Finding 2024-002 Federal Agency: U.S. Department of Housing and Urban Development Federal Program Titles: Section 8 Housing Choice Vouchers and Public and Indian Housing (Non-major Program) Programs Federal Assistance Listing Number: 14.850 and 14.871 Noncompliance – B. Allowable Costs/Cost Principles Noncompliance Material to the Financial Statements: No Significant Deficiency in Internal Control over Compliance for Allowable Costs/Cost Principles Criteria: The Authority's federal program expenditures must meet the requirements of 2 CFR Part 200 Subpart E Cost Principles and conflict of interest requirements of 24 CFR 982.161, and must be adequately documented. Condition: Based upon inspection of the Authority’s paid invoices and on discussion with management, there were costs that were determined to be unallowable. Additionally, reimbursements were made to employees in violation of the Authority's adopted personnel policy. There were excessive reimbursements to employees that would be considered outside the normal course of business of the Authority, and housing assistance payments were made to landlords that would be considered a conflict of interest as defined in 24 CFR 982.161. Context: The following costs were determined to be unallowable or not reasonable or necessary in the proper and efficient performance of the federal program: Meals and gifts (2 CFR section 200.438) Alcohol (2 CFR section 200.423) Professional service costs (2 CFR section 200.459) Travel (2 CFR section 200.475) Payments to landlords that represent a conflict of interest (24 CFR 982.161) Known Questioned Costs: $107,736 Cause: There is a significant deficiency in internal controls over the compliance for the allowable costs/cost principles type of compliance requirement. Housing assistance payments were made to landlords that are defined as a conflict of interest, and approval was granted to reimburse Authority personnel without properly considering the allowability of such costs in accordance with 2 CFR 200. Effect: The Public and Indian Housing and Section 8 Housing Choice Vouchers Programs expended federal funds for unallowable items and as such is in non-compliance with the allowable costs/cost principles type of compliance. Recommendation: We recommend the Authority design and implement internal control procedures that will reasonably assure compliance with the Uniform Guidance and the compliance supplement. This includes the proper internal control procedures to review invoices in accordance with program requirements, as well as compliance with the Authority's adopted personnel policy. Additionally, the Authority should establish internal controls related to the proper approval of these invoices for payment.
Finding 2024-002 Federal Agency: U.S. Department of Housing and Urban Development Federal Program Titles: Section 8 Housing Choice Vouchers and Public and Indian Housing (Non-major Program) Programs Federal Assistance Listing Number: 14.850 and 14.871 Noncompliance – B. Allowable Costs/Cost Principles Noncompliance Material to the Financial Statements: No Significant Deficiency in Internal Control over Compliance for Allowable Costs/Cost Principles Criteria: The Authority's federal program expenditures must meet the requirements of 2 CFR Part 200 Subpart E Cost Principles and conflict of interest requirements of 24 CFR 982.161, and must be adequately documented. Condition: Based upon inspection of the Authority’s paid invoices and on discussion with management, there were costs that were determined to be unallowable. Additionally, reimbursements were made to employees in violation of the Authority's adopted personnel policy. There were excessive reimbursements to employees that would be considered outside the normal course of business of the Authority, and housing assistance payments were made to landlords that would be considered a conflict of interest as defined in 24 CFR 982.161. Context: The following costs were determined to be unallowable or not reasonable or necessary in the proper and efficient performance of the federal program: Meals and gifts (2 CFR section 200.438) Alcohol (2 CFR section 200.423) Professional service costs (2 CFR section 200.459) Travel (2 CFR section 200.475) Payments to landlords that represent a conflict of interest (24 CFR 982.161) Known Questioned Costs: $107,736 Cause: There is a significant deficiency in internal controls over the compliance for the allowable costs/cost principles type of compliance requirement. Housing assistance payments were made to landlords that are defined as a conflict of interest, and approval was granted to reimburse Authority personnel without properly considering the allowability of such costs in accordance with 2 CFR 200. Effect: The Public and Indian Housing and Section 8 Housing Choice Vouchers Programs expended federal funds for unallowable items and as such is in non-compliance with the allowable costs/cost principles type of compliance. Recommendation: We recommend the Authority design and implement internal control procedures that will reasonably assure compliance with the Uniform Guidance and the compliance supplement. This includes the proper internal control procedures to review invoices in accordance with program requirements, as well as compliance with the Authority's adopted personnel policy. Additionally, the Authority should establish internal controls related to the proper approval of these invoices for payment.
Program Identification Finding Reference Number: F-2024-001 Assistance Listing Number: 97.091 Federal Program Titles: Homeland Security Biowatch Program (Significant Deficiency) Awarding Agency / Pass-Through Entity: Department of Homeland Security Award Number: 06OHBIO00002 (Formerly: 2006-ST-091-000002) Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Criteria The criteria for the findings and questioned costs were based on 2 CFR § 200.459, Professional Service Costs, and Bay Area Air Quality Management District’s ("the District”) Professional Services Contract No. 2023.122. 2 CFR § 200.459, paragraph (b)(8), Professional Service Costs, requires: (a) Costs of professional and consultant services rendered by persons who are members of a particular profession or possess a special skill and who are not officers or employees of the recipient or subrecipient are allowable, subject to paragraphs (b) and (c) of this section when reasonable in relation to the services rendered and when not contingent upon recovery of the costs from the Federal Government. In addition, legal and related services are limited under § 200.435. (b) In determining the allowability of costs in a particular case, no single factor or any combination of factors is necessarily determinative. However, the following factors are relevant: (1) The nature and scope of the service rendered in relation to the service required. (2) The necessity of contracting for the service, considering the recipient's or subrecipient's capability in the particular area. (3) The past pattern of such costs, particularly in the years prior to receiving a Federal award(s). (4) The impact of Federal awards on the recipient's or subrecipient's business (meaning, what new problems have arisen). (5) Whether the proportion of Federal work to the recipient's or subrecipient's total business influences the recipient or subrecipient in favor of incurring the cost, particularly where the services rendered are not of a continuing nature and have little relationship to work under Federal awards. BAY AREA AIR QUALITY MANAGEMENT DISTRICT Schedule of Findings and Questioned Costs (Continued) For the Year Ended June 30, 2024 Criteria (continued) (6) Whether the service can be performed more economically by direct employment rather than contracting. (7) The qualifications of the individual or entity providing the service and the customary fees charged, especially on non-federally funded activities. (8) Adequacy of the contractual agreement for the service (for example, description of the service, estimate of the time required, rate of compensation, and termination provisions). (c) To be allowable, retainer fees must be supported by evidence of bona fide services available or rendered in addition to the factors in paragraph (b) of this section. In addition, the District’s Professional Services Contract No. 2023.122, paragraph (8)(a) and (b), require: 8. Payment a. District shall pay Contractor for services in accordance with the terms set forth in the Cost Schedule, which is attached hereto as Attachment B and incorporated herein by this reference. b. Contractor shall submit invoice(s) to District for services performed. Each invoice shall specify the total cost of the services for which the invoice is submitted, shall reference tasks shown in the Scope of Work, the hours associated with same, or percentage completion thereof, and the amount of charge claimed, and, as appropriate, shall list any charges for equipment, material, supplies, travel, and subcontractors’ services. Furthermore, paragraph (12)(c) and (d) require: 12. Employees of Contractor a. Contractor shall be responsible for the cost of regular pay to its employees, as well as cost of vacation leave, vacation replacements, sick leave, severance pay, and pay for legal holidays. b. Contractor, its officers, employees, agents, or representatives shall not be considered employees or agents of District, nor shall Contractor, its officers, employees, agents, or representatives be entitled to or eligible to participate in any benefits, privileges, or plans, given or extended by District to its employees. c. Contractor shall assign those employees listed in the Cost Schedule to perform work under this Contract. Contractor shall not assign different employees to perform this work without the express written permission of District, which District will not unreasonably withhold. d. District reserves the right to review the credentials to perform the work of any of Contractor’s employees assigned herein and to disapprove Contractor’s assignments. Contractor warrants that it will not employ any subcontractor(s) without prior written approval from District, which District will not unreasonably withhold. BAY AREA AIR QUALITY MANAGEMENT DISTRICT Schedule of Findings and Questioned Costs (Continued) For the Year Ended June 30, 2024 Criteria (continued) Regarding direct costs and expenses, Attachment B (“Cost Schedule”) of the District’s professional services contract, further requires: District will also reimburse Contractor for reasonable and necessary expenses incurred in conjunction with the work performed under this Contract (e.g., hardware parts and supplies), including reasonable travel expenses in accordance with the District’s travel reimbursement policy attached hereto as Attachment C, and any administrative costs and expenses (e.g., rent and utility costs for office space). Reimbursable expenses such as project specific supplies and materials will be charged at cost. Contractor’s invoices shall include a line item reflecting all direct costs and expenses. Condition As part of our compliance review over program expenditures, we selected a sample of expenditures to determine whether costs were allowable under program regulations, accurately charged, and appropriately supported in accordance with 2 CFR § 200.459, paragraph (b)(8), and the District’s Professional Services Contract No. 2023.122, Attachment B (“Cost Schedule”). In our sample of twelve (12) expenditures, we identified eight (8) discrepancies in the eleven (11) contractor-submitted invoices when compared to the approved cost schedule per the Agreement with the contractor, as follows: 1. Professional service fees were charged for two (2) positions not listed in the cost schedule, and 2. Professional service fees were charged for six (6) positions in excess of the hourly rate established in the cost schedule. The identified discrepancies resulted in an overstatement of program expenditures, amounting to $9,316 of the $1,387,774 sampled, from a total of $1,424,920 in program expenditures. Additionally, the contractor received reimbursement for travel and supplies without providing sufficient documentation to the District to demonstrate compliance with 2 CFR § 200.459, paragraph (b)(8), the District’s Professional Services Contract No. 2023.122, Attachment B (“Cost Schedule”), and Attachment C (“Contractor Travel Policy”). The reimbursements lacked adequate support to verify that the expenses were reasonable, necessary, and directly related to the contracted professional services. As a result of our inquiry, the District obtained documentation supporting all travel and supply reimbursements associated with the submitted invoices by the contractor during Fiscal Year 2024. Based on the submitted documentation, the District concluded that the support was sufficient to demonstrate compliance with the noted requirements. Our samples were statistically valid and representative of the overall expenditures. BAY AREA AIR QUALITY MANAGEMENT DISTRICT Schedule of Findings and Questioned Costs (Continued) For the Year Ended June 30, 2024 Cause and Effect The deviations from the approved cost schedule indicate that the contractor did not adhere to the District’s professional services contract. Charges for professional services did not align with the cost schedule outlined in the professional services contract, resulting in unallowable and excessive costs due to insufficient review of the contractor invoices prior to payment. Changes to the cost schedule should be pre-approved by the District; however, the required approvals were not obtained before payments were processed. Further, the District lacked adequate oversight to ensure that contractor reimbursements for travel and supplies were properly supported with documentation and aligned with federal and contractual requirements. Such documentation should be submitted by the contractor along with the invoice in order for the District to review and approve prior to payment. Without proper documentation, the District cannot verify that reimbursed travel and supplies are reasonable, necessary, and directly related to the contracted professional services. Questioned Costs The total costs related to the conditions mentioned above include a $3,486 overstatement for charges related to positions not listed in the cost schedule and a $5,830 overstatement due to hourly rates charged in excess of the cost schedule, totaling $9,316. Recommendation We recommend that the District establish and implement a formal approval process for expenditures to ensure all charges are thoroughly reviewed and verified against contract terms before payment. Additionally, the District should conduct a detailed analysis of all payments made against the approved cost schedule to identify and reconcile any variances, determining the total amount of excessive charges. The District should also coordinate with the contractor to recover any overcharges, either through a credit or refund, to ensure federal funds are properly accounted for and used in accordance with the professional services contract. To strengthen oversight and compliance, the District should enhance its internal controls by maintaining detailed records that support cost approvals, modifications, and contract adherence. This includes requiring contractors to submit detailed supporting documentation such as itemized receipts, travel justifications, and proof of business necessity before reimbursements are processed. Furthermore, the District should provide adequate and ongoing training to staff and contractors on proper documentation standards and allowable costs under 2 CFR § 200.459 and the District’s contract terms, to prevent future instances of noncompliance. BAY AREA AIR QUALITY MANAGEMENT DISTRICT Schedule of Findings and Questioned Costs (Continued) For the Year Ended June 30, 2024 View of Responsible Officials and Corrective Action Plan Air District Management concurs with the recommendation under Finding Reference Number F-2024-001. Upon review of the supporting travel expense documentation, management has found no discrepancies. Moving forward, the Air District will continue to ensure that all supporting travel documentation agrees with the corresponding invoices to maintain compliance and accuracy. Regarding the overstatement of program expenditures, the Air District will initiate the recovery of the identified overcharges by deducting the amount from future reimbursement requests submitted to the Department of Homeland Security (DHS). Specifically, the Air District plans on recovering the $9,316 in overcharges from the contractor for fiscal year ending June 30, 2024. Additionally, the Air District is in the process of reviewing Fiscal Year 2025 invoices to identify any potential overcharges and will request reimbursement from the contractor, as necessary. To strengthen oversight and compliance, the Air District has begun implementing process changes as of February 2025. These changes ensure that consultant invoices align with the terms of the Air District’s contract prior to approval and payment processing. Name: Daniel Meer Title: Manager, Government Outreach & Special Projects Email: dmeer@baaqmd.gov
Finding 2024-002 Federal Agency: U.S. Department of Housing and Urban Development Federal Program Titles: Section 8 Housing Choice Vouchers and Public and Indian Housing (Non-major Program) Programs Federal Assistance Listing Number: 14.850 and 14.871 Noncompliance – B. Allowable Costs/Cost Principles Noncompliance Material to the Financial Statements: No Significant Deficiency in Internal Control over Compliance for Allowable Costs/Cost Principles Criteria: The Authority's federal program expenditures must meet the requirements of 2 CFR Part 200 Subpart E Cost Principles and conflict of interest requirements of 24 CFR 982.161, and must be adequately documented. Condition: Based upon inspection of the Authority’s paid invoices and on discussion with management, there were costs that were determined to be unallowable. Additionally, reimbursements were made to employees in violation of the Authority's adopted personnel policy. There were excessive reimbursements to employees that would be considered outside the normal course of business of the Authority, and housing assistance payments were made to landlords that would be considered a conflict of interest as defined in 24 CFR 982.161. Context: The following costs were determined to be unallowable or not reasonable or necessary in the proper and efficient performance of the federal program: Meals and gifts (2 CFR section 200.438) Alcohol (2 CFR section 200.423) Professional service costs (2 CFR section 200.459) Travel (2 CFR section 200.475) Payments to landlords that represent a conflict of interest (24 CFR 982.161) Known Questioned Costs: $107,736 Cause: There is a significant deficiency in internal controls over the compliance for the allowable costs/cost principles type of compliance requirement. Housing assistance payments were made to landlords that are defined as a conflict of interest, and approval was granted to reimburse Authority personnel without properly considering the allowability of such costs in accordance with 2 CFR 200. Effect: The Public and Indian Housing and Section 8 Housing Choice Vouchers Programs expended federal funds for unallowable items and as such is in non-compliance with the allowable costs/cost principles type of compliance. Recommendation: We recommend the Authority design and implement internal control procedures that will reasonably assure compliance with the Uniform Guidance and the compliance supplement. This includes the proper internal control procedures to review invoices in accordance with program requirements, as well as compliance with the Authority's adopted personnel policy. Additionally, the Authority should establish internal controls related to the proper approval of these invoices for payment.
Finding 2024-002 Federal Agency: U.S. Department of Housing and Urban Development Federal Program Titles: Section 8 Housing Choice Vouchers and Public and Indian Housing (Non-major Program) Programs Federal Assistance Listing Number: 14.850 and 14.871 Noncompliance – B. Allowable Costs/Cost Principles Noncompliance Material to the Financial Statements: No Significant Deficiency in Internal Control over Compliance for Allowable Costs/Cost Principles Criteria: The Authority's federal program expenditures must meet the requirements of 2 CFR Part 200 Subpart E Cost Principles and conflict of interest requirements of 24 CFR 982.161, and must be adequately documented. Condition: Based upon inspection of the Authority’s paid invoices and on discussion with management, there were costs that were determined to be unallowable. Additionally, reimbursements were made to employees in violation of the Authority's adopted personnel policy. There were excessive reimbursements to employees that would be considered outside the normal course of business of the Authority, and housing assistance payments were made to landlords that would be considered a conflict of interest as defined in 24 CFR 982.161. Context: The following costs were determined to be unallowable or not reasonable or necessary in the proper and efficient performance of the federal program: Meals and gifts (2 CFR section 200.438) Alcohol (2 CFR section 200.423) Professional service costs (2 CFR section 200.459) Travel (2 CFR section 200.475) Payments to landlords that represent a conflict of interest (24 CFR 982.161) Known Questioned Costs: $107,736 Cause: There is a significant deficiency in internal controls over the compliance for the allowable costs/cost principles type of compliance requirement. Housing assistance payments were made to landlords that are defined as a conflict of interest, and approval was granted to reimburse Authority personnel without properly considering the allowability of such costs in accordance with 2 CFR 200. Effect: The Public and Indian Housing and Section 8 Housing Choice Vouchers Programs expended federal funds for unallowable items and as such is in non-compliance with the allowable costs/cost principles type of compliance. Recommendation: We recommend the Authority design and implement internal control procedures that will reasonably assure compliance with the Uniform Guidance and the compliance supplement. This includes the proper internal control procedures to review invoices in accordance with program requirements, as well as compliance with the Authority's adopted personnel policy. Additionally, the Authority should establish internal controls related to the proper approval of these invoices for payment.
Program Identification Finding Reference Number: F-2024-001 Assistance Listing Number: 97.091 Federal Program Titles: Homeland Security Biowatch Program (Significant Deficiency) Awarding Agency / Pass-Through Entity: Department of Homeland Security Award Number: 06OHBIO00002 (Formerly: 2006-ST-091-000002) Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Criteria The criteria for the findings and questioned costs were based on 2 CFR § 200.459, Professional Service Costs, and Bay Area Air Quality Management District’s ("the District”) Professional Services Contract No. 2023.122. 2 CFR § 200.459, paragraph (b)(8), Professional Service Costs, requires: (a) Costs of professional and consultant services rendered by persons who are members of a particular profession or possess a special skill and who are not officers or employees of the recipient or subrecipient are allowable, subject to paragraphs (b) and (c) of this section when reasonable in relation to the services rendered and when not contingent upon recovery of the costs from the Federal Government. In addition, legal and related services are limited under § 200.435. (b) In determining the allowability of costs in a particular case, no single factor or any combination of factors is necessarily determinative. However, the following factors are relevant: (1) The nature and scope of the service rendered in relation to the service required. (2) The necessity of contracting for the service, considering the recipient's or subrecipient's capability in the particular area. (3) The past pattern of such costs, particularly in the years prior to receiving a Federal award(s). (4) The impact of Federal awards on the recipient's or subrecipient's business (meaning, what new problems have arisen). (5) Whether the proportion of Federal work to the recipient's or subrecipient's total business influences the recipient or subrecipient in favor of incurring the cost, particularly where the services rendered are not of a continuing nature and have little relationship to work under Federal awards. BAY AREA AIR QUALITY MANAGEMENT DISTRICT Schedule of Findings and Questioned Costs (Continued) For the Year Ended June 30, 2024 Criteria (continued) (6) Whether the service can be performed more economically by direct employment rather than contracting. (7) The qualifications of the individual or entity providing the service and the customary fees charged, especially on non-federally funded activities. (8) Adequacy of the contractual agreement for the service (for example, description of the service, estimate of the time required, rate of compensation, and termination provisions). (c) To be allowable, retainer fees must be supported by evidence of bona fide services available or rendered in addition to the factors in paragraph (b) of this section. In addition, the District’s Professional Services Contract No. 2023.122, paragraph (8)(a) and (b), require: 8. Payment a. District shall pay Contractor for services in accordance with the terms set forth in the Cost Schedule, which is attached hereto as Attachment B and incorporated herein by this reference. b. Contractor shall submit invoice(s) to District for services performed. Each invoice shall specify the total cost of the services for which the invoice is submitted, shall reference tasks shown in the Scope of Work, the hours associated with same, or percentage completion thereof, and the amount of charge claimed, and, as appropriate, shall list any charges for equipment, material, supplies, travel, and subcontractors’ services. Furthermore, paragraph (12)(c) and (d) require: 12. Employees of Contractor a. Contractor shall be responsible for the cost of regular pay to its employees, as well as cost of vacation leave, vacation replacements, sick leave, severance pay, and pay for legal holidays. b. Contractor, its officers, employees, agents, or representatives shall not be considered employees or agents of District, nor shall Contractor, its officers, employees, agents, or representatives be entitled to or eligible to participate in any benefits, privileges, or plans, given or extended by District to its employees. c. Contractor shall assign those employees listed in the Cost Schedule to perform work under this Contract. Contractor shall not assign different employees to perform this work without the express written permission of District, which District will not unreasonably withhold. d. District reserves the right to review the credentials to perform the work of any of Contractor’s employees assigned herein and to disapprove Contractor’s assignments. Contractor warrants that it will not employ any subcontractor(s) without prior written approval from District, which District will not unreasonably withhold. BAY AREA AIR QUALITY MANAGEMENT DISTRICT Schedule of Findings and Questioned Costs (Continued) For the Year Ended June 30, 2024 Criteria (continued) Regarding direct costs and expenses, Attachment B (“Cost Schedule”) of the District’s professional services contract, further requires: District will also reimburse Contractor for reasonable and necessary expenses incurred in conjunction with the work performed under this Contract (e.g., hardware parts and supplies), including reasonable travel expenses in accordance with the District’s travel reimbursement policy attached hereto as Attachment C, and any administrative costs and expenses (e.g., rent and utility costs for office space). Reimbursable expenses such as project specific supplies and materials will be charged at cost. Contractor’s invoices shall include a line item reflecting all direct costs and expenses. Condition As part of our compliance review over program expenditures, we selected a sample of expenditures to determine whether costs were allowable under program regulations, accurately charged, and appropriately supported in accordance with 2 CFR § 200.459, paragraph (b)(8), and the District’s Professional Services Contract No. 2023.122, Attachment B (“Cost Schedule”). In our sample of twelve (12) expenditures, we identified eight (8) discrepancies in the eleven (11) contractor-submitted invoices when compared to the approved cost schedule per the Agreement with the contractor, as follows: 1. Professional service fees were charged for two (2) positions not listed in the cost schedule, and 2. Professional service fees were charged for six (6) positions in excess of the hourly rate established in the cost schedule. The identified discrepancies resulted in an overstatement of program expenditures, amounting to $9,316 of the $1,387,774 sampled, from a total of $1,424,920 in program expenditures. Additionally, the contractor received reimbursement for travel and supplies without providing sufficient documentation to the District to demonstrate compliance with 2 CFR § 200.459, paragraph (b)(8), the District’s Professional Services Contract No. 2023.122, Attachment B (“Cost Schedule”), and Attachment C (“Contractor Travel Policy”). The reimbursements lacked adequate support to verify that the expenses were reasonable, necessary, and directly related to the contracted professional services. As a result of our inquiry, the District obtained documentation supporting all travel and supply reimbursements associated with the submitted invoices by the contractor during Fiscal Year 2024. Based on the submitted documentation, the District concluded that the support was sufficient to demonstrate compliance with the noted requirements. Our samples were statistically valid and representative of the overall expenditures. BAY AREA AIR QUALITY MANAGEMENT DISTRICT Schedule of Findings and Questioned Costs (Continued) For the Year Ended June 30, 2024 Cause and Effect The deviations from the approved cost schedule indicate that the contractor did not adhere to the District’s professional services contract. Charges for professional services did not align with the cost schedule outlined in the professional services contract, resulting in unallowable and excessive costs due to insufficient review of the contractor invoices prior to payment. Changes to the cost schedule should be pre-approved by the District; however, the required approvals were not obtained before payments were processed. Further, the District lacked adequate oversight to ensure that contractor reimbursements for travel and supplies were properly supported with documentation and aligned with federal and contractual requirements. Such documentation should be submitted by the contractor along with the invoice in order for the District to review and approve prior to payment. Without proper documentation, the District cannot verify that reimbursed travel and supplies are reasonable, necessary, and directly related to the contracted professional services. Questioned Costs The total costs related to the conditions mentioned above include a $3,486 overstatement for charges related to positions not listed in the cost schedule and a $5,830 overstatement due to hourly rates charged in excess of the cost schedule, totaling $9,316. Recommendation We recommend that the District establish and implement a formal approval process for expenditures to ensure all charges are thoroughly reviewed and verified against contract terms before payment. Additionally, the District should conduct a detailed analysis of all payments made against the approved cost schedule to identify and reconcile any variances, determining the total amount of excessive charges. The District should also coordinate with the contractor to recover any overcharges, either through a credit or refund, to ensure federal funds are properly accounted for and used in accordance with the professional services contract. To strengthen oversight and compliance, the District should enhance its internal controls by maintaining detailed records that support cost approvals, modifications, and contract adherence. This includes requiring contractors to submit detailed supporting documentation such as itemized receipts, travel justifications, and proof of business necessity before reimbursements are processed. Furthermore, the District should provide adequate and ongoing training to staff and contractors on proper documentation standards and allowable costs under 2 CFR § 200.459 and the District’s contract terms, to prevent future instances of noncompliance. BAY AREA AIR QUALITY MANAGEMENT DISTRICT Schedule of Findings and Questioned Costs (Continued) For the Year Ended June 30, 2024 View of Responsible Officials and Corrective Action Plan Air District Management concurs with the recommendation under Finding Reference Number F-2024-001. Upon review of the supporting travel expense documentation, management has found no discrepancies. Moving forward, the Air District will continue to ensure that all supporting travel documentation agrees with the corresponding invoices to maintain compliance and accuracy. Regarding the overstatement of program expenditures, the Air District will initiate the recovery of the identified overcharges by deducting the amount from future reimbursement requests submitted to the Department of Homeland Security (DHS). Specifically, the Air District plans on recovering the $9,316 in overcharges from the contractor for fiscal year ending June 30, 2024. Additionally, the Air District is in the process of reviewing Fiscal Year 2025 invoices to identify any potential overcharges and will request reimbursement from the contractor, as necessary. To strengthen oversight and compliance, the Air District has begun implementing process changes as of February 2025. These changes ensure that consultant invoices align with the terms of the Air District’s contract prior to approval and payment processing. Name: Daniel Meer Title: Manager, Government Outreach & Special Projects Email: dmeer@baaqmd.gov
Program: AL 21.023 ? COVID-19 Emergency Rental Assistance ? Allowability & Earmarking Grant Number & Year: N/A Federal Grantor Agency: U.S. Department of the Treasury Criteria: Per 2 CFR ? 1000.10 (January 1, 2022), the U.S. Department of the Treasury adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at 2 CFR part 200. 2 CFR ? 200.403 (January 1, 2022) states, in relevant part, the following: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. 2 CFR ? 200.404 (January 1, 2022) states the following: A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost. The question of reasonableness is particularly important when the non-Federal entity is predominantly federally-funded. In determining reasonableness of a given cost, consideration must be given to: (a) Whether the cost is of a type generally recognized as ordinary and necessary for the operation of the non-Federal entity or the proper and efficient performance of the Federal award. (b) The restraints or requirements imposed by such factors as: sound business practices; arm?s-length bargaining; Federal, state, local, tribal, and other laws and regulations; and terms and conditions of the Federal award. (c) Market prices for comparable goods or services for the geographic area. (d) Whether the individuals concerned acted with prudence in the circumstances considering their responsibilities to the non-Federal entity, its employees, where applicable its students or membership, the public at large, and the Federal Government. (e) Whether the non-Federal entity significantly deviates from its established practices and policies regarding the incurrence of costs, which may unjustifiably increase the Federal award?s cost. 2 CFR ? 200.459 (January 1, 2022) states, in relevant part, the following: (a) Costs of professional and consultant services rendered by persons who are members of a particular profession or possess a special skill, and who are not officers or employees of the non-Federal entity, are allowable, subject to paragraphs (b) and (c) of this section when reasonable in relation to the services rendered and when not contingent upon recovery of the costs from the Federal Government. . . . (b) In determining the allowability of costs in a particular case, no single factor or any special combination of factors is necessarily determinative. However, the following factors are relevant: (1) The nature and scope of the service rendered in relation to the service required. * * * * (6) Whether the service can be performed more economically by direct employment rather than contracting. (7) The qualifications of the individual or concern rendering the service and the customary fees charged, especially on non-federally funded activities. (8) Adequacy of the contractual agreement for the service (e.g., description of the service, estimate of time required, rate of compensation, and termination provisions). Division N ? Additional Coronavirus Response and Relief, Title V ? Banking, Section 501(c)(2)(A) of the Consolidated Appropriations Act, 2021, states, in relevant part: Not less than 90 percent of the funds received by an eligible grantee from a payment made under this section shall be used to provide financial assistance to eligible households . . . . Division N ? Additional Coronavirus Response and Relief, Title V ? Banking, Section 501(c)(3) of the Consolidated Appropriations Act, 2021, states, in relevant part: Not more than 10 percent of funds received by an eligible grantee from a payment made under this section may be used to provide eligible households with case management and other services related to the novel coronavirus disease (COVID-19) outbreak, as defined by the Secretary, intended to help keep households stably housed. Division N ? Additional Coronavirus Response and Relief, Title V ? Banking, Section 501(c)(5)(A) of the Consolidated Appropriations Act, 2021, states, in relevant part: Not more than 10 percent of the amount paid to an eligible grantee under this section may be used for administrative costs attributable to providing financial assistance and housing stability services under paragraphs (2) and (3), respectively, including for data collection and reporting requirements related to such funds. Per the amended Emergency Rental Assistance terms, dated March 26, 2021, ?The total of all administrative costs, whether direct or indirect costs, may not exceed 10 percent of the total amount of the total award.? The Reallocation Guidance from the U.S. Department of the Treasury (Treasury), dated March 30, 2022, states the following: A Grantee may spend up to 10% of its initial ERA1 allocation for administrative expenses only if the Grantee obligates at least 30% of its initial allocation for the provision of financial assistance and housing stability services on behalf of eligible households by September 30, 2022. If a Grantee has obligated less than 30% of its initial allocation providing financial assistance and housing stability services as of September 30, 2022, Treasury will presume that the Grantee?s administrative expenses were not attributable to such services ? and therefore were not permissible uses of ERA1 funds ? to the extent that the administrative expenses exceed 10% of the Grantee?s allocation after deducting amounts recaptured or reallocated as excess funds, unless the Grantee can demonstrate that those costs are related to the delivery of the program. Condition: The contractual agreement to receive and evaluate applications for Emergency Rental Assistance (ERA) did not have adequate limitations or provisions to ensure costs were reasonable. A similar finding was noted in the prior audit. Repeat Finding: 2021-063 Questioned Costs: $3,580,007 known Statistical Sample: No Context: The State of Nebraska was initially awarded $158,572,581 for ERA to assist eligible households that have difficulty making timely payments of rent and utilities due to the COVID-19 pandemic. At least 90% of funds are to be earmarked for financial aid to eligible households. Not more than 10% of funds may be used for administrative costs. The Agency entered into a contract with Deloitte & Touche LLP (Deloitte) to provide program administration and case management. Eligibility determinations were made by Deloitte and then sent to the State for review and to process the aid payments to eligible recipients. Deloitte was paid $8,672,561 during the fiscal year ended June 30, 2022. We tested one payment for $531,314 and noted the following: ? Adequate support was not on file to allow for a determination as to whether the contracted amount was reasonable. There were no maximums or limitations other than the $14,627,160 cap specified in the contract. The contract was paid on an hourly rate and did not have any stipulations regarding the number of hours paid per application or performance measures to be achieved. ? Per guidance from Treasury, if the State obligates less than 30% of its initial allocation providing financial aid by September 30, 2022, Treasury will presume that the State?s administrative expenses were not attributable to the program, at least to the extent that the administrative expenses exceed 10% of the Grantee?s allocation after deducting amounts recaptured or reallocated as excess funds. The State voluntarily reallocated $84,700,000 to local governments and was required to return an additional $11,716,548 for reallocation. Therefore, State administrative expenses would be limited to $6,215,603 (10% of awarded amount less reallocations). Administrative expenses in fiscal year 2021 and 2022 totaled $9,795,610. As a result, we question costs of $3,580,007 for administrative costs exceeding 10%. As of January 17, 2023, the Agency has spent $26,399,517 on financial aid, and $13,080,572 for administrative expenses, of which $12,563,227 was paid to Deloitte. This is 33.13% of the total amount paid as of January 17, 2023. Without spending 30% of its award on financial aid, the Agency will not meet the earmarking requirements per the guidance released from Treasury. Based on the amount of financial aid spent, the administrative costs appear unreasonable. Cause: The contract was not competitively bid, and contract provisions were not specific enough to ensure that amounts paid were reasonable. The Agency lacked adequate procedures to ensure adherence to earmarking requirements. Effect: Without such adequate procedures, there is an increased risk for misuse of Federal funds. The Agency did not meet earmarking requirements. Recommendation: We recommend the Agency improve its procedures for ensuring the reasonableness of contractual service payments. Management Response: The Military Department does not agree with this finding. Vendor Contract: The State performed procurement procedures soliciting Requests for Information from vendors in 2020 to support COVID-19 related tasks. A contractual agreement was completed with the vendor once the State determined the program costs, estimated level-of-effort, and key assumptions were reasonable based on the scope of services the State requested. In addition, the state complied with the procurement standards set forth in 2 CFR 200.317-200.327, including expected contract provisions, key program assumptions, and not-to-exceed thresholds. The contractual agreement was completed to enable the State to proactively monitor vendor performance and analyze detailed information on associated cost. Vendor performance was monitored through twice-weekly status meetings, bi-weekly executive status briefings with executives across multiple agencies, bi-weekly Executive Steering Committee meetings, and review of detailed invoices. The State as the Grantee is able to demonstrate that the administrative costs are related to the delivery of the program in a timely fashion and is aligned with US Treasury Guidance. APA Response: As of January 17, 2023, the Agency has spent $1 in administration costs for every $2 spent for aid. This does not appear reasonable and is not in accordance with earmarking requirements. Thus, in addition to the questioned administrative costs identified for 2022, the agency appears to be on track for incurring millions of dollars more in such questioned costs for 2023.
Program: AL 21.023 ? COVID-19 Emergency Rental Assistance ? Allowability & Earmarking Grant Number & Year: N/A Federal Grantor Agency: U.S. Department of the Treasury Criteria: Per 2 CFR ? 1000.10 (January 1, 2022), the U.S. Department of the Treasury adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at 2 CFR part 200. 2 CFR ? 200.403 (January 1, 2022) states, in relevant part, the following: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. 2 CFR ? 200.404 (January 1, 2022) states the following: A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost. The question of reasonableness is particularly important when the non-Federal entity is predominantly federally-funded. In determining reasonableness of a given cost, consideration must be given to: (a) Whether the cost is of a type generally recognized as ordinary and necessary for the operation of the non-Federal entity or the proper and efficient performance of the Federal award. (b) The restraints or requirements imposed by such factors as: sound business practices; arm?s-length bargaining; Federal, state, local, tribal, and other laws and regulations; and terms and conditions of the Federal award. (c) Market prices for comparable goods or services for the geographic area. (d) Whether the individuals concerned acted with prudence in the circumstances considering their responsibilities to the non-Federal entity, its employees, where applicable its students or membership, the public at large, and the Federal Government. (e) Whether the non-Federal entity significantly deviates from its established practices and policies regarding the incurrence of costs, which may unjustifiably increase the Federal award?s cost. 2 CFR ? 200.459 (January 1, 2022) states, in relevant part, the following: (a) Costs of professional and consultant services rendered by persons who are members of a particular profession or possess a special skill, and who are not officers or employees of the non-Federal entity, are allowable, subject to paragraphs (b) and (c) of this section when reasonable in relation to the services rendered and when not contingent upon recovery of the costs from the Federal Government. . . . (b) In determining the allowability of costs in a particular case, no single factor or any special combination of factors is necessarily determinative. However, the following factors are relevant: (1) The nature and scope of the service rendered in relation to the service required. * * * * (6) Whether the service can be performed more economically by direct employment rather than contracting. (7) The qualifications of the individual or concern rendering the service and the customary fees charged, especially on non-federally funded activities. (8) Adequacy of the contractual agreement for the service (e.g., description of the service, estimate of time required, rate of compensation, and termination provisions). Division N ? Additional Coronavirus Response and Relief, Title V ? Banking, Section 501(c)(2)(A) of the Consolidated Appropriations Act, 2021, states, in relevant part: Not less than 90 percent of the funds received by an eligible grantee from a payment made under this section shall be used to provide financial assistance to eligible households . . . . Division N ? Additional Coronavirus Response and Relief, Title V ? Banking, Section 501(c)(3) of the Consolidated Appropriations Act, 2021, states, in relevant part: Not more than 10 percent of funds received by an eligible grantee from a payment made under this section may be used to provide eligible households with case management and other services related to the novel coronavirus disease (COVID-19) outbreak, as defined by the Secretary, intended to help keep households stably housed. Division N ? Additional Coronavirus Response and Relief, Title V ? Banking, Section 501(c)(5)(A) of the Consolidated Appropriations Act, 2021, states, in relevant part: Not more than 10 percent of the amount paid to an eligible grantee under this section may be used for administrative costs attributable to providing financial assistance and housing stability services under paragraphs (2) and (3), respectively, including for data collection and reporting requirements related to such funds. Per the amended Emergency Rental Assistance terms, dated March 26, 2021, ?The total of all administrative costs, whether direct or indirect costs, may not exceed 10 percent of the total amount of the total award.? The Reallocation Guidance from the U.S. Department of the Treasury (Treasury), dated March 30, 2022, states the following: A Grantee may spend up to 10% of its initial ERA1 allocation for administrative expenses only if the Grantee obligates at least 30% of its initial allocation for the provision of financial assistance and housing stability services on behalf of eligible households by September 30, 2022. If a Grantee has obligated less than 30% of its initial allocation providing financial assistance and housing stability services as of September 30, 2022, Treasury will presume that the Grantee?s administrative expenses were not attributable to such services ? and therefore were not permissible uses of ERA1 funds ? to the extent that the administrative expenses exceed 10% of the Grantee?s allocation after deducting amounts recaptured or reallocated as excess funds, unless the Grantee can demonstrate that those costs are related to the delivery of the program. Condition: The contractual agreement to receive and evaluate applications for Emergency Rental Assistance (ERA) did not have adequate limitations or provisions to ensure costs were reasonable. A similar finding was noted in the prior audit. Repeat Finding: 2021-063 Questioned Costs: $3,580,007 known Statistical Sample: No Context: The State of Nebraska was initially awarded $158,572,581 for ERA to assist eligible households that have difficulty making timely payments of rent and utilities due to the COVID-19 pandemic. At least 90% of funds are to be earmarked for financial aid to eligible households. Not more than 10% of funds may be used for administrative costs. The Agency entered into a contract with Deloitte & Touche LLP (Deloitte) to provide program administration and case management. Eligibility determinations were made by Deloitte and then sent to the State for review and to process the aid payments to eligible recipients. Deloitte was paid $8,672,561 during the fiscal year ended June 30, 2022. We tested one payment for $531,314 and noted the following: ? Adequate support was not on file to allow for a determination as to whether the contracted amount was reasonable. There were no maximums or limitations other than the $14,627,160 cap specified in the contract. The contract was paid on an hourly rate and did not have any stipulations regarding the number of hours paid per application or performance measures to be achieved. ? Per guidance from Treasury, if the State obligates less than 30% of its initial allocation providing financial aid by September 30, 2022, Treasury will presume that the State?s administrative expenses were not attributable to the program, at least to the extent that the administrative expenses exceed 10% of the Grantee?s allocation after deducting amounts recaptured or reallocated as excess funds. The State voluntarily reallocated $84,700,000 to local governments and was required to return an additional $11,716,548 for reallocation. Therefore, State administrative expenses would be limited to $6,215,603 (10% of awarded amount less reallocations). Administrative expenses in fiscal year 2021 and 2022 totaled $9,795,610. As a result, we question costs of $3,580,007 for administrative costs exceeding 10%. As of January 17, 2023, the Agency has spent $26,399,517 on financial aid, and $13,080,572 for administrative expenses, of which $12,563,227 was paid to Deloitte. This is 33.13% of the total amount paid as of January 17, 2023. Without spending 30% of its award on financial aid, the Agency will not meet the earmarking requirements per the guidance released from Treasury. Based on the amount of financial aid spent, the administrative costs appear unreasonable. Cause: The contract was not competitively bid, and contract provisions were not specific enough to ensure that amounts paid were reasonable. The Agency lacked adequate procedures to ensure adherence to earmarking requirements. Effect: Without such adequate procedures, there is an increased risk for misuse of Federal funds. The Agency did not meet earmarking requirements. Recommendation: We recommend the Agency improve its procedures for ensuring the reasonableness of contractual service payments. Management Response: The Military Department does not agree with this finding. Vendor Contract: The State performed procurement procedures soliciting Requests for Information from vendors in 2020 to support COVID-19 related tasks. A contractual agreement was completed with the vendor once the State determined the program costs, estimated level-of-effort, and key assumptions were reasonable based on the scope of services the State requested. In addition, the state complied with the procurement standards set forth in 2 CFR 200.317-200.327, including expected contract provisions, key program assumptions, and not-to-exceed thresholds. The contractual agreement was completed to enable the State to proactively monitor vendor performance and analyze detailed information on associated cost. Vendor performance was monitored through twice-weekly status meetings, bi-weekly executive status briefings with executives across multiple agencies, bi-weekly Executive Steering Committee meetings, and review of detailed invoices. The State as the Grantee is able to demonstrate that the administrative costs are related to the delivery of the program in a timely fashion and is aligned with US Treasury Guidance. APA Response: As of January 17, 2023, the Agency has spent $1 in administration costs for every $2 spent for aid. This does not appear reasonable and is not in accordance with earmarking requirements. Thus, in addition to the questioned administrative costs identified for 2022, the agency appears to be on track for incurring millions of dollars more in such questioned costs for 2023.