2 CFR §200.430 Compensation – Personal Services: “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 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) [Reserved] (vii) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities, which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, 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: We noted that the Organization allocated payroll expenditures using timecards that were not fully reviewed and approved. Two out of 43 selections for the Coronavirus State and Local Fiscal Recovery Funds program did not have employee and/or supervisor approvals. Cause: The Organization did not have adequate policies/procedures in place to ensure timesheet allocations are obtained for all employees charging time to federal grants and that they are appropriately reviewed. Effect or Potential Effect: Without adequate controls to ensure that costs allocated to federal programs are supported, the Organization could incorrectly charge expenditures to the federal program. Questioned Costs: None above the $25,000 reporting threshold. Context: This is a condition identified per review of the Organization’s compliance with specified requirements not using a statistically valid sample. Payroll costs charged to the Coronavirus State and Local Fiscal Recovery Funds program were $1,320,137 in fiscal year 2024. Any costs not adequately supported by approved timesheet or subsequent attestation are considered questioned costs. Identification as a Repeat Finding: No similar finding noted in the prior year. Recommendation: The Organization should consistently obtain and retain timesheet approvals from both employees and supervisors for each pay period requested for reimbursement. Subsequent attestations of time worked should be timely obtained if detective controls identify missing timesheet approvals. Views of Responsible Officials: Management agrees with the finding. Management is updating and implementing mitigating controls to ensure approvals are sufficiently documented.
Federal Agencies: Department of the Treasury Federal Assistance Listing Numbers: COVID-19 Coronavirus State and Local Fiscal Recovery Funds Programs: 21.027 Award/Pass-Through Entity Identifying Numbers: HCS-23-AR-2111-018, ARPA - HCS-22-AR-2104-018, COVID-19 - EL-22-AR-27-018, ARPA - EL-22-AR-35-018(1), ARPA - EL-21-AR-03-018(4), ARPA - EL-21-AR-04-018(5), ARPA - EL-22-AR-29-018(2), ARPA - HS-21-AR-01-018(2), BH-22-AR-02-018(1), HCS-23-67-2301-018, HCS-23-AR-2107-018, ARP – 19911, CRF-2024-01, Agreement, 3733, COVID-19 – Agreement, K501, K4893, K4786, K4560, K4862 Criteria: The Uniform Guidance in 2 CFR §200.303 requires that non Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Per 2 CFR §200.430 Compensation – Personal Services: “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 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) [Reserved] (vii) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities, which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, 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: We noted that the Organization allocated payroll expenditures using timecards that were not fully reviewed and approved. Two out of 43 selections for the Coronavirus State and Local Fiscal Recovery Funds program did not have employee and/or supervisor approvals. Cause: The Organization did not have adequate policies/procedures in place to ensure timesheet allocations are obtained for all employees charging time to federal grants and that they are appropriately reviewed. Effect or Potential Effect: Without adequate controls to ensure that costs allocated to federal programs are supported, the Organization could incorrectly charge expenditures to the federal program. Questioned Costs: None above the $25,000 reporting threshold. Context: This is a condition identified per review of the Organization’s compliance with specified requirements not using a statistically valid sample. Payroll costs charged to the Coronavirus State and Local Fiscal Recovery Funds program were $1,320,137 in fiscal year 2024. Any costs not adequately supported by approved timesheet or subsequent attestation are considered questioned costs. Identification as a Repeat Finding: No similar finding noted in the prior year. Recommendation: The Organization should consistently obtain and retain timesheet approvals from both employees and supervisors for each pay period requested for reimbursement. Subsequent attestations of time worked should be timely obtained if detective controls identify missing timesheet approvals. Views of Responsible Officials: Management agrees with the finding. Management is updating and implementing mitigating controls to ensure approvals are sufficiently documented.
Federal Agencies: Department of the Treasury Federal Assistance Listing Numbers: COVID-19 Coronavirus State and Local Fiscal Recovery Funds Programs: 21.027 Award/Pass-Through Entity Identifying Numbers: HCS-23-AR-2111-018, ARPA - HCS-22-AR-2104-018, COVID-19 - EL-22-AR-27-018, ARPA - EL-22-AR-35-018(1), ARPA - EL-21-AR-03-018(4), ARPA - EL-21-AR-04-018(5), ARPA - EL-22-AR-29-018(2), ARPA - HS-21-AR-01-018(2), BH-22-AR-02-018(1), HCS-23-67-2301-018, HCS-23-AR-2107-018, ARP – 19911, CRF-2024-01, Agreement, 3733, COVID-19 – Agreement, K501, K4893, K4786, K4560, K4862 Criteria: The Uniform Guidance in 2 CFR §200.303 requires that non Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Per 2 CFR §200.430 Compensation – Personal Services: “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 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) [Reserved] (vii) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities, which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, 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: We noted that the Organization allocated payroll expenditures using timecards that were not fully reviewed and approved. Two out of 43 selections for the Coronavirus State and Local Fiscal Recovery Funds program did not have employee and/or supervisor approvals. Cause: The Organization did not have adequate policies/procedures in place to ensure timesheet allocations are obtained for all employees charging time to federal grants and that they are appropriately reviewed. Effect or Potential Effect: Without adequate controls to ensure that costs allocated to federal programs are supported, the Organization could incorrectly charge expenditures to the federal program. Questioned Costs: None above the $25,000 reporting threshold. Context: This is a condition identified per review of the Organization’s compliance with specified requirements not using a statistically valid sample. Payroll costs charged to the Coronavirus State and Local Fiscal Recovery Funds program were $1,320,137 in fiscal year 2024. Any costs not adequately supported by approved timesheet or subsequent attestation are considered questioned costs. Identification as a Repeat Finding: No similar finding noted in the prior year. Recommendation: The Organization should consistently obtain and retain timesheet approvals from both employees and supervisors for each pay period requested for reimbursement. Subsequent attestations of time worked should be timely obtained if detective controls identify missing timesheet approvals. Views of Responsible Officials: Management agrees with the finding. Management is updating and implementing mitigating controls to ensure approvals are sufficiently documented.
Federal Agencies: Department of the Treasury Federal Assistance Listing Numbers: COVID-19 Coronavirus State and Local Fiscal Recovery Funds Programs: 21.027 Award/Pass-Through Entity Identifying Numbers: HCS-23-AR-2111-018, ARPA - HCS-22-AR-2104-018, COVID-19 - EL-22-AR-27-018, ARPA - EL-22-AR-35-018(1), ARPA - EL-21-AR-03-018(4), ARPA - EL-21-AR-04-018(5), ARPA - EL-22-AR-29-018(2), ARPA - HS-21-AR-01-018(2), BH-22-AR-02-018(1), HCS-23-67-2301-018, HCS-23-AR-2107-018, ARP – 19911, CRF-2024-01, Agreement, 3733, COVID-19 – Agreement, K501, K4893, K4786, K4560, K4862 Criteria: The Uniform Guidance in 2 CFR §200.303 requires that non Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Per 2 CFR §200.430 Compensation – Personal Services: “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 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) [Reserved] (vii) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities, which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, 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: We noted that the Organization allocated payroll expenditures using timecards that were not fully reviewed and approved. Two out of 43 selections for the Coronavirus State and Local Fiscal Recovery Funds program did not have employee and/or supervisor approvals. Cause: The Organization did not have adequate policies/procedures in place to ensure timesheet allocations are obtained for all employees charging time to federal grants and that they are appropriately reviewed. Effect or Potential Effect: Without adequate controls to ensure that costs allocated to federal programs are supported, the Organization could incorrectly charge expenditures to the federal program. Questioned Costs: None above the $25,000 reporting threshold. Context: This is a condition identified per review of the Organization’s compliance with specified requirements not using a statistically valid sample. Payroll costs charged to the Coronavirus State and Local Fiscal Recovery Funds program were $1,320,137 in fiscal year 2024. Any costs not adequately supported by approved timesheet or subsequent attestation are considered questioned costs. Identification as a Repeat Finding: No similar finding noted in the prior year. Recommendation: The Organization should consistently obtain and retain timesheet approvals from both employees and supervisors for each pay period requested for reimbursement. Subsequent attestations of time worked should be timely obtained if detective controls identify missing timesheet approvals. Views of Responsible Officials: Management agrees with the finding. Management is updating and implementing mitigating controls to ensure approvals are sufficiently documented.
Federal Agencies: Department of the Treasury Federal Assistance Listing Numbers: COVID-19 Coronavirus State and Local Fiscal Recovery Funds Programs: 21.027 Award/Pass-Through Entity Identifying Numbers: HCS-23-AR-2111-018, ARPA - HCS-22-AR-2104-018, COVID-19 - EL-22-AR-27-018, ARPA - EL-22-AR-35-018(1), ARPA - EL-21-AR-03-018(4), ARPA - EL-21-AR-04-018(5), ARPA - EL-22-AR-29-018(2), ARPA - HS-21-AR-01-018(2), BH-22-AR-02-018(1), HCS-23-67-2301-018, HCS-23-AR-2107-018, ARP – 19911, CRF-2024-01, Agreement, 3733, COVID-19 – Agreement, K501, K4893, K4786, K4560, K4862 Criteria: The Uniform Guidance in 2 CFR §200.303 requires that non Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Per 2 CFR §200.430 Compensation – Personal Services: “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 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) [Reserved] (vii) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities, which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, 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: We noted that the Organization allocated payroll expenditures using timecards that were not fully reviewed and approved. Two out of 43 selections for the Coronavirus State and Local Fiscal Recovery Funds program did not have employee and/or supervisor approvals. Cause: The Organization did not have adequate policies/procedures in place to ensure timesheet allocations are obtained for all employees charging time to federal grants and that they are appropriately reviewed. Effect or Potential Effect: Without adequate controls to ensure that costs allocated to federal programs are supported, the Organization could incorrectly charge expenditures to the federal program. Questioned Costs: None above the $25,000 reporting threshold. Context: This is a condition identified per review of the Organization’s compliance with specified requirements not using a statistically valid sample. Payroll costs charged to the Coronavirus State and Local Fiscal Recovery Funds program were $1,320,137 in fiscal year 2024. Any costs not adequately supported by approved timesheet or subsequent attestation are considered questioned costs. Identification as a Repeat Finding: No similar finding noted in the prior year. Recommendation: The Organization should consistently obtain and retain timesheet approvals from both employees and supervisors for each pay period requested for reimbursement. Subsequent attestations of time worked should be timely obtained if detective controls identify missing timesheet approvals. Views of Responsible Officials: Management agrees with the finding. Management is updating and implementing mitigating controls to ensure approvals are sufficiently documented.