2023-027 The Department of Commerce did not have adequate internal controls over and did not comply with requirements for monitoring subrecipients to ensure payments were allowable, properly supported, and met period of performance requirements for the Coronavirus State and Local Fiscal Recovery Funds. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: SLFRP0002 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Period of Performance Subrecipient Monitoring Known Questioned Cost Amount: $95,560 Prior Year Audit Finding: Yes, Finding 2022-019 Background The Coronavirus State and Local Fiscal Recovery Funds (SLFRF), as part of the America Rescue Plan Act of 2021, delivered $350 billion to state, local and tribal governments to support the response to and recovery from the COVID-19 public health emergency. Washington received $4.4 billion of SLFRF money from the U.S. Department of the Treasury, which the state’s Office of Financial Management allocated to state agencies for various programs. In fiscal year 2023, state agencies spent about $1.9 billion in SLFRF funds, more than $718 million of which was spent by the Department of Commerce. The Department used SLFRF funds to administer and provide economic assistance to households at risk of eviction and homelessness primarily through the Eviction Rental Assistance Program (ERAP 2.0) and Treasury Rent Assistance Program (TRAP 2.0), in addition to transportation, tourism and other pandemic-recovery projects. During fiscal year 2023, the Department expended about $253.5 million on reimbursements and advance payments to local governments and nonprofit organizations as subrecipients. These subrecipients were responsible for making direct payments of rent and utilities for eligible low-income households with overdue rent payments dating as far back as March 2020. Pass-through entities are required to monitor the activities of subrecipients to ensure they are properly using federal funds for allowable activities and expenditures. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the prior audit, we reported the Department did not have adequate internal controls over and did not comply with federal requirements for monitoring subrecipients to ensure payments were allowable, properly supported and within the period of performance. The prior finding number was 2022-019. Description of Condition The Department did not have adequate internal controls over and did not comply with requirements to monitor subrecipients to ensure payments were allowable, properly supported and met period of performance requirements for the SLFRF program. During the audit period, the Department only required summary level supporting documentation when approving subrecipient payments. Since detailed source documentation was not required at the time of reimbursement, the Department implemented a fiscal review process for ERAP and TRAP 2.0 subrecipients. We used a statistical sampling method to randomly select and review 56 out of 554 payments. Of the payments examined, we identified nine (16 percent) payments that were not allowable under terms and conditions of the subaward. Specifically: 1. Seven payments (13 percent) were for advances to the subrecipient, which are specifically prohibited under the terms and conditions of the Department’s subaward 2. Four payments (7 percent), including one of the payments mentioned above, did not have adequate documentation to ensure the payment was for an allowable activity under the subaward, met cost principles and occurred within the award’s period of performance. The Department’s invoice review procedure required the Department to verify that each subrecipient submitted, along with its invoice, a voucher detail worksheet that outlines expenses by budget category, and a general ledger report detailing the expenses incurred by the subrecipient during the invoice period. For four of the nine payments referenced above, we found the Department approved them for payment without receiving a general ledger report from the subrecipient detailing all incurred expenses. In one of these instances, we also found the Department advanced program funds to the subrecipient without reviewing supporting documentation from the subrecipient to demonstrate that all expenditures were incurred to support the amount advanced by the Department. We were not provided with any documentation demonstrating these funds were returned to the Department. We also used a non-statistical sampling method to randomly select and examine nine out of 35 subrecipients for which the Department completed monitoring during the audit period. We determined five of the nine fiscal reviews completed (56 percent) were insufficient to ensure payments to the subrecipients were allowable and adequately supported. We came to this conclusion because the support we were provided lacked enough details to ensure the activities were allowable and within the period of performance. In addition, the Department did not have evidence that it obtained supporting documentation for client files from one of the nine subrecipients we examined. We also examined program monitoring documentation completed for the same nine subrecipients. The Department only selected five households from each subrecipient for eligibility verification. There was a total of 53,699 households served for ERAP 2.0, and an additional 8,373 households served for TRAP 2.0. Therefore, the Department reviewed less than one-half of one percent of client files for each subrecipient. For these nine subrecipients, we verified that staff reviewed the number of client files that management required under the program. However, in our judgment, the total number of client files reviewed for each subrecipient was inadequate to reasonably ensure compliance with program requirements. The following table summarizes the percentage of client files the Department reviewed for each subrecipient during the audit period: We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. Cause of Condition Management did not ensure that proper internal controls were in place to oversee ERAP 2.0 and the use of SLFRF funds. The Department approved payments to subrecipients without reviewing adequate supporting documentation, and management relied on annual program and fiscal monitoring to ensure subrecipients had proper supporting documentation and only served eligible households. In addition, it issued advance payments to subrecipients despite the subawards explicitly stating this was not allowable. Management did not ensure program and fiscal monitoring conducted included a sufficient sample of subrecipient records, and required detailed source documentation, to provide reasonable assurance of material compliance with federal SLFRF requirements and the terms and conditions of the subawards. Effect of Condition and Questioned Costs We determined the Department did not request and review adequate supporting documentation before paying subrecipients, and it did not perform adequate fiscal monitoring to ensure that funds advanced to subrecipients were disbursed to eligible households and for allowable activities. As a result, we identified $95,560 in known federal questioned costs and $1,482,489 in likely federal questioned costs. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our “best estimate of total questioned costs,” as required by 2 CFR § 200.516(3). To ensure a representative sample, we stratified the population by dollar amount. Without establishing adequate internal controls and reviewing required supporting documentation from subrecipients, the Department cannot reasonably ensure it is using federal funds for allowable purposes and that spending occurs within the allowed period of performance. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Department: • Update its written procedures to require an adequate number of subrecipient client files to be reviewed during fiscal and program monitoring to provide reasonable assurance that each subrecipient is compliant with program requirements • Improve internal controls to ensure subrecipients provide adequate supporting documentation when requesting reimbursement • Request and review supporting documentation from all participating subrecipients on households served with SLFRF funds to determine if any amounts reimbursed to the subrecipients must be returned to the Department • Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Department’s Response The State and Local Fiscal Recovery Funds were provided to the state as an advanced payment by which the Department used them to address the immense rent assistance needs as a result of the COVID-19 pandemic. Commerce funded subrecipients up to 25% of their contract total in an effort to mitigate cash flow issues to allow the swift distribution of funding. The Department utilized this method as obtaining documentation and processing reimbursements on a weekly basis still could not provide sufficient funding for all of the rent assistance needs. The Department now acknowledges the advanced payments were not authorized per federal guidance, however, all housing expenses were verified through thorough review of subrecipient expenditure supporting documentation. The Department completed fiscal and program monitoring of each subrecipient over the contract period, however, neither the Code of Federal Regulations nor the Washington State Auditor’s Office has been able to provide the Department with the number of client files that would need to be reviewed to be considered adequate. The Department created a procedure to review a minimum of five client files per subrecipient and followed this procedure. The Department understands that given the urgent need for assistance and the enormous amount of rent assistance funding distributed, thousands of client files would had to have been reviewed in a short period of time and we could not build and sustain the necessary staff capacity to match the fast-paced program delivery. The Department did increase internal controls related to program monitoring to more accurately comply with federal requirements as a result of the prior audit results. In July 2022, the Department began to review supporting backup documentation for all expenditures. The Department did not yet understand that transaction level detail was required and its review included a higher level of detail. Since the process was newly implemented in fiscal year 2023, it took some time to work out compliance challenges and provide technical assistance to subrecipients in order to comply with the federal requirements. The Department’s expenditure backup documentation review process began including transaction level detail in fiscal year 2023 as a result of the prior audit results. Any repayment of questioned costs will be determined through the standard resolution process with the United States Department of Treasury. Auditor’s Remarks Federal regulations require pass-through entities to monitor the activities of subrecipients as necessary to ensure that subawards are used for authorized purposes and in compliance with federal requirements and the terms and conditions of the subaward. In our judgement, the Department’s design of monitoring subrecipients for fiscal and program compliance did not provide this level of assurance. Specifically, the Department’s decision to review only five client files per subrecipient did not provide reasonable assurance of each subrecipient’s compliance when the average subrecipient served 1,413 clients, as illustrated in the Description of Condition. Based on this evidence, the Department only reviewed a total of 230 client files during the audit period, which makes up less than 0.4 percent of the total number of clients served. In addition, the Department’s decision to not review transaction-level supporting documentation at the time of issuing payment to subrecipients means that the monitoring of subrecipients was also being relied upon to ensure all payments made to subrecipients were only for allowable activities under the subaward. In our judgment, the procedures in place requiring only five client files be reviewed for each subrecipient were not sufficient to provide reasonable assurance of material compliance with the requirements for Activities Allowed or Unallowed and Allowable Costs/Cost Principles. We reaffirm our audit finding and will follow up on the status of the Department’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200, Uniform Guidance, section 332, Requirements for pass-through entities, establishes the requirements for all pass-through entities. Title 2 CFR Part 200, Uniform Guidance, section 403, Factors affecting the allowability of costs, describes the general criteria in order for a cost to be allowable under federal awards, including being adequately documented. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.
2023-027 The Department of Commerce did not have adequate internal controls over and did not comply with requirements for monitoring subrecipients to ensure payments were allowable, properly supported, and met period of performance requirements for the Coronavirus State and Local Fiscal Recovery Funds. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: SLFRP0002 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Period of Performance Subrecipient Monitoring Known Questioned Cost Amount: $95,560 Prior Year Audit Finding: Yes, Finding 2022-019 Background The Coronavirus State and Local Fiscal Recovery Funds (SLFRF), as part of the America Rescue Plan Act of 2021, delivered $350 billion to state, local and tribal governments to support the response to and recovery from the COVID-19 public health emergency. Washington received $4.4 billion of SLFRF money from the U.S. Department of the Treasury, which the state’s Office of Financial Management allocated to state agencies for various programs. In fiscal year 2023, state agencies spent about $1.9 billion in SLFRF funds, more than $718 million of which was spent by the Department of Commerce. The Department used SLFRF funds to administer and provide economic assistance to households at risk of eviction and homelessness primarily through the Eviction Rental Assistance Program (ERAP 2.0) and Treasury Rent Assistance Program (TRAP 2.0), in addition to transportation, tourism and other pandemic-recovery projects. During fiscal year 2023, the Department expended about $253.5 million on reimbursements and advance payments to local governments and nonprofit organizations as subrecipients. These subrecipients were responsible for making direct payments of rent and utilities for eligible low-income households with overdue rent payments dating as far back as March 2020. Pass-through entities are required to monitor the activities of subrecipients to ensure they are properly using federal funds for allowable activities and expenditures. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the prior audit, we reported the Department did not have adequate internal controls over and did not comply with federal requirements for monitoring subrecipients to ensure payments were allowable, properly supported and within the period of performance. The prior finding number was 2022-019. Description of Condition The Department did not have adequate internal controls over and did not comply with requirements to monitor subrecipients to ensure payments were allowable, properly supported and met period of performance requirements for the SLFRF program. During the audit period, the Department only required summary level supporting documentation when approving subrecipient payments. Since detailed source documentation was not required at the time of reimbursement, the Department implemented a fiscal review process for ERAP and TRAP 2.0 subrecipients. We used a statistical sampling method to randomly select and review 56 out of 554 payments. Of the payments examined, we identified nine (16 percent) payments that were not allowable under terms and conditions of the subaward. Specifically: 1. Seven payments (13 percent) were for advances to the subrecipient, which are specifically prohibited under the terms and conditions of the Department’s subaward 2. Four payments (7 percent), including one of the payments mentioned above, did not have adequate documentation to ensure the payment was for an allowable activity under the subaward, met cost principles and occurred within the award’s period of performance. The Department’s invoice review procedure required the Department to verify that each subrecipient submitted, along with its invoice, a voucher detail worksheet that outlines expenses by budget category, and a general ledger report detailing the expenses incurred by the subrecipient during the invoice period. For four of the nine payments referenced above, we found the Department approved them for payment without receiving a general ledger report from the subrecipient detailing all incurred expenses. In one of these instances, we also found the Department advanced program funds to the subrecipient without reviewing supporting documentation from the subrecipient to demonstrate that all expenditures were incurred to support the amount advanced by the Department. We were not provided with any documentation demonstrating these funds were returned to the Department. We also used a non-statistical sampling method to randomly select and examine nine out of 35 subrecipients for which the Department completed monitoring during the audit period. We determined five of the nine fiscal reviews completed (56 percent) were insufficient to ensure payments to the subrecipients were allowable and adequately supported. We came to this conclusion because the support we were provided lacked enough details to ensure the activities were allowable and within the period of performance. In addition, the Department did not have evidence that it obtained supporting documentation for client files from one of the nine subrecipients we examined. We also examined program monitoring documentation completed for the same nine subrecipients. The Department only selected five households from each subrecipient for eligibility verification. There was a total of 53,699 households served for ERAP 2.0, and an additional 8,373 households served for TRAP 2.0. Therefore, the Department reviewed less than one-half of one percent of client files for each subrecipient. For these nine subrecipients, we verified that staff reviewed the number of client files that management required under the program. However, in our judgment, the total number of client files reviewed for each subrecipient was inadequate to reasonably ensure compliance with program requirements. The following table summarizes the percentage of client files the Department reviewed for each subrecipient during the audit period: We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. Cause of Condition Management did not ensure that proper internal controls were in place to oversee ERAP 2.0 and the use of SLFRF funds. The Department approved payments to subrecipients without reviewing adequate supporting documentation, and management relied on annual program and fiscal monitoring to ensure subrecipients had proper supporting documentation and only served eligible households. In addition, it issued advance payments to subrecipients despite the subawards explicitly stating this was not allowable. Management did not ensure program and fiscal monitoring conducted included a sufficient sample of subrecipient records, and required detailed source documentation, to provide reasonable assurance of material compliance with federal SLFRF requirements and the terms and conditions of the subawards. Effect of Condition and Questioned Costs We determined the Department did not request and review adequate supporting documentation before paying subrecipients, and it did not perform adequate fiscal monitoring to ensure that funds advanced to subrecipients were disbursed to eligible households and for allowable activities. As a result, we identified $95,560 in known federal questioned costs and $1,482,489 in likely federal questioned costs. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our “best estimate of total questioned costs,” as required by 2 CFR § 200.516(3). To ensure a representative sample, we stratified the population by dollar amount. Without establishing adequate internal controls and reviewing required supporting documentation from subrecipients, the Department cannot reasonably ensure it is using federal funds for allowable purposes and that spending occurs within the allowed period of performance. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Department: • Update its written procedures to require an adequate number of subrecipient client files to be reviewed during fiscal and program monitoring to provide reasonable assurance that each subrecipient is compliant with program requirements • Improve internal controls to ensure subrecipients provide adequate supporting documentation when requesting reimbursement • Request and review supporting documentation from all participating subrecipients on households served with SLFRF funds to determine if any amounts reimbursed to the subrecipients must be returned to the Department • Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Department’s Response The State and Local Fiscal Recovery Funds were provided to the state as an advanced payment by which the Department used them to address the immense rent assistance needs as a result of the COVID-19 pandemic. Commerce funded subrecipients up to 25% of their contract total in an effort to mitigate cash flow issues to allow the swift distribution of funding. The Department utilized this method as obtaining documentation and processing reimbursements on a weekly basis still could not provide sufficient funding for all of the rent assistance needs. The Department now acknowledges the advanced payments were not authorized per federal guidance, however, all housing expenses were verified through thorough review of subrecipient expenditure supporting documentation. The Department completed fiscal and program monitoring of each subrecipient over the contract period, however, neither the Code of Federal Regulations nor the Washington State Auditor’s Office has been able to provide the Department with the number of client files that would need to be reviewed to be considered adequate. The Department created a procedure to review a minimum of five client files per subrecipient and followed this procedure. The Department understands that given the urgent need for assistance and the enormous amount of rent assistance funding distributed, thousands of client files would had to have been reviewed in a short period of time and we could not build and sustain the necessary staff capacity to match the fast-paced program delivery. The Department did increase internal controls related to program monitoring to more accurately comply with federal requirements as a result of the prior audit results. In July 2022, the Department began to review supporting backup documentation for all expenditures. The Department did not yet understand that transaction level detail was required and its review included a higher level of detail. Since the process was newly implemented in fiscal year 2023, it took some time to work out compliance challenges and provide technical assistance to subrecipients in order to comply with the federal requirements. The Department’s expenditure backup documentation review process began including transaction level detail in fiscal year 2023 as a result of the prior audit results. Any repayment of questioned costs will be determined through the standard resolution process with the United States Department of Treasury. Auditor’s Remarks Federal regulations require pass-through entities to monitor the activities of subrecipients as necessary to ensure that subawards are used for authorized purposes and in compliance with federal requirements and the terms and conditions of the subaward. In our judgement, the Department’s design of monitoring subrecipients for fiscal and program compliance did not provide this level of assurance. Specifically, the Department’s decision to review only five client files per subrecipient did not provide reasonable assurance of each subrecipient’s compliance when the average subrecipient served 1,413 clients, as illustrated in the Description of Condition. Based on this evidence, the Department only reviewed a total of 230 client files during the audit period, which makes up less than 0.4 percent of the total number of clients served. In addition, the Department’s decision to not review transaction-level supporting documentation at the time of issuing payment to subrecipients means that the monitoring of subrecipients was also being relied upon to ensure all payments made to subrecipients were only for allowable activities under the subaward. In our judgment, the procedures in place requiring only five client files be reviewed for each subrecipient were not sufficient to provide reasonable assurance of material compliance with the requirements for Activities Allowed or Unallowed and Allowable Costs/Cost Principles. We reaffirm our audit finding and will follow up on the status of the Department’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200, Uniform Guidance, section 332, Requirements for pass-through entities, establishes the requirements for all pass-through entities. Title 2 CFR Part 200, Uniform Guidance, section 403, Factors affecting the allowability of costs, describes the general criteria in order for a cost to be allowable under federal awards, including being adequately documented. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.
2023-027 The Department of Commerce did not have adequate internal controls over and did not comply with requirements for monitoring subrecipients to ensure payments were allowable, properly supported, and met period of performance requirements for the Coronavirus State and Local Fiscal Recovery Funds. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: SLFRP0002 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Period of Performance Subrecipient Monitoring Known Questioned Cost Amount: $95,560 Prior Year Audit Finding: Yes, Finding 2022-019 Background The Coronavirus State and Local Fiscal Recovery Funds (SLFRF), as part of the America Rescue Plan Act of 2021, delivered $350 billion to state, local and tribal governments to support the response to and recovery from the COVID-19 public health emergency. Washington received $4.4 billion of SLFRF money from the U.S. Department of the Treasury, which the state’s Office of Financial Management allocated to state agencies for various programs. In fiscal year 2023, state agencies spent about $1.9 billion in SLFRF funds, more than $718 million of which was spent by the Department of Commerce. The Department used SLFRF funds to administer and provide economic assistance to households at risk of eviction and homelessness primarily through the Eviction Rental Assistance Program (ERAP 2.0) and Treasury Rent Assistance Program (TRAP 2.0), in addition to transportation, tourism and other pandemic-recovery projects. During fiscal year 2023, the Department expended about $253.5 million on reimbursements and advance payments to local governments and nonprofit organizations as subrecipients. These subrecipients were responsible for making direct payments of rent and utilities for eligible low-income households with overdue rent payments dating as far back as March 2020. Pass-through entities are required to monitor the activities of subrecipients to ensure they are properly using federal funds for allowable activities and expenditures. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the prior audit, we reported the Department did not have adequate internal controls over and did not comply with federal requirements for monitoring subrecipients to ensure payments were allowable, properly supported and within the period of performance. The prior finding number was 2022-019. Description of Condition The Department did not have adequate internal controls over and did not comply with requirements to monitor subrecipients to ensure payments were allowable, properly supported and met period of performance requirements for the SLFRF program. During the audit period, the Department only required summary level supporting documentation when approving subrecipient payments. Since detailed source documentation was not required at the time of reimbursement, the Department implemented a fiscal review process for ERAP and TRAP 2.0 subrecipients. We used a statistical sampling method to randomly select and review 56 out of 554 payments. Of the payments examined, we identified nine (16 percent) payments that were not allowable under terms and conditions of the subaward. Specifically: 1. Seven payments (13 percent) were for advances to the subrecipient, which are specifically prohibited under the terms and conditions of the Department’s subaward 2. Four payments (7 percent), including one of the payments mentioned above, did not have adequate documentation to ensure the payment was for an allowable activity under the subaward, met cost principles and occurred within the award’s period of performance. The Department’s invoice review procedure required the Department to verify that each subrecipient submitted, along with its invoice, a voucher detail worksheet that outlines expenses by budget category, and a general ledger report detailing the expenses incurred by the subrecipient during the invoice period. For four of the nine payments referenced above, we found the Department approved them for payment without receiving a general ledger report from the subrecipient detailing all incurred expenses. In one of these instances, we also found the Department advanced program funds to the subrecipient without reviewing supporting documentation from the subrecipient to demonstrate that all expenditures were incurred to support the amount advanced by the Department. We were not provided with any documentation demonstrating these funds were returned to the Department. We also used a non-statistical sampling method to randomly select and examine nine out of 35 subrecipients for which the Department completed monitoring during the audit period. We determined five of the nine fiscal reviews completed (56 percent) were insufficient to ensure payments to the subrecipients were allowable and adequately supported. We came to this conclusion because the support we were provided lacked enough details to ensure the activities were allowable and within the period of performance. In addition, the Department did not have evidence that it obtained supporting documentation for client files from one of the nine subrecipients we examined. We also examined program monitoring documentation completed for the same nine subrecipients. The Department only selected five households from each subrecipient for eligibility verification. There was a total of 53,699 households served for ERAP 2.0, and an additional 8,373 households served for TRAP 2.0. Therefore, the Department reviewed less than one-half of one percent of client files for each subrecipient. For these nine subrecipients, we verified that staff reviewed the number of client files that management required under the program. However, in our judgment, the total number of client files reviewed for each subrecipient was inadequate to reasonably ensure compliance with program requirements. The following table summarizes the percentage of client files the Department reviewed for each subrecipient during the audit period: We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. Cause of Condition Management did not ensure that proper internal controls were in place to oversee ERAP 2.0 and the use of SLFRF funds. The Department approved payments to subrecipients without reviewing adequate supporting documentation, and management relied on annual program and fiscal monitoring to ensure subrecipients had proper supporting documentation and only served eligible households. In addition, it issued advance payments to subrecipients despite the subawards explicitly stating this was not allowable. Management did not ensure program and fiscal monitoring conducted included a sufficient sample of subrecipient records, and required detailed source documentation, to provide reasonable assurance of material compliance with federal SLFRF requirements and the terms and conditions of the subawards. Effect of Condition and Questioned Costs We determined the Department did not request and review adequate supporting documentation before paying subrecipients, and it did not perform adequate fiscal monitoring to ensure that funds advanced to subrecipients were disbursed to eligible households and for allowable activities. As a result, we identified $95,560 in known federal questioned costs and $1,482,489 in likely federal questioned costs. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our “best estimate of total questioned costs,” as required by 2 CFR § 200.516(3). To ensure a representative sample, we stratified the population by dollar amount. Without establishing adequate internal controls and reviewing required supporting documentation from subrecipients, the Department cannot reasonably ensure it is using federal funds for allowable purposes and that spending occurs within the allowed period of performance. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Department: • Update its written procedures to require an adequate number of subrecipient client files to be reviewed during fiscal and program monitoring to provide reasonable assurance that each subrecipient is compliant with program requirements • Improve internal controls to ensure subrecipients provide adequate supporting documentation when requesting reimbursement • Request and review supporting documentation from all participating subrecipients on households served with SLFRF funds to determine if any amounts reimbursed to the subrecipients must be returned to the Department • Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Department’s Response The State and Local Fiscal Recovery Funds were provided to the state as an advanced payment by which the Department used them to address the immense rent assistance needs as a result of the COVID-19 pandemic. Commerce funded subrecipients up to 25% of their contract total in an effort to mitigate cash flow issues to allow the swift distribution of funding. The Department utilized this method as obtaining documentation and processing reimbursements on a weekly basis still could not provide sufficient funding for all of the rent assistance needs. The Department now acknowledges the advanced payments were not authorized per federal guidance, however, all housing expenses were verified through thorough review of subrecipient expenditure supporting documentation. The Department completed fiscal and program monitoring of each subrecipient over the contract period, however, neither the Code of Federal Regulations nor the Washington State Auditor’s Office has been able to provide the Department with the number of client files that would need to be reviewed to be considered adequate. The Department created a procedure to review a minimum of five client files per subrecipient and followed this procedure. The Department understands that given the urgent need for assistance and the enormous amount of rent assistance funding distributed, thousands of client files would had to have been reviewed in a short period of time and we could not build and sustain the necessary staff capacity to match the fast-paced program delivery. The Department did increase internal controls related to program monitoring to more accurately comply with federal requirements as a result of the prior audit results. In July 2022, the Department began to review supporting backup documentation for all expenditures. The Department did not yet understand that transaction level detail was required and its review included a higher level of detail. Since the process was newly implemented in fiscal year 2023, it took some time to work out compliance challenges and provide technical assistance to subrecipients in order to comply with the federal requirements. The Department’s expenditure backup documentation review process began including transaction level detail in fiscal year 2023 as a result of the prior audit results. Any repayment of questioned costs will be determined through the standard resolution process with the United States Department of Treasury. Auditor’s Remarks Federal regulations require pass-through entities to monitor the activities of subrecipients as necessary to ensure that subawards are used for authorized purposes and in compliance with federal requirements and the terms and conditions of the subaward. In our judgement, the Department’s design of monitoring subrecipients for fiscal and program compliance did not provide this level of assurance. Specifically, the Department’s decision to review only five client files per subrecipient did not provide reasonable assurance of each subrecipient’s compliance when the average subrecipient served 1,413 clients, as illustrated in the Description of Condition. Based on this evidence, the Department only reviewed a total of 230 client files during the audit period, which makes up less than 0.4 percent of the total number of clients served. In addition, the Department’s decision to not review transaction-level supporting documentation at the time of issuing payment to subrecipients means that the monitoring of subrecipients was also being relied upon to ensure all payments made to subrecipients were only for allowable activities under the subaward. In our judgment, the procedures in place requiring only five client files be reviewed for each subrecipient were not sufficient to provide reasonable assurance of material compliance with the requirements for Activities Allowed or Unallowed and Allowable Costs/Cost Principles. We reaffirm our audit finding and will follow up on the status of the Department’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200, Uniform Guidance, section 332, Requirements for pass-through entities, establishes the requirements for all pass-through entities. Title 2 CFR Part 200, Uniform Guidance, section 403, Factors affecting the allowability of costs, describes the general criteria in order for a cost to be allowable under federal awards, including being adequately documented. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.
2023-027 The Department of Commerce did not have adequate internal controls over and did not comply with requirements for monitoring subrecipients to ensure payments were allowable, properly supported, and met period of performance requirements for the Coronavirus State and Local Fiscal Recovery Funds. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: SLFRP0002 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Period of Performance Subrecipient Monitoring Known Questioned Cost Amount: $95,560 Prior Year Audit Finding: Yes, Finding 2022-019 Background The Coronavirus State and Local Fiscal Recovery Funds (SLFRF), as part of the America Rescue Plan Act of 2021, delivered $350 billion to state, local and tribal governments to support the response to and recovery from the COVID-19 public health emergency. Washington received $4.4 billion of SLFRF money from the U.S. Department of the Treasury, which the state’s Office of Financial Management allocated to state agencies for various programs. In fiscal year 2023, state agencies spent about $1.9 billion in SLFRF funds, more than $718 million of which was spent by the Department of Commerce. The Department used SLFRF funds to administer and provide economic assistance to households at risk of eviction and homelessness primarily through the Eviction Rental Assistance Program (ERAP 2.0) and Treasury Rent Assistance Program (TRAP 2.0), in addition to transportation, tourism and other pandemic-recovery projects. During fiscal year 2023, the Department expended about $253.5 million on reimbursements and advance payments to local governments and nonprofit organizations as subrecipients. These subrecipients were responsible for making direct payments of rent and utilities for eligible low-income households with overdue rent payments dating as far back as March 2020. Pass-through entities are required to monitor the activities of subrecipients to ensure they are properly using federal funds for allowable activities and expenditures. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the prior audit, we reported the Department did not have adequate internal controls over and did not comply with federal requirements for monitoring subrecipients to ensure payments were allowable, properly supported and within the period of performance. The prior finding number was 2022-019. Description of Condition The Department did not have adequate internal controls over and did not comply with requirements to monitor subrecipients to ensure payments were allowable, properly supported and met period of performance requirements for the SLFRF program. During the audit period, the Department only required summary level supporting documentation when approving subrecipient payments. Since detailed source documentation was not required at the time of reimbursement, the Department implemented a fiscal review process for ERAP and TRAP 2.0 subrecipients. We used a statistical sampling method to randomly select and review 56 out of 554 payments. Of the payments examined, we identified nine (16 percent) payments that were not allowable under terms and conditions of the subaward. Specifically: 1. Seven payments (13 percent) were for advances to the subrecipient, which are specifically prohibited under the terms and conditions of the Department’s subaward 2. Four payments (7 percent), including one of the payments mentioned above, did not have adequate documentation to ensure the payment was for an allowable activity under the subaward, met cost principles and occurred within the award’s period of performance. The Department’s invoice review procedure required the Department to verify that each subrecipient submitted, along with its invoice, a voucher detail worksheet that outlines expenses by budget category, and a general ledger report detailing the expenses incurred by the subrecipient during the invoice period. For four of the nine payments referenced above, we found the Department approved them for payment without receiving a general ledger report from the subrecipient detailing all incurred expenses. In one of these instances, we also found the Department advanced program funds to the subrecipient without reviewing supporting documentation from the subrecipient to demonstrate that all expenditures were incurred to support the amount advanced by the Department. We were not provided with any documentation demonstrating these funds were returned to the Department. We also used a non-statistical sampling method to randomly select and examine nine out of 35 subrecipients for which the Department completed monitoring during the audit period. We determined five of the nine fiscal reviews completed (56 percent) were insufficient to ensure payments to the subrecipients were allowable and adequately supported. We came to this conclusion because the support we were provided lacked enough details to ensure the activities were allowable and within the period of performance. In addition, the Department did not have evidence that it obtained supporting documentation for client files from one of the nine subrecipients we examined. We also examined program monitoring documentation completed for the same nine subrecipients. The Department only selected five households from each subrecipient for eligibility verification. There was a total of 53,699 households served for ERAP 2.0, and an additional 8,373 households served for TRAP 2.0. Therefore, the Department reviewed less than one-half of one percent of client files for each subrecipient. For these nine subrecipients, we verified that staff reviewed the number of client files that management required under the program. However, in our judgment, the total number of client files reviewed for each subrecipient was inadequate to reasonably ensure compliance with program requirements. The following table summarizes the percentage of client files the Department reviewed for each subrecipient during the audit period: We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. Cause of Condition Management did not ensure that proper internal controls were in place to oversee ERAP 2.0 and the use of SLFRF funds. The Department approved payments to subrecipients without reviewing adequate supporting documentation, and management relied on annual program and fiscal monitoring to ensure subrecipients had proper supporting documentation and only served eligible households. In addition, it issued advance payments to subrecipients despite the subawards explicitly stating this was not allowable. Management did not ensure program and fiscal monitoring conducted included a sufficient sample of subrecipient records, and required detailed source documentation, to provide reasonable assurance of material compliance with federal SLFRF requirements and the terms and conditions of the subawards. Effect of Condition and Questioned Costs We determined the Department did not request and review adequate supporting documentation before paying subrecipients, and it did not perform adequate fiscal monitoring to ensure that funds advanced to subrecipients were disbursed to eligible households and for allowable activities. As a result, we identified $95,560 in known federal questioned costs and $1,482,489 in likely federal questioned costs. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our “best estimate of total questioned costs,” as required by 2 CFR § 200.516(3). To ensure a representative sample, we stratified the population by dollar amount. Without establishing adequate internal controls and reviewing required supporting documentation from subrecipients, the Department cannot reasonably ensure it is using federal funds for allowable purposes and that spending occurs within the allowed period of performance. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Department: • Update its written procedures to require an adequate number of subrecipient client files to be reviewed during fiscal and program monitoring to provide reasonable assurance that each subrecipient is compliant with program requirements • Improve internal controls to ensure subrecipients provide adequate supporting documentation when requesting reimbursement • Request and review supporting documentation from all participating subrecipients on households served with SLFRF funds to determine if any amounts reimbursed to the subrecipients must be returned to the Department • Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Department’s Response The State and Local Fiscal Recovery Funds were provided to the state as an advanced payment by which the Department used them to address the immense rent assistance needs as a result of the COVID-19 pandemic. Commerce funded subrecipients up to 25% of their contract total in an effort to mitigate cash flow issues to allow the swift distribution of funding. The Department utilized this method as obtaining documentation and processing reimbursements on a weekly basis still could not provide sufficient funding for all of the rent assistance needs. The Department now acknowledges the advanced payments were not authorized per federal guidance, however, all housing expenses were verified through thorough review of subrecipient expenditure supporting documentation. The Department completed fiscal and program monitoring of each subrecipient over the contract period, however, neither the Code of Federal Regulations nor the Washington State Auditor’s Office has been able to provide the Department with the number of client files that would need to be reviewed to be considered adequate. The Department created a procedure to review a minimum of five client files per subrecipient and followed this procedure. The Department understands that given the urgent need for assistance and the enormous amount of rent assistance funding distributed, thousands of client files would had to have been reviewed in a short period of time and we could not build and sustain the necessary staff capacity to match the fast-paced program delivery. The Department did increase internal controls related to program monitoring to more accurately comply with federal requirements as a result of the prior audit results. In July 2022, the Department began to review supporting backup documentation for all expenditures. The Department did not yet understand that transaction level detail was required and its review included a higher level of detail. Since the process was newly implemented in fiscal year 2023, it took some time to work out compliance challenges and provide technical assistance to subrecipients in order to comply with the federal requirements. The Department’s expenditure backup documentation review process began including transaction level detail in fiscal year 2023 as a result of the prior audit results. Any repayment of questioned costs will be determined through the standard resolution process with the United States Department of Treasury. Auditor’s Remarks Federal regulations require pass-through entities to monitor the activities of subrecipients as necessary to ensure that subawards are used for authorized purposes and in compliance with federal requirements and the terms and conditions of the subaward. In our judgement, the Department’s design of monitoring subrecipients for fiscal and program compliance did not provide this level of assurance. Specifically, the Department’s decision to review only five client files per subrecipient did not provide reasonable assurance of each subrecipient’s compliance when the average subrecipient served 1,413 clients, as illustrated in the Description of Condition. Based on this evidence, the Department only reviewed a total of 230 client files during the audit period, which makes up less than 0.4 percent of the total number of clients served. In addition, the Department’s decision to not review transaction-level supporting documentation at the time of issuing payment to subrecipients means that the monitoring of subrecipients was also being relied upon to ensure all payments made to subrecipients were only for allowable activities under the subaward. In our judgment, the procedures in place requiring only five client files be reviewed for each subrecipient were not sufficient to provide reasonable assurance of material compliance with the requirements for Activities Allowed or Unallowed and Allowable Costs/Cost Principles. We reaffirm our audit finding and will follow up on the status of the Department’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200, Uniform Guidance, section 332, Requirements for pass-through entities, establishes the requirements for all pass-through entities. Title 2 CFR Part 200, Uniform Guidance, section 403, Factors affecting the allowability of costs, describes the general criteria in order for a cost to be allowable under federal awards, including being adequately documented. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.
2023-027 The Department of Commerce did not have adequate internal controls over and did not comply with requirements for monitoring subrecipients to ensure payments were allowable, properly supported, and met period of performance requirements for the Coronavirus State and Local Fiscal Recovery Funds. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: SLFRP0002 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Period of Performance Subrecipient Monitoring Known Questioned Cost Amount: $95,560 Prior Year Audit Finding: Yes, Finding 2022-019 Background The Coronavirus State and Local Fiscal Recovery Funds (SLFRF), as part of the America Rescue Plan Act of 2021, delivered $350 billion to state, local and tribal governments to support the response to and recovery from the COVID-19 public health emergency. Washington received $4.4 billion of SLFRF money from the U.S. Department of the Treasury, which the state’s Office of Financial Management allocated to state agencies for various programs. In fiscal year 2023, state agencies spent about $1.9 billion in SLFRF funds, more than $718 million of which was spent by the Department of Commerce. The Department used SLFRF funds to administer and provide economic assistance to households at risk of eviction and homelessness primarily through the Eviction Rental Assistance Program (ERAP 2.0) and Treasury Rent Assistance Program (TRAP 2.0), in addition to transportation, tourism and other pandemic-recovery projects. During fiscal year 2023, the Department expended about $253.5 million on reimbursements and advance payments to local governments and nonprofit organizations as subrecipients. These subrecipients were responsible for making direct payments of rent and utilities for eligible low-income households with overdue rent payments dating as far back as March 2020. Pass-through entities are required to monitor the activities of subrecipients to ensure they are properly using federal funds for allowable activities and expenditures. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the prior audit, we reported the Department did not have adequate internal controls over and did not comply with federal requirements for monitoring subrecipients to ensure payments were allowable, properly supported and within the period of performance. The prior finding number was 2022-019. Description of Condition The Department did not have adequate internal controls over and did not comply with requirements to monitor subrecipients to ensure payments were allowable, properly supported and met period of performance requirements for the SLFRF program. During the audit period, the Department only required summary level supporting documentation when approving subrecipient payments. Since detailed source documentation was not required at the time of reimbursement, the Department implemented a fiscal review process for ERAP and TRAP 2.0 subrecipients. We used a statistical sampling method to randomly select and review 56 out of 554 payments. Of the payments examined, we identified nine (16 percent) payments that were not allowable under terms and conditions of the subaward. Specifically: 1. Seven payments (13 percent) were for advances to the subrecipient, which are specifically prohibited under the terms and conditions of the Department’s subaward 2. Four payments (7 percent), including one of the payments mentioned above, did not have adequate documentation to ensure the payment was for an allowable activity under the subaward, met cost principles and occurred within the award’s period of performance. The Department’s invoice review procedure required the Department to verify that each subrecipient submitted, along with its invoice, a voucher detail worksheet that outlines expenses by budget category, and a general ledger report detailing the expenses incurred by the subrecipient during the invoice period. For four of the nine payments referenced above, we found the Department approved them for payment without receiving a general ledger report from the subrecipient detailing all incurred expenses. In one of these instances, we also found the Department advanced program funds to the subrecipient without reviewing supporting documentation from the subrecipient to demonstrate that all expenditures were incurred to support the amount advanced by the Department. We were not provided with any documentation demonstrating these funds were returned to the Department. We also used a non-statistical sampling method to randomly select and examine nine out of 35 subrecipients for which the Department completed monitoring during the audit period. We determined five of the nine fiscal reviews completed (56 percent) were insufficient to ensure payments to the subrecipients were allowable and adequately supported. We came to this conclusion because the support we were provided lacked enough details to ensure the activities were allowable and within the period of performance. In addition, the Department did not have evidence that it obtained supporting documentation for client files from one of the nine subrecipients we examined. We also examined program monitoring documentation completed for the same nine subrecipients. The Department only selected five households from each subrecipient for eligibility verification. There was a total of 53,699 households served for ERAP 2.0, and an additional 8,373 households served for TRAP 2.0. Therefore, the Department reviewed less than one-half of one percent of client files for each subrecipient. For these nine subrecipients, we verified that staff reviewed the number of client files that management required under the program. However, in our judgment, the total number of client files reviewed for each subrecipient was inadequate to reasonably ensure compliance with program requirements. The following table summarizes the percentage of client files the Department reviewed for each subrecipient during the audit period: We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. Cause of Condition Management did not ensure that proper internal controls were in place to oversee ERAP 2.0 and the use of SLFRF funds. The Department approved payments to subrecipients without reviewing adequate supporting documentation, and management relied on annual program and fiscal monitoring to ensure subrecipients had proper supporting documentation and only served eligible households. In addition, it issued advance payments to subrecipients despite the subawards explicitly stating this was not allowable. Management did not ensure program and fiscal monitoring conducted included a sufficient sample of subrecipient records, and required detailed source documentation, to provide reasonable assurance of material compliance with federal SLFRF requirements and the terms and conditions of the subawards. Effect of Condition and Questioned Costs We determined the Department did not request and review adequate supporting documentation before paying subrecipients, and it did not perform adequate fiscal monitoring to ensure that funds advanced to subrecipients were disbursed to eligible households and for allowable activities. As a result, we identified $95,560 in known federal questioned costs and $1,482,489 in likely federal questioned costs. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our “best estimate of total questioned costs,” as required by 2 CFR § 200.516(3). To ensure a representative sample, we stratified the population by dollar amount. Without establishing adequate internal controls and reviewing required supporting documentation from subrecipients, the Department cannot reasonably ensure it is using federal funds for allowable purposes and that spending occurs within the allowed period of performance. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Department: • Update its written procedures to require an adequate number of subrecipient client files to be reviewed during fiscal and program monitoring to provide reasonable assurance that each subrecipient is compliant with program requirements • Improve internal controls to ensure subrecipients provide adequate supporting documentation when requesting reimbursement • Request and review supporting documentation from all participating subrecipients on households served with SLFRF funds to determine if any amounts reimbursed to the subrecipients must be returned to the Department • Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Department’s Response The State and Local Fiscal Recovery Funds were provided to the state as an advanced payment by which the Department used them to address the immense rent assistance needs as a result of the COVID-19 pandemic. Commerce funded subrecipients up to 25% of their contract total in an effort to mitigate cash flow issues to allow the swift distribution of funding. The Department utilized this method as obtaining documentation and processing reimbursements on a weekly basis still could not provide sufficient funding for all of the rent assistance needs. The Department now acknowledges the advanced payments were not authorized per federal guidance, however, all housing expenses were verified through thorough review of subrecipient expenditure supporting documentation. The Department completed fiscal and program monitoring of each subrecipient over the contract period, however, neither the Code of Federal Regulations nor the Washington State Auditor’s Office has been able to provide the Department with the number of client files that would need to be reviewed to be considered adequate. The Department created a procedure to review a minimum of five client files per subrecipient and followed this procedure. The Department understands that given the urgent need for assistance and the enormous amount of rent assistance funding distributed, thousands of client files would had to have been reviewed in a short period of time and we could not build and sustain the necessary staff capacity to match the fast-paced program delivery. The Department did increase internal controls related to program monitoring to more accurately comply with federal requirements as a result of the prior audit results. In July 2022, the Department began to review supporting backup documentation for all expenditures. The Department did not yet understand that transaction level detail was required and its review included a higher level of detail. Since the process was newly implemented in fiscal year 2023, it took some time to work out compliance challenges and provide technical assistance to subrecipients in order to comply with the federal requirements. The Department’s expenditure backup documentation review process began including transaction level detail in fiscal year 2023 as a result of the prior audit results. Any repayment of questioned costs will be determined through the standard resolution process with the United States Department of Treasury. Auditor’s Remarks Federal regulations require pass-through entities to monitor the activities of subrecipients as necessary to ensure that subawards are used for authorized purposes and in compliance with federal requirements and the terms and conditions of the subaward. In our judgement, the Department’s design of monitoring subrecipients for fiscal and program compliance did not provide this level of assurance. Specifically, the Department’s decision to review only five client files per subrecipient did not provide reasonable assurance of each subrecipient’s compliance when the average subrecipient served 1,413 clients, as illustrated in the Description of Condition. Based on this evidence, the Department only reviewed a total of 230 client files during the audit period, which makes up less than 0.4 percent of the total number of clients served. In addition, the Department’s decision to not review transaction-level supporting documentation at the time of issuing payment to subrecipients means that the monitoring of subrecipients was also being relied upon to ensure all payments made to subrecipients were only for allowable activities under the subaward. In our judgment, the procedures in place requiring only five client files be reviewed for each subrecipient were not sufficient to provide reasonable assurance of material compliance with the requirements for Activities Allowed or Unallowed and Allowable Costs/Cost Principles. We reaffirm our audit finding and will follow up on the status of the Department’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200, Uniform Guidance, section 332, Requirements for pass-through entities, establishes the requirements for all pass-through entities. Title 2 CFR Part 200, Uniform Guidance, section 403, Factors affecting the allowability of costs, describes the general criteria in order for a cost to be allowable under federal awards, including being adequately documented. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.
2023-027 The Department of Commerce did not have adequate internal controls over and did not comply with requirements for monitoring subrecipients to ensure payments were allowable, properly supported, and met period of performance requirements for the Coronavirus State and Local Fiscal Recovery Funds. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: SLFRP0002 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Period of Performance Subrecipient Monitoring Known Questioned Cost Amount: $95,560 Prior Year Audit Finding: Yes, Finding 2022-019 Background The Coronavirus State and Local Fiscal Recovery Funds (SLFRF), as part of the America Rescue Plan Act of 2021, delivered $350 billion to state, local and tribal governments to support the response to and recovery from the COVID-19 public health emergency. Washington received $4.4 billion of SLFRF money from the U.S. Department of the Treasury, which the state’s Office of Financial Management allocated to state agencies for various programs. In fiscal year 2023, state agencies spent about $1.9 billion in SLFRF funds, more than $718 million of which was spent by the Department of Commerce. The Department used SLFRF funds to administer and provide economic assistance to households at risk of eviction and homelessness primarily through the Eviction Rental Assistance Program (ERAP 2.0) and Treasury Rent Assistance Program (TRAP 2.0), in addition to transportation, tourism and other pandemic-recovery projects. During fiscal year 2023, the Department expended about $253.5 million on reimbursements and advance payments to local governments and nonprofit organizations as subrecipients. These subrecipients were responsible for making direct payments of rent and utilities for eligible low-income households with overdue rent payments dating as far back as March 2020. Pass-through entities are required to monitor the activities of subrecipients to ensure they are properly using federal funds for allowable activities and expenditures. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the prior audit, we reported the Department did not have adequate internal controls over and did not comply with federal requirements for monitoring subrecipients to ensure payments were allowable, properly supported and within the period of performance. The prior finding number was 2022-019. Description of Condition The Department did not have adequate internal controls over and did not comply with requirements to monitor subrecipients to ensure payments were allowable, properly supported and met period of performance requirements for the SLFRF program. During the audit period, the Department only required summary level supporting documentation when approving subrecipient payments. Since detailed source documentation was not required at the time of reimbursement, the Department implemented a fiscal review process for ERAP and TRAP 2.0 subrecipients. We used a statistical sampling method to randomly select and review 56 out of 554 payments. Of the payments examined, we identified nine (16 percent) payments that were not allowable under terms and conditions of the subaward. Specifically: 1. Seven payments (13 percent) were for advances to the subrecipient, which are specifically prohibited under the terms and conditions of the Department’s subaward 2. Four payments (7 percent), including one of the payments mentioned above, did not have adequate documentation to ensure the payment was for an allowable activity under the subaward, met cost principles and occurred within the award’s period of performance. The Department’s invoice review procedure required the Department to verify that each subrecipient submitted, along with its invoice, a voucher detail worksheet that outlines expenses by budget category, and a general ledger report detailing the expenses incurred by the subrecipient during the invoice period. For four of the nine payments referenced above, we found the Department approved them for payment without receiving a general ledger report from the subrecipient detailing all incurred expenses. In one of these instances, we also found the Department advanced program funds to the subrecipient without reviewing supporting documentation from the subrecipient to demonstrate that all expenditures were incurred to support the amount advanced by the Department. We were not provided with any documentation demonstrating these funds were returned to the Department. We also used a non-statistical sampling method to randomly select and examine nine out of 35 subrecipients for which the Department completed monitoring during the audit period. We determined five of the nine fiscal reviews completed (56 percent) were insufficient to ensure payments to the subrecipients were allowable and adequately supported. We came to this conclusion because the support we were provided lacked enough details to ensure the activities were allowable and within the period of performance. In addition, the Department did not have evidence that it obtained supporting documentation for client files from one of the nine subrecipients we examined. We also examined program monitoring documentation completed for the same nine subrecipients. The Department only selected five households from each subrecipient for eligibility verification. There was a total of 53,699 households served for ERAP 2.0, and an additional 8,373 households served for TRAP 2.0. Therefore, the Department reviewed less than one-half of one percent of client files for each subrecipient. For these nine subrecipients, we verified that staff reviewed the number of client files that management required under the program. However, in our judgment, the total number of client files reviewed for each subrecipient was inadequate to reasonably ensure compliance with program requirements. The following table summarizes the percentage of client files the Department reviewed for each subrecipient during the audit period: We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. Cause of Condition Management did not ensure that proper internal controls were in place to oversee ERAP 2.0 and the use of SLFRF funds. The Department approved payments to subrecipients without reviewing adequate supporting documentation, and management relied on annual program and fiscal monitoring to ensure subrecipients had proper supporting documentation and only served eligible households. In addition, it issued advance payments to subrecipients despite the subawards explicitly stating this was not allowable. Management did not ensure program and fiscal monitoring conducted included a sufficient sample of subrecipient records, and required detailed source documentation, to provide reasonable assurance of material compliance with federal SLFRF requirements and the terms and conditions of the subawards. Effect of Condition and Questioned Costs We determined the Department did not request and review adequate supporting documentation before paying subrecipients, and it did not perform adequate fiscal monitoring to ensure that funds advanced to subrecipients were disbursed to eligible households and for allowable activities. As a result, we identified $95,560 in known federal questioned costs and $1,482,489 in likely federal questioned costs. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our “best estimate of total questioned costs,” as required by 2 CFR § 200.516(3). To ensure a representative sample, we stratified the population by dollar amount. Without establishing adequate internal controls and reviewing required supporting documentation from subrecipients, the Department cannot reasonably ensure it is using federal funds for allowable purposes and that spending occurs within the allowed period of performance. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Department: • Update its written procedures to require an adequate number of subrecipient client files to be reviewed during fiscal and program monitoring to provide reasonable assurance that each subrecipient is compliant with program requirements • Improve internal controls to ensure subrecipients provide adequate supporting documentation when requesting reimbursement • Request and review supporting documentation from all participating subrecipients on households served with SLFRF funds to determine if any amounts reimbursed to the subrecipients must be returned to the Department • Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Department’s Response The State and Local Fiscal Recovery Funds were provided to the state as an advanced payment by which the Department used them to address the immense rent assistance needs as a result of the COVID-19 pandemic. Commerce funded subrecipients up to 25% of their contract total in an effort to mitigate cash flow issues to allow the swift distribution of funding. The Department utilized this method as obtaining documentation and processing reimbursements on a weekly basis still could not provide sufficient funding for all of the rent assistance needs. The Department now acknowledges the advanced payments were not authorized per federal guidance, however, all housing expenses were verified through thorough review of subrecipient expenditure supporting documentation. The Department completed fiscal and program monitoring of each subrecipient over the contract period, however, neither the Code of Federal Regulations nor the Washington State Auditor’s Office has been able to provide the Department with the number of client files that would need to be reviewed to be considered adequate. The Department created a procedure to review a minimum of five client files per subrecipient and followed this procedure. The Department understands that given the urgent need for assistance and the enormous amount of rent assistance funding distributed, thousands of client files would had to have been reviewed in a short period of time and we could not build and sustain the necessary staff capacity to match the fast-paced program delivery. The Department did increase internal controls related to program monitoring to more accurately comply with federal requirements as a result of the prior audit results. In July 2022, the Department began to review supporting backup documentation for all expenditures. The Department did not yet understand that transaction level detail was required and its review included a higher level of detail. Since the process was newly implemented in fiscal year 2023, it took some time to work out compliance challenges and provide technical assistance to subrecipients in order to comply with the federal requirements. The Department’s expenditure backup documentation review process began including transaction level detail in fiscal year 2023 as a result of the prior audit results. Any repayment of questioned costs will be determined through the standard resolution process with the United States Department of Treasury. Auditor’s Remarks Federal regulations require pass-through entities to monitor the activities of subrecipients as necessary to ensure that subawards are used for authorized purposes and in compliance with federal requirements and the terms and conditions of the subaward. In our judgement, the Department’s design of monitoring subrecipients for fiscal and program compliance did not provide this level of assurance. Specifically, the Department’s decision to review only five client files per subrecipient did not provide reasonable assurance of each subrecipient’s compliance when the average subrecipient served 1,413 clients, as illustrated in the Description of Condition. Based on this evidence, the Department only reviewed a total of 230 client files during the audit period, which makes up less than 0.4 percent of the total number of clients served. In addition, the Department’s decision to not review transaction-level supporting documentation at the time of issuing payment to subrecipients means that the monitoring of subrecipients was also being relied upon to ensure all payments made to subrecipients were only for allowable activities under the subaward. In our judgment, the procedures in place requiring only five client files be reviewed for each subrecipient were not sufficient to provide reasonable assurance of material compliance with the requirements for Activities Allowed or Unallowed and Allowable Costs/Cost Principles. We reaffirm our audit finding and will follow up on the status of the Department’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200, Uniform Guidance, section 332, Requirements for pass-through entities, establishes the requirements for all pass-through entities. Title 2 CFR Part 200, Uniform Guidance, section 403, Factors affecting the allowability of costs, describes the general criteria in order for a cost to be allowable under federal awards, including being adequately documented. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.
2023-027 The Department of Commerce did not have adequate internal controls over and did not comply with requirements for monitoring subrecipients to ensure payments were allowable, properly supported, and met period of performance requirements for the Coronavirus State and Local Fiscal Recovery Funds. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: SLFRP0002 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Period of Performance Subrecipient Monitoring Known Questioned Cost Amount: $95,560 Prior Year Audit Finding: Yes, Finding 2022-019 Background The Coronavirus State and Local Fiscal Recovery Funds (SLFRF), as part of the America Rescue Plan Act of 2021, delivered $350 billion to state, local and tribal governments to support the response to and recovery from the COVID-19 public health emergency. Washington received $4.4 billion of SLFRF money from the U.S. Department of the Treasury, which the state’s Office of Financial Management allocated to state agencies for various programs. In fiscal year 2023, state agencies spent about $1.9 billion in SLFRF funds, more than $718 million of which was spent by the Department of Commerce. The Department used SLFRF funds to administer and provide economic assistance to households at risk of eviction and homelessness primarily through the Eviction Rental Assistance Program (ERAP 2.0) and Treasury Rent Assistance Program (TRAP 2.0), in addition to transportation, tourism and other pandemic-recovery projects. During fiscal year 2023, the Department expended about $253.5 million on reimbursements and advance payments to local governments and nonprofit organizations as subrecipients. These subrecipients were responsible for making direct payments of rent and utilities for eligible low-income households with overdue rent payments dating as far back as March 2020. Pass-through entities are required to monitor the activities of subrecipients to ensure they are properly using federal funds for allowable activities and expenditures. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the prior audit, we reported the Department did not have adequate internal controls over and did not comply with federal requirements for monitoring subrecipients to ensure payments were allowable, properly supported and within the period of performance. The prior finding number was 2022-019. Description of Condition The Department did not have adequate internal controls over and did not comply with requirements to monitor subrecipients to ensure payments were allowable, properly supported and met period of performance requirements for the SLFRF program. During the audit period, the Department only required summary level supporting documentation when approving subrecipient payments. Since detailed source documentation was not required at the time of reimbursement, the Department implemented a fiscal review process for ERAP and TRAP 2.0 subrecipients. We used a statistical sampling method to randomly select and review 56 out of 554 payments. Of the payments examined, we identified nine (16 percent) payments that were not allowable under terms and conditions of the subaward. Specifically: 1. Seven payments (13 percent) were for advances to the subrecipient, which are specifically prohibited under the terms and conditions of the Department’s subaward 2. Four payments (7 percent), including one of the payments mentioned above, did not have adequate documentation to ensure the payment was for an allowable activity under the subaward, met cost principles and occurred within the award’s period of performance. The Department’s invoice review procedure required the Department to verify that each subrecipient submitted, along with its invoice, a voucher detail worksheet that outlines expenses by budget category, and a general ledger report detailing the expenses incurred by the subrecipient during the invoice period. For four of the nine payments referenced above, we found the Department approved them for payment without receiving a general ledger report from the subrecipient detailing all incurred expenses. In one of these instances, we also found the Department advanced program funds to the subrecipient without reviewing supporting documentation from the subrecipient to demonstrate that all expenditures were incurred to support the amount advanced by the Department. We were not provided with any documentation demonstrating these funds were returned to the Department. We also used a non-statistical sampling method to randomly select and examine nine out of 35 subrecipients for which the Department completed monitoring during the audit period. We determined five of the nine fiscal reviews completed (56 percent) were insufficient to ensure payments to the subrecipients were allowable and adequately supported. We came to this conclusion because the support we were provided lacked enough details to ensure the activities were allowable and within the period of performance. In addition, the Department did not have evidence that it obtained supporting documentation for client files from one of the nine subrecipients we examined. We also examined program monitoring documentation completed for the same nine subrecipients. The Department only selected five households from each subrecipient for eligibility verification. There was a total of 53,699 households served for ERAP 2.0, and an additional 8,373 households served for TRAP 2.0. Therefore, the Department reviewed less than one-half of one percent of client files for each subrecipient. For these nine subrecipients, we verified that staff reviewed the number of client files that management required under the program. However, in our judgment, the total number of client files reviewed for each subrecipient was inadequate to reasonably ensure compliance with program requirements. The following table summarizes the percentage of client files the Department reviewed for each subrecipient during the audit period: We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. Cause of Condition Management did not ensure that proper internal controls were in place to oversee ERAP 2.0 and the use of SLFRF funds. The Department approved payments to subrecipients without reviewing adequate supporting documentation, and management relied on annual program and fiscal monitoring to ensure subrecipients had proper supporting documentation and only served eligible households. In addition, it issued advance payments to subrecipients despite the subawards explicitly stating this was not allowable. Management did not ensure program and fiscal monitoring conducted included a sufficient sample of subrecipient records, and required detailed source documentation, to provide reasonable assurance of material compliance with federal SLFRF requirements and the terms and conditions of the subawards. Effect of Condition and Questioned Costs We determined the Department did not request and review adequate supporting documentation before paying subrecipients, and it did not perform adequate fiscal monitoring to ensure that funds advanced to subrecipients were disbursed to eligible households and for allowable activities. As a result, we identified $95,560 in known federal questioned costs and $1,482,489 in likely federal questioned costs. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our “best estimate of total questioned costs,” as required by 2 CFR § 200.516(3). To ensure a representative sample, we stratified the population by dollar amount. Without establishing adequate internal controls and reviewing required supporting documentation from subrecipients, the Department cannot reasonably ensure it is using federal funds for allowable purposes and that spending occurs within the allowed period of performance. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Department: • Update its written procedures to require an adequate number of subrecipient client files to be reviewed during fiscal and program monitoring to provide reasonable assurance that each subrecipient is compliant with program requirements • Improve internal controls to ensure subrecipients provide adequate supporting documentation when requesting reimbursement • Request and review supporting documentation from all participating subrecipients on households served with SLFRF funds to determine if any amounts reimbursed to the subrecipients must be returned to the Department • Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Department’s Response The State and Local Fiscal Recovery Funds were provided to the state as an advanced payment by which the Department used them to address the immense rent assistance needs as a result of the COVID-19 pandemic. Commerce funded subrecipients up to 25% of their contract total in an effort to mitigate cash flow issues to allow the swift distribution of funding. The Department utilized this method as obtaining documentation and processing reimbursements on a weekly basis still could not provide sufficient funding for all of the rent assistance needs. The Department now acknowledges the advanced payments were not authorized per federal guidance, however, all housing expenses were verified through thorough review of subrecipient expenditure supporting documentation. The Department completed fiscal and program monitoring of each subrecipient over the contract period, however, neither the Code of Federal Regulations nor the Washington State Auditor’s Office has been able to provide the Department with the number of client files that would need to be reviewed to be considered adequate. The Department created a procedure to review a minimum of five client files per subrecipient and followed this procedure. The Department understands that given the urgent need for assistance and the enormous amount of rent assistance funding distributed, thousands of client files would had to have been reviewed in a short period of time and we could not build and sustain the necessary staff capacity to match the fast-paced program delivery. The Department did increase internal controls related to program monitoring to more accurately comply with federal requirements as a result of the prior audit results. In July 2022, the Department began to review supporting backup documentation for all expenditures. The Department did not yet understand that transaction level detail was required and its review included a higher level of detail. Since the process was newly implemented in fiscal year 2023, it took some time to work out compliance challenges and provide technical assistance to subrecipients in order to comply with the federal requirements. The Department’s expenditure backup documentation review process began including transaction level detail in fiscal year 2023 as a result of the prior audit results. Any repayment of questioned costs will be determined through the standard resolution process with the United States Department of Treasury. Auditor’s Remarks Federal regulations require pass-through entities to monitor the activities of subrecipients as necessary to ensure that subawards are used for authorized purposes and in compliance with federal requirements and the terms and conditions of the subaward. In our judgement, the Department’s design of monitoring subrecipients for fiscal and program compliance did not provide this level of assurance. Specifically, the Department’s decision to review only five client files per subrecipient did not provide reasonable assurance of each subrecipient’s compliance when the average subrecipient served 1,413 clients, as illustrated in the Description of Condition. Based on this evidence, the Department only reviewed a total of 230 client files during the audit period, which makes up less than 0.4 percent of the total number of clients served. In addition, the Department’s decision to not review transaction-level supporting documentation at the time of issuing payment to subrecipients means that the monitoring of subrecipients was also being relied upon to ensure all payments made to subrecipients were only for allowable activities under the subaward. In our judgment, the procedures in place requiring only five client files be reviewed for each subrecipient were not sufficient to provide reasonable assurance of material compliance with the requirements for Activities Allowed or Unallowed and Allowable Costs/Cost Principles. We reaffirm our audit finding and will follow up on the status of the Department’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200, Uniform Guidance, section 332, Requirements for pass-through entities, establishes the requirements for all pass-through entities. Title 2 CFR Part 200, Uniform Guidance, section 403, Factors affecting the allowability of costs, describes the general criteria in order for a cost to be allowable under federal awards, including being adequately documented. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.
2023-027 The Department of Commerce did not have adequate internal controls over and did not comply with requirements for monitoring subrecipients to ensure payments were allowable, properly supported, and met period of performance requirements for the Coronavirus State and Local Fiscal Recovery Funds. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: SLFRP0002 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Period of Performance Subrecipient Monitoring Known Questioned Cost Amount: $95,560 Prior Year Audit Finding: Yes, Finding 2022-019 Background The Coronavirus State and Local Fiscal Recovery Funds (SLFRF), as part of the America Rescue Plan Act of 2021, delivered $350 billion to state, local and tribal governments to support the response to and recovery from the COVID-19 public health emergency. Washington received $4.4 billion of SLFRF money from the U.S. Department of the Treasury, which the state’s Office of Financial Management allocated to state agencies for various programs. In fiscal year 2023, state agencies spent about $1.9 billion in SLFRF funds, more than $718 million of which was spent by the Department of Commerce. The Department used SLFRF funds to administer and provide economic assistance to households at risk of eviction and homelessness primarily through the Eviction Rental Assistance Program (ERAP 2.0) and Treasury Rent Assistance Program (TRAP 2.0), in addition to transportation, tourism and other pandemic-recovery projects. During fiscal year 2023, the Department expended about $253.5 million on reimbursements and advance payments to local governments and nonprofit organizations as subrecipients. These subrecipients were responsible for making direct payments of rent and utilities for eligible low-income households with overdue rent payments dating as far back as March 2020. Pass-through entities are required to monitor the activities of subrecipients to ensure they are properly using federal funds for allowable activities and expenditures. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the prior audit, we reported the Department did not have adequate internal controls over and did not comply with federal requirements for monitoring subrecipients to ensure payments were allowable, properly supported and within the period of performance. The prior finding number was 2022-019. Description of Condition The Department did not have adequate internal controls over and did not comply with requirements to monitor subrecipients to ensure payments were allowable, properly supported and met period of performance requirements for the SLFRF program. During the audit period, the Department only required summary level supporting documentation when approving subrecipient payments. Since detailed source documentation was not required at the time of reimbursement, the Department implemented a fiscal review process for ERAP and TRAP 2.0 subrecipients. We used a statistical sampling method to randomly select and review 56 out of 554 payments. Of the payments examined, we identified nine (16 percent) payments that were not allowable under terms and conditions of the subaward. Specifically: 1. Seven payments (13 percent) were for advances to the subrecipient, which are specifically prohibited under the terms and conditions of the Department’s subaward 2. Four payments (7 percent), including one of the payments mentioned above, did not have adequate documentation to ensure the payment was for an allowable activity under the subaward, met cost principles and occurred within the award’s period of performance. The Department’s invoice review procedure required the Department to verify that each subrecipient submitted, along with its invoice, a voucher detail worksheet that outlines expenses by budget category, and a general ledger report detailing the expenses incurred by the subrecipient during the invoice period. For four of the nine payments referenced above, we found the Department approved them for payment without receiving a general ledger report from the subrecipient detailing all incurred expenses. In one of these instances, we also found the Department advanced program funds to the subrecipient without reviewing supporting documentation from the subrecipient to demonstrate that all expenditures were incurred to support the amount advanced by the Department. We were not provided with any documentation demonstrating these funds were returned to the Department. We also used a non-statistical sampling method to randomly select and examine nine out of 35 subrecipients for which the Department completed monitoring during the audit period. We determined five of the nine fiscal reviews completed (56 percent) were insufficient to ensure payments to the subrecipients were allowable and adequately supported. We came to this conclusion because the support we were provided lacked enough details to ensure the activities were allowable and within the period of performance. In addition, the Department did not have evidence that it obtained supporting documentation for client files from one of the nine subrecipients we examined. We also examined program monitoring documentation completed for the same nine subrecipients. The Department only selected five households from each subrecipient for eligibility verification. There was a total of 53,699 households served for ERAP 2.0, and an additional 8,373 households served for TRAP 2.0. Therefore, the Department reviewed less than one-half of one percent of client files for each subrecipient. For these nine subrecipients, we verified that staff reviewed the number of client files that management required under the program. However, in our judgment, the total number of client files reviewed for each subrecipient was inadequate to reasonably ensure compliance with program requirements. The following table summarizes the percentage of client files the Department reviewed for each subrecipient during the audit period: We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. Cause of Condition Management did not ensure that proper internal controls were in place to oversee ERAP 2.0 and the use of SLFRF funds. The Department approved payments to subrecipients without reviewing adequate supporting documentation, and management relied on annual program and fiscal monitoring to ensure subrecipients had proper supporting documentation and only served eligible households. In addition, it issued advance payments to subrecipients despite the subawards explicitly stating this was not allowable. Management did not ensure program and fiscal monitoring conducted included a sufficient sample of subrecipient records, and required detailed source documentation, to provide reasonable assurance of material compliance with federal SLFRF requirements and the terms and conditions of the subawards. Effect of Condition and Questioned Costs We determined the Department did not request and review adequate supporting documentation before paying subrecipients, and it did not perform adequate fiscal monitoring to ensure that funds advanced to subrecipients were disbursed to eligible households and for allowable activities. As a result, we identified $95,560 in known federal questioned costs and $1,482,489 in likely federal questioned costs. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our “best estimate of total questioned costs,” as required by 2 CFR § 200.516(3). To ensure a representative sample, we stratified the population by dollar amount. Without establishing adequate internal controls and reviewing required supporting documentation from subrecipients, the Department cannot reasonably ensure it is using federal funds for allowable purposes and that spending occurs within the allowed period of performance. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Department: • Update its written procedures to require an adequate number of subrecipient client files to be reviewed during fiscal and program monitoring to provide reasonable assurance that each subrecipient is compliant with program requirements • Improve internal controls to ensure subrecipients provide adequate supporting documentation when requesting reimbursement • Request and review supporting documentation from all participating subrecipients on households served with SLFRF funds to determine if any amounts reimbursed to the subrecipients must be returned to the Department • Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Department’s Response The State and Local Fiscal Recovery Funds were provided to the state as an advanced payment by which the Department used them to address the immense rent assistance needs as a result of the COVID-19 pandemic. Commerce funded subrecipients up to 25% of their contract total in an effort to mitigate cash flow issues to allow the swift distribution of funding. The Department utilized this method as obtaining documentation and processing reimbursements on a weekly basis still could not provide sufficient funding for all of the rent assistance needs. The Department now acknowledges the advanced payments were not authorized per federal guidance, however, all housing expenses were verified through thorough review of subrecipient expenditure supporting documentation. The Department completed fiscal and program monitoring of each subrecipient over the contract period, however, neither the Code of Federal Regulations nor the Washington State Auditor’s Office has been able to provide the Department with the number of client files that would need to be reviewed to be considered adequate. The Department created a procedure to review a minimum of five client files per subrecipient and followed this procedure. The Department understands that given the urgent need for assistance and the enormous amount of rent assistance funding distributed, thousands of client files would had to have been reviewed in a short period of time and we could not build and sustain the necessary staff capacity to match the fast-paced program delivery. The Department did increase internal controls related to program monitoring to more accurately comply with federal requirements as a result of the prior audit results. In July 2022, the Department began to review supporting backup documentation for all expenditures. The Department did not yet understand that transaction level detail was required and its review included a higher level of detail. Since the process was newly implemented in fiscal year 2023, it took some time to work out compliance challenges and provide technical assistance to subrecipients in order to comply with the federal requirements. The Department’s expenditure backup documentation review process began including transaction level detail in fiscal year 2023 as a result of the prior audit results. Any repayment of questioned costs will be determined through the standard resolution process with the United States Department of Treasury. Auditor’s Remarks Federal regulations require pass-through entities to monitor the activities of subrecipients as necessary to ensure that subawards are used for authorized purposes and in compliance with federal requirements and the terms and conditions of the subaward. In our judgement, the Department’s design of monitoring subrecipients for fiscal and program compliance did not provide this level of assurance. Specifically, the Department’s decision to review only five client files per subrecipient did not provide reasonable assurance of each subrecipient’s compliance when the average subrecipient served 1,413 clients, as illustrated in the Description of Condition. Based on this evidence, the Department only reviewed a total of 230 client files during the audit period, which makes up less than 0.4 percent of the total number of clients served. In addition, the Department’s decision to not review transaction-level supporting documentation at the time of issuing payment to subrecipients means that the monitoring of subrecipients was also being relied upon to ensure all payments made to subrecipients were only for allowable activities under the subaward. In our judgment, the procedures in place requiring only five client files be reviewed for each subrecipient were not sufficient to provide reasonable assurance of material compliance with the requirements for Activities Allowed or Unallowed and Allowable Costs/Cost Principles. We reaffirm our audit finding and will follow up on the status of the Department’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200, Uniform Guidance, section 332, Requirements for pass-through entities, establishes the requirements for all pass-through entities. Title 2 CFR Part 200, Uniform Guidance, section 403, Factors affecting the allowability of costs, describes the general criteria in order for a cost to be allowable under federal awards, including being adequately documented. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.
2023-044 The Department of Health did not have adequate internal controls to ensure payments to subrecipients were allowable, met cost principles, and were within the period of performance for the Immunization Cooperative Agreements program. Assistance Listing Number and Title: 93.268 Immunization Cooperative Agreements 93.268 COVID-19 Immunization Cooperative Agreements Federal Grantor Name: U.S Department of Health and Human Services Federal Award/Contract Number: 6NH231IP922619-04-01; 5 NH23IP922619-04-00;6 NH23IP922619-02-04; 6 NH23IP922619-02-06; 6 NH23IP922619-02-03; 6 NH23IP922619-02-02 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Period of Performance Known Questioned Cost Amount: $416,027 Prior Year Audit Finding: Yes, Finding 2022-031 Background The Department of Health administers the Immunization Cooperative Agreements program, which aims to reduce and ultimately eliminate vaccine-preventable diseases by increasing and maintaining high immunization coverage. Emphasis is placed on populations at highest risk for underimmunization and disease, including children eligible under the Vaccines for Children program. In fiscal year 2023, the Department spent more than $24.6 million in federal program funds, about $8.5 million of which it disbursed to subrecipients. The Department also received more than $97.6 million in non-cash assistance from the federal grantor in the form of vaccines. To help carry out the program’s objectives, the Department issues consolidated contracts to Local Health Jurisdictions that are classified as subrecipients. A consolidated contract is for one subrecipient that combines funding for multiple federal programs. Each federal grant specifies a performance period during which recipients must obligate and liquidate program costs. The periods for this program are July 1 through June 30 of the associated fiscal year. Payments for costs charged before a grant’s beginning date or after the ending date are not allowed without the grantor’s prior approval. Subrecipients are awarded federal funds on a reimbursement basis only. The Department assigns each subrecipient a risk level based on standardized criteria, and it maintains a matrix that specifies the documentation that subrecipients at each risk level are required to submit with every reimbursement. There are varying requirements among low, moderate and high-risk subrecipients for each of the following expense categories: • Salaries and benefits • Equipment ($5,000 or more) • Materials and supplies • Meals • Outreach materials • Travel • Training • Contracts • Sub-subrecipients • Administrative/indirect costs During the audit period, subrecipients submitted invoices to the Department’s accounting unit where staff, on a weekly basis, compiled a list of all consolidated contract invoices into one email. The accounting unit emailed the requests to Department program staff requesting review to ensure the payment was allowable and within the period of performance. The emails consisted of 30 to 50 invoice requests with hundreds of pages of supporting documentation. Each invoice listed in the email would be considered approved if program staff did not respond. To address concerns about an invoice, program staff were required to email the accounting unit within 10 business days to withhold payment until the items in question were resolved. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the prior audit, we reported the Department did not have adequate internal controls over and did not comply with requirements to ensure payments to providers were allowable, met cost principles and were within the period of performance for the program. The prior finding number was 2022-031. Description of Condition The Department did not have adequate internal controls to ensure payments to subrecipients were allowable, met cost principles, and were within the period of performance for the program. Department program staff were required to use the documentation matrix when reviewing subrecipient payments to ensure they were for allowable activities, met cost principles, were within the period of performance and included required supporting documentation. However, program staff did not communicate their approval to the accounting unit that issues payment. As a result, the Department paid the subrecipients without knowing whether these expenditures had been reviewed and approved by program staff. We used a statistical sampling method to randomly select and examine 56 out of 681 provider payments. Additionally, we judgmentally reviewed two individually significant payments that exceeded $476,000 each. In total, we examined more than $2.4 million in provider payments as part of the audit. Of the 58 payments examined, we identified seven payments (12.5 percent) and one individually significant payment that did not have the required supporting documentation for the subrecipients’ assigned risk level. In addition, we judgmentally selected and examined six high-risk transactions out of a population of 1,293 expenditures charged to the federal fiscal year 2023 award that opened during the audit period. We found four expenditures that were improperly charged to the grant because the activity occurred before the period of performance. We also judgmentally selected and examined two out of a population of 167 expenditures charged to the federal fiscal year 2022 award that closed during the audit period. We found one expenditure was improperly charged to the grant because the activity occurred after the period of performance. We consider these internal control deficiencies to be a material weakness. Cause of Condition The Department’s established procedures allowed for paying providers without ensuring program staff reviewed and determined the payment was allowable, within the period of performance, and adequately supported. Furthermore, program management did not ensure staff followed the existing review procedures. Additionally, the Department did not ensure that expenditures that were cost allocated and directly charged during the opening and closing of awards were within the award’s period of performance. Effect of Condition and Questioned Costs Without establishing adequate internal controls, the Department cannot reasonably ensure it is using federal funds for allowable purposes and within the period of performance. By not ensuring subrecipients submitted required supporting documentation, staff could not adequately verify the reimbursement claims, and the Department could not ensure its subrecipients complied with the subaward’s terms and conditions. The eight payments for which the Department did not have required supporting documentation from subrecipients totaled $404,592 in known questioned costs. Based on these results, we estimate that the total amount of likely improper payments using federal funds to be $588,502. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our “best estimate of total questioned costs,” as required by 2 CFR § 200.516(3). To ensure a representative sample, we stratified the population by dollar amount. For the federal fiscal year award 2023 that opened during the audit period, we identified questioned costs totaling $3,852. For the federal fiscal year 2022 award that closed during our audit period, we identified questioned costs totaling $7,583. In total, we identified $416,027 in known federal questioned costs and $599,937 in likely questioned costs. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Department: • Improve internal controls to ensure that it obtains adequate supporting documentation from subrecipients before reimbursing them • Improve internal controls to ensure program staff review, approve, and communicate approval of expenditures to those issuing payment to verify they are for allowable activities and within the period of performance prior to payment • Improve its internal controls to ensure expenditures charged at the beginning and end of an award are within the period of performance • Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Department’s Response We appreciate the State Auditor’s Office audit of the Immunizations grant. DOH is committed to ensuring our programs comply with federal regulations. The Department does not concur with the finding. While the Department has taken steps to ensure payments to providers contain proper support in line with our A19 matrix for risk assessed of our subrecipients, we continue to disagree with SAO’s assessment of a material weakness in internal controls over the consolidated contract provider payment process. As noted in the finding, program staff now document their review and approval of consolidated contract reimbursement requests. If the payment has no issues or concerns, the total payment is logged in a spreadsheet with documented review and approval to denote no issues and that full payment can be made. If there is a question on allowable cost, period of performance, a need for additional backup or an error, program Immunization staff will update spreadsheet with the amounts in question and communicate with the Local Health Jurisdiction, document the correspondence, and contact the accounting consolidated contract payment desk to withhold the specific amount of payment until the issue is resolved. Once resolved staff update the spreadsheet to denote the issue has been resolved and email accounting to release the payment amount in question. The defined process of consolidated contract payments has been in place for well over a decade and was implemented in response to issues arising with timely payment of funds to our local government partners. The consolidated contracts are an essential tool in providing such funding on a large scale. This process balances many needs in tracking payments, providing documentation to the programs for review as well as allowing for timely distribution of funding to the local health jurisdictions (LHJs) for state and federal programs in order to serve the residents of the State of Washington. It also simplifies the invoicing and payment process as well as reconciliation between DOH and the LHJs. We do not concur with several of the exceptions and questioned costs identified. The Department believes there was a lack of understanding of DOH process related to allocation of space costs and how overtime is earned and accounted for according the Collective Bargaining Agreement. Additionally, while in some instances the level of support did not meet our internal policies, which are held to a higher standard than federal requirements, the level of documentation received from the subrecipient accounting system gave us assurance that the transactions/costs questioned met federal cost principles for allowability and period of performance. This, along with the following additional overall internal monitoring and policy processes support our overall assurance of the allowability of payments: • The Immunization program staff maintain detailed budget information for each subrecipient by project area, and as A-19s are submitted, program and accounting staff update budget spreadsheets. When reviewing the support provided by the subrecipient, they ensure amounts submitted by project are reasonable and are in alignment with expectations for the budget period submitted. • The Immunization program refer to the federal Immunization Program Operations Manual (IPOM) to determine allowable costs, purchase, and procurement procedures. •The Fiscal Monitoring Unit provides technical assistance and training, not only to program staff, but to the subrecipients while onsite and at the request of the entities receiving funding. • The Immunizations program provides technical assistance, policies, and training to Immunization subrecipients related to both allowability and compliance. • The Immunizations program has continued to strengthen processes to ensure that the backup documentation received is in alignment with the agency’s documentation matrix for sub-recipients per their risk level. Auditor’s Remarks While management has implemented a new procedure for program staff to document their review and approval of subrecipient reimbursement requests, this approval is not communicated to fiscal staff before payments are issued. As a result, approval is assumed and not verified by fiscal staff when no response is received from the program staff. The amount of supporting documentation submitted by a subrecipient utilizing consolidated contracts is extensive and often covers multiple reimbursement requests for more than one federally funded program. In our judgment, this increases the risk that a proper review is not performed before payments are issued. The Department did not concur with some of the identified exceptions and stated it believed it was due to our Office’s lack of understanding of their processes. This assertion is not accurate. We understand their processes, but four of the exceptions were payments for services that occurred prior to the grant being open (expenses were for the month of June 2022, but the award opened July 1, 2022. These four exceptions included the “allocation of space costs and how overtime is earned and accounted for” referred to in the Department’s response. These exceptions were discussed in detail with the Department and during these discussions the Department mistakenly asserted that the time of payment was what determined compliance, not when the activity occurred. This is not correct and may be part of why the Department did not concur with the exceptions. We reaffirm our finding and will follow up on the status of the Department’s corrective action during our next audit period. Applicable Laws and Regulations 45 U.S. Code of Federal Regulations (CFR) Part 75, section 2, Definitions, includes the definition of improper payment. Title 45 CFR Part 75, section 303, Internal Controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. 45 CFR Part 75, section 403, Factors Affecting Allowability of Costs. 45 CFR Part 75, section 410, Collection of Unallowable Costs Title 45 CFR Part 75, section 516, Audit findings, establishes reporting requirements for audit findings. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Washington State Department of Health A-19 Documentation Matrix Approved by FMU 7/1/22 This is the backup documentation required based on the determined risk level. More supporting documentation may be requested by programs at any time regardless of risk category. Please review your statement of work to determine if there are additional documentation requirements. NOTE: Indirect costs included on A19s must include verification of the following: • Indirect plan is current and on file with DOH • Indirect rate is being applied accurately to allowable expenditures • If the indirect cost rate plan has expired, no indirect costs can be charged If the subrecipient is using 10% de minimis they must complete DOH de minimis certification
2023-044 The Department of Health did not have adequate internal controls to ensure payments to subrecipients were allowable, met cost principles, and were within the period of performance for the Immunization Cooperative Agreements program. Assistance Listing Number and Title: 93.268 Immunization Cooperative Agreements 93.268 COVID-19 Immunization Cooperative Agreements Federal Grantor Name: U.S Department of Health and Human Services Federal Award/Contract Number: 6NH231IP922619-04-01; 5 NH23IP922619-04-00;6 NH23IP922619-02-04; 6 NH23IP922619-02-06; 6 NH23IP922619-02-03; 6 NH23IP922619-02-02 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Period of Performance Known Questioned Cost Amount: $416,027 Prior Year Audit Finding: Yes, Finding 2022-031 Background The Department of Health administers the Immunization Cooperative Agreements program, which aims to reduce and ultimately eliminate vaccine-preventable diseases by increasing and maintaining high immunization coverage. Emphasis is placed on populations at highest risk for underimmunization and disease, including children eligible under the Vaccines for Children program. In fiscal year 2023, the Department spent more than $24.6 million in federal program funds, about $8.5 million of which it disbursed to subrecipients. The Department also received more than $97.6 million in non-cash assistance from the federal grantor in the form of vaccines. To help carry out the program’s objectives, the Department issues consolidated contracts to Local Health Jurisdictions that are classified as subrecipients. A consolidated contract is for one subrecipient that combines funding for multiple federal programs. Each federal grant specifies a performance period during which recipients must obligate and liquidate program costs. The periods for this program are July 1 through June 30 of the associated fiscal year. Payments for costs charged before a grant’s beginning date or after the ending date are not allowed without the grantor’s prior approval. Subrecipients are awarded federal funds on a reimbursement basis only. The Department assigns each subrecipient a risk level based on standardized criteria, and it maintains a matrix that specifies the documentation that subrecipients at each risk level are required to submit with every reimbursement. There are varying requirements among low, moderate and high-risk subrecipients for each of the following expense categories: • Salaries and benefits • Equipment ($5,000 or more) • Materials and supplies • Meals • Outreach materials • Travel • Training • Contracts • Sub-subrecipients • Administrative/indirect costs During the audit period, subrecipients submitted invoices to the Department’s accounting unit where staff, on a weekly basis, compiled a list of all consolidated contract invoices into one email. The accounting unit emailed the requests to Department program staff requesting review to ensure the payment was allowable and within the period of performance. The emails consisted of 30 to 50 invoice requests with hundreds of pages of supporting documentation. Each invoice listed in the email would be considered approved if program staff did not respond. To address concerns about an invoice, program staff were required to email the accounting unit within 10 business days to withhold payment until the items in question were resolved. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the prior audit, we reported the Department did not have adequate internal controls over and did not comply with requirements to ensure payments to providers were allowable, met cost principles and were within the period of performance for the program. The prior finding number was 2022-031. Description of Condition The Department did not have adequate internal controls to ensure payments to subrecipients were allowable, met cost principles, and were within the period of performance for the program. Department program staff were required to use the documentation matrix when reviewing subrecipient payments to ensure they were for allowable activities, met cost principles, were within the period of performance and included required supporting documentation. However, program staff did not communicate their approval to the accounting unit that issues payment. As a result, the Department paid the subrecipients without knowing whether these expenditures had been reviewed and approved by program staff. We used a statistical sampling method to randomly select and examine 56 out of 681 provider payments. Additionally, we judgmentally reviewed two individually significant payments that exceeded $476,000 each. In total, we examined more than $2.4 million in provider payments as part of the audit. Of the 58 payments examined, we identified seven payments (12.5 percent) and one individually significant payment that did not have the required supporting documentation for the subrecipients’ assigned risk level. In addition, we judgmentally selected and examined six high-risk transactions out of a population of 1,293 expenditures charged to the federal fiscal year 2023 award that opened during the audit period. We found four expenditures that were improperly charged to the grant because the activity occurred before the period of performance. We also judgmentally selected and examined two out of a population of 167 expenditures charged to the federal fiscal year 2022 award that closed during the audit period. We found one expenditure was improperly charged to the grant because the activity occurred after the period of performance. We consider these internal control deficiencies to be a material weakness. Cause of Condition The Department’s established procedures allowed for paying providers without ensuring program staff reviewed and determined the payment was allowable, within the period of performance, and adequately supported. Furthermore, program management did not ensure staff followed the existing review procedures. Additionally, the Department did not ensure that expenditures that were cost allocated and directly charged during the opening and closing of awards were within the award’s period of performance. Effect of Condition and Questioned Costs Without establishing adequate internal controls, the Department cannot reasonably ensure it is using federal funds for allowable purposes and within the period of performance. By not ensuring subrecipients submitted required supporting documentation, staff could not adequately verify the reimbursement claims, and the Department could not ensure its subrecipients complied with the subaward’s terms and conditions. The eight payments for which the Department did not have required supporting documentation from subrecipients totaled $404,592 in known questioned costs. Based on these results, we estimate that the total amount of likely improper payments using federal funds to be $588,502. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our “best estimate of total questioned costs,” as required by 2 CFR § 200.516(3). To ensure a representative sample, we stratified the population by dollar amount. For the federal fiscal year award 2023 that opened during the audit period, we identified questioned costs totaling $3,852. For the federal fiscal year 2022 award that closed during our audit period, we identified questioned costs totaling $7,583. In total, we identified $416,027 in known federal questioned costs and $599,937 in likely questioned costs. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Department: • Improve internal controls to ensure that it obtains adequate supporting documentation from subrecipients before reimbursing them • Improve internal controls to ensure program staff review, approve, and communicate approval of expenditures to those issuing payment to verify they are for allowable activities and within the period of performance prior to payment • Improve its internal controls to ensure expenditures charged at the beginning and end of an award are within the period of performance • Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Department’s Response We appreciate the State Auditor’s Office audit of the Immunizations grant. DOH is committed to ensuring our programs comply with federal regulations. The Department does not concur with the finding. While the Department has taken steps to ensure payments to providers contain proper support in line with our A19 matrix for risk assessed of our subrecipients, we continue to disagree with SAO’s assessment of a material weakness in internal controls over the consolidated contract provider payment process. As noted in the finding, program staff now document their review and approval of consolidated contract reimbursement requests. If the payment has no issues or concerns, the total payment is logged in a spreadsheet with documented review and approval to denote no issues and that full payment can be made. If there is a question on allowable cost, period of performance, a need for additional backup or an error, program Immunization staff will update spreadsheet with the amounts in question and communicate with the Local Health Jurisdiction, document the correspondence, and contact the accounting consolidated contract payment desk to withhold the specific amount of payment until the issue is resolved. Once resolved staff update the spreadsheet to denote the issue has been resolved and email accounting to release the payment amount in question. The defined process of consolidated contract payments has been in place for well over a decade and was implemented in response to issues arising with timely payment of funds to our local government partners. The consolidated contracts are an essential tool in providing such funding on a large scale. This process balances many needs in tracking payments, providing documentation to the programs for review as well as allowing for timely distribution of funding to the local health jurisdictions (LHJs) for state and federal programs in order to serve the residents of the State of Washington. It also simplifies the invoicing and payment process as well as reconciliation between DOH and the LHJs. We do not concur with several of the exceptions and questioned costs identified. The Department believes there was a lack of understanding of DOH process related to allocation of space costs and how overtime is earned and accounted for according the Collective Bargaining Agreement. Additionally, while in some instances the level of support did not meet our internal policies, which are held to a higher standard than federal requirements, the level of documentation received from the subrecipient accounting system gave us assurance that the transactions/costs questioned met federal cost principles for allowability and period of performance. This, along with the following additional overall internal monitoring and policy processes support our overall assurance of the allowability of payments: • The Immunization program staff maintain detailed budget information for each subrecipient by project area, and as A-19s are submitted, program and accounting staff update budget spreadsheets. When reviewing the support provided by the subrecipient, they ensure amounts submitted by project are reasonable and are in alignment with expectations for the budget period submitted. • The Immunization program refer to the federal Immunization Program Operations Manual (IPOM) to determine allowable costs, purchase, and procurement procedures. •The Fiscal Monitoring Unit provides technical assistance and training, not only to program staff, but to the subrecipients while onsite and at the request of the entities receiving funding. • The Immunizations program provides technical assistance, policies, and training to Immunization subrecipients related to both allowability and compliance. • The Immunizations program has continued to strengthen processes to ensure that the backup documentation received is in alignment with the agency’s documentation matrix for sub-recipients per their risk level. Auditor’s Remarks While management has implemented a new procedure for program staff to document their review and approval of subrecipient reimbursement requests, this approval is not communicated to fiscal staff before payments are issued. As a result, approval is assumed and not verified by fiscal staff when no response is received from the program staff. The amount of supporting documentation submitted by a subrecipient utilizing consolidated contracts is extensive and often covers multiple reimbursement requests for more than one federally funded program. In our judgment, this increases the risk that a proper review is not performed before payments are issued. The Department did not concur with some of the identified exceptions and stated it believed it was due to our Office’s lack of understanding of their processes. This assertion is not accurate. We understand their processes, but four of the exceptions were payments for services that occurred prior to the grant being open (expenses were for the month of June 2022, but the award opened July 1, 2022. These four exceptions included the “allocation of space costs and how overtime is earned and accounted for” referred to in the Department’s response. These exceptions were discussed in detail with the Department and during these discussions the Department mistakenly asserted that the time of payment was what determined compliance, not when the activity occurred. This is not correct and may be part of why the Department did not concur with the exceptions. We reaffirm our finding and will follow up on the status of the Department’s corrective action during our next audit period. Applicable Laws and Regulations 45 U.S. Code of Federal Regulations (CFR) Part 75, section 2, Definitions, includes the definition of improper payment. Title 45 CFR Part 75, section 303, Internal Controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. 45 CFR Part 75, section 403, Factors Affecting Allowability of Costs. 45 CFR Part 75, section 410, Collection of Unallowable Costs Title 45 CFR Part 75, section 516, Audit findings, establishes reporting requirements for audit findings. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Washington State Department of Health A-19 Documentation Matrix Approved by FMU 7/1/22 This is the backup documentation required based on the determined risk level. More supporting documentation may be requested by programs at any time regardless of risk category. Please review your statement of work to determine if there are additional documentation requirements. NOTE: Indirect costs included on A19s must include verification of the following: • Indirect plan is current and on file with DOH • Indirect rate is being applied accurately to allowable expenditures • If the indirect cost rate plan has expired, no indirect costs can be charged If the subrecipient is using 10% de minimis they must complete DOH de minimis certification
2023-044 The Department of Health did not have adequate internal controls to ensure payments to subrecipients were allowable, met cost principles, and were within the period of performance for the Immunization Cooperative Agreements program. Assistance Listing Number and Title: 93.268 Immunization Cooperative Agreements 93.268 COVID-19 Immunization Cooperative Agreements Federal Grantor Name: U.S Department of Health and Human Services Federal Award/Contract Number: 6NH231IP922619-04-01; 5 NH23IP922619-04-00;6 NH23IP922619-02-04; 6 NH23IP922619-02-06; 6 NH23IP922619-02-03; 6 NH23IP922619-02-02 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Period of Performance Known Questioned Cost Amount: $416,027 Prior Year Audit Finding: Yes, Finding 2022-031 Background The Department of Health administers the Immunization Cooperative Agreements program, which aims to reduce and ultimately eliminate vaccine-preventable diseases by increasing and maintaining high immunization coverage. Emphasis is placed on populations at highest risk for underimmunization and disease, including children eligible under the Vaccines for Children program. In fiscal year 2023, the Department spent more than $24.6 million in federal program funds, about $8.5 million of which it disbursed to subrecipients. The Department also received more than $97.6 million in non-cash assistance from the federal grantor in the form of vaccines. To help carry out the program’s objectives, the Department issues consolidated contracts to Local Health Jurisdictions that are classified as subrecipients. A consolidated contract is for one subrecipient that combines funding for multiple federal programs. Each federal grant specifies a performance period during which recipients must obligate and liquidate program costs. The periods for this program are July 1 through June 30 of the associated fiscal year. Payments for costs charged before a grant’s beginning date or after the ending date are not allowed without the grantor’s prior approval. Subrecipients are awarded federal funds on a reimbursement basis only. The Department assigns each subrecipient a risk level based on standardized criteria, and it maintains a matrix that specifies the documentation that subrecipients at each risk level are required to submit with every reimbursement. There are varying requirements among low, moderate and high-risk subrecipients for each of the following expense categories: • Salaries and benefits • Equipment ($5,000 or more) • Materials and supplies • Meals • Outreach materials • Travel • Training • Contracts • Sub-subrecipients • Administrative/indirect costs During the audit period, subrecipients submitted invoices to the Department’s accounting unit where staff, on a weekly basis, compiled a list of all consolidated contract invoices into one email. The accounting unit emailed the requests to Department program staff requesting review to ensure the payment was allowable and within the period of performance. The emails consisted of 30 to 50 invoice requests with hundreds of pages of supporting documentation. Each invoice listed in the email would be considered approved if program staff did not respond. To address concerns about an invoice, program staff were required to email the accounting unit within 10 business days to withhold payment until the items in question were resolved. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the prior audit, we reported the Department did not have adequate internal controls over and did not comply with requirements to ensure payments to providers were allowable, met cost principles and were within the period of performance for the program. The prior finding number was 2022-031. Description of Condition The Department did not have adequate internal controls to ensure payments to subrecipients were allowable, met cost principles, and were within the period of performance for the program. Department program staff were required to use the documentation matrix when reviewing subrecipient payments to ensure they were for allowable activities, met cost principles, were within the period of performance and included required supporting documentation. However, program staff did not communicate their approval to the accounting unit that issues payment. As a result, the Department paid the subrecipients without knowing whether these expenditures had been reviewed and approved by program staff. We used a statistical sampling method to randomly select and examine 56 out of 681 provider payments. Additionally, we judgmentally reviewed two individually significant payments that exceeded $476,000 each. In total, we examined more than $2.4 million in provider payments as part of the audit. Of the 58 payments examined, we identified seven payments (12.5 percent) and one individually significant payment that did not have the required supporting documentation for the subrecipients’ assigned risk level. In addition, we judgmentally selected and examined six high-risk transactions out of a population of 1,293 expenditures charged to the federal fiscal year 2023 award that opened during the audit period. We found four expenditures that were improperly charged to the grant because the activity occurred before the period of performance. We also judgmentally selected and examined two out of a population of 167 expenditures charged to the federal fiscal year 2022 award that closed during the audit period. We found one expenditure was improperly charged to the grant because the activity occurred after the period of performance. We consider these internal control deficiencies to be a material weakness. Cause of Condition The Department’s established procedures allowed for paying providers without ensuring program staff reviewed and determined the payment was allowable, within the period of performance, and adequately supported. Furthermore, program management did not ensure staff followed the existing review procedures. Additionally, the Department did not ensure that expenditures that were cost allocated and directly charged during the opening and closing of awards were within the award’s period of performance. Effect of Condition and Questioned Costs Without establishing adequate internal controls, the Department cannot reasonably ensure it is using federal funds for allowable purposes and within the period of performance. By not ensuring subrecipients submitted required supporting documentation, staff could not adequately verify the reimbursement claims, and the Department could not ensure its subrecipients complied with the subaward’s terms and conditions. The eight payments for which the Department did not have required supporting documentation from subrecipients totaled $404,592 in known questioned costs. Based on these results, we estimate that the total amount of likely improper payments using federal funds to be $588,502. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our “best estimate of total questioned costs,” as required by 2 CFR § 200.516(3). To ensure a representative sample, we stratified the population by dollar amount. For the federal fiscal year award 2023 that opened during the audit period, we identified questioned costs totaling $3,852. For the federal fiscal year 2022 award that closed during our audit period, we identified questioned costs totaling $7,583. In total, we identified $416,027 in known federal questioned costs and $599,937 in likely questioned costs. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Department: • Improve internal controls to ensure that it obtains adequate supporting documentation from subrecipients before reimbursing them • Improve internal controls to ensure program staff review, approve, and communicate approval of expenditures to those issuing payment to verify they are for allowable activities and within the period of performance prior to payment • Improve its internal controls to ensure expenditures charged at the beginning and end of an award are within the period of performance • Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Department’s Response We appreciate the State Auditor’s Office audit of the Immunizations grant. DOH is committed to ensuring our programs comply with federal regulations. The Department does not concur with the finding. While the Department has taken steps to ensure payments to providers contain proper support in line with our A19 matrix for risk assessed of our subrecipients, we continue to disagree with SAO’s assessment of a material weakness in internal controls over the consolidated contract provider payment process. As noted in the finding, program staff now document their review and approval of consolidated contract reimbursement requests. If the payment has no issues or concerns, the total payment is logged in a spreadsheet with documented review and approval to denote no issues and that full payment can be made. If there is a question on allowable cost, period of performance, a need for additional backup or an error, program Immunization staff will update spreadsheet with the amounts in question and communicate with the Local Health Jurisdiction, document the correspondence, and contact the accounting consolidated contract payment desk to withhold the specific amount of payment until the issue is resolved. Once resolved staff update the spreadsheet to denote the issue has been resolved and email accounting to release the payment amount in question. The defined process of consolidated contract payments has been in place for well over a decade and was implemented in response to issues arising with timely payment of funds to our local government partners. The consolidated contracts are an essential tool in providing such funding on a large scale. This process balances many needs in tracking payments, providing documentation to the programs for review as well as allowing for timely distribution of funding to the local health jurisdictions (LHJs) for state and federal programs in order to serve the residents of the State of Washington. It also simplifies the invoicing and payment process as well as reconciliation between DOH and the LHJs. We do not concur with several of the exceptions and questioned costs identified. The Department believes there was a lack of understanding of DOH process related to allocation of space costs and how overtime is earned and accounted for according the Collective Bargaining Agreement. Additionally, while in some instances the level of support did not meet our internal policies, which are held to a higher standard than federal requirements, the level of documentation received from the subrecipient accounting system gave us assurance that the transactions/costs questioned met federal cost principles for allowability and period of performance. This, along with the following additional overall internal monitoring and policy processes support our overall assurance of the allowability of payments: • The Immunization program staff maintain detailed budget information for each subrecipient by project area, and as A-19s are submitted, program and accounting staff update budget spreadsheets. When reviewing the support provided by the subrecipient, they ensure amounts submitted by project are reasonable and are in alignment with expectations for the budget period submitted. • The Immunization program refer to the federal Immunization Program Operations Manual (IPOM) to determine allowable costs, purchase, and procurement procedures. •The Fiscal Monitoring Unit provides technical assistance and training, not only to program staff, but to the subrecipients while onsite and at the request of the entities receiving funding. • The Immunizations program provides technical assistance, policies, and training to Immunization subrecipients related to both allowability and compliance. • The Immunizations program has continued to strengthen processes to ensure that the backup documentation received is in alignment with the agency’s documentation matrix for sub-recipients per their risk level. Auditor’s Remarks While management has implemented a new procedure for program staff to document their review and approval of subrecipient reimbursement requests, this approval is not communicated to fiscal staff before payments are issued. As a result, approval is assumed and not verified by fiscal staff when no response is received from the program staff. The amount of supporting documentation submitted by a subrecipient utilizing consolidated contracts is extensive and often covers multiple reimbursement requests for more than one federally funded program. In our judgment, this increases the risk that a proper review is not performed before payments are issued. The Department did not concur with some of the identified exceptions and stated it believed it was due to our Office’s lack of understanding of their processes. This assertion is not accurate. We understand their processes, but four of the exceptions were payments for services that occurred prior to the grant being open (expenses were for the month of June 2022, but the award opened July 1, 2022. These four exceptions included the “allocation of space costs and how overtime is earned and accounted for” referred to in the Department’s response. These exceptions were discussed in detail with the Department and during these discussions the Department mistakenly asserted that the time of payment was what determined compliance, not when the activity occurred. This is not correct and may be part of why the Department did not concur with the exceptions. We reaffirm our finding and will follow up on the status of the Department’s corrective action during our next audit period. Applicable Laws and Regulations 45 U.S. Code of Federal Regulations (CFR) Part 75, section 2, Definitions, includes the definition of improper payment. Title 45 CFR Part 75, section 303, Internal Controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. 45 CFR Part 75, section 403, Factors Affecting Allowability of Costs. 45 CFR Part 75, section 410, Collection of Unallowable Costs Title 45 CFR Part 75, section 516, Audit findings, establishes reporting requirements for audit findings. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Washington State Department of Health A-19 Documentation Matrix Approved by FMU 7/1/22 This is the backup documentation required based on the determined risk level. More supporting documentation may be requested by programs at any time regardless of risk category. Please review your statement of work to determine if there are additional documentation requirements. NOTE: Indirect costs included on A19s must include verification of the following: • Indirect plan is current and on file with DOH • Indirect rate is being applied accurately to allowable expenditures • If the indirect cost rate plan has expired, no indirect costs can be charged If the subrecipient is using 10% de minimis they must complete DOH de minimis certification
2023-046 The Department of Health did not have adequate internal controls to ensure payments to subrecipients were allowable, met cost principles, and were within the period of performance for the Epidemiology and Laboratory Capacity for Infectious Diseases program. Assistance Listing Number and Title: 93.323 Epidemiology and Laboratory Capacity for Infectious Diseases 93.323 COVID-19 Epidemiology and Laboratory Capacity for Infectious Diseases Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: NU50CK000515-05-00; NU50CK000515-01-06; NU50CK000515-01-07; NU50CK000515-01-08; NU50CK000515-02-04; NU50CK000515-01-09; NU50CK000515-02-01; NU50CK000515-02-06; NU50CK000515-02-03; NU50CK000515-02-09; NU50CK000515-02-07; NU50CK000515-03-03; NU50CK000515-03-01; NU50CK000515-04-00; NU50CK000515-04-03 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs / Cost Principles Period of Performance Known Questioned Cost Amount: $1,735 Prior Year Audit Finding: Yes, Finding 2022-033 Background The Department of Health administers the Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) program. The goal of the program is to support state, local, and territories’ public health efforts to reduce morbidity and associated deaths caused by a wide range of infectious disease threats. ELC provides annual funding, strategic direction, and technical assistance to domestic jurisdictions for strengthening core capacities in epidemiology, laboratory, and health information systems activities. In addition to strengthening core infectious disease capacities nationwide, the program also supports several specific infectious disease programs and projects, and provides special appropriations in response to infectious disease emergencies. The Department spent about $198.5 million in federal grant funds in fiscal year 2023, about $17 million of which was disbursed to subrecipients. To help carry out the program’s objectives, the Department issues consolidated contracts to Local Health Jurisdictions that are classified as subrecipients. A consolidated contract is for one subrecipient that combines funding for multiple federal programs. Subrecipients are awarded federal funds on a reimbursement basis only. The Department assigns each subrecipient a risk level based on standardized criteria, and it maintains a matrix that specifies the documentation that subrecipients at each risk level are required to submit with every reimbursement. There are varying requirements among low, moderate and high-risk subrecipients for each of the following expense categories: • Salaries and benefits • Equipment ($5,000 or more) • Materials, supplies, and other • Travel (in-state and out-of-state) • Contracts and sub-subrecipients • Administrative/indirect costs During the audit period, subrecipients submitted invoices to the Department’s accounting unit where staff, on a weekly basis, compiled a list of all consolidated contract invoices into one email. The emails were sent to Department program staff requesting review to ensure the payment was allowable. The emails consisted of 30 to 50 invoice requests with hundreds of pages of supporting documentation. Each invoice listed in the email would be considered approved if program staff did not respond. To address concerns about an invoice, program staff were required to email the accounting unit within 10 business days to withhold payment until the items in question were resolved. Beginning in February 2023, program staff documented their review and approval of the reimbursement request on a spreadsheet. The spreadsheet was only used at the program level, so it was not shared with the fiscal staff to communicate approval prior to issuing payment. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the prior audit, we reported the Department did not have adequate internal controls over and did not comply with fiscal monitoring requirements to ensure subrecipients of the ELC program only used funds for allowable activities and met cost principles. The prior finding number was 2022-033. Description of Condition The Department did not have adequate internal controls to ensure payments to subrecipients were allowable, met cost principles, and were within the period of performance for the ELC program. Department program staff were required to use the documentation matrix when reviewing subrecipient payments to ensure they were for allowable activities, met cost principles, were within the period of performance and included required supporting documentation. However, program staff did not communicate their approval to the accounting unit that issues payment. As a result, the Department paid the subrecipients without knowing whether these expenditures had been reviewed and approved by the program staff. We used a statistically valid sampling method to randomly select and examine 55 out of 441 subrecipient payments. Additionally, we judgmentally reviewed one individually significant payment that totaled $939,182. In total, we examined more than $8.8 million in subrecipient payments as part of the audit. Of the 55 randomly selected payments examined, we identified two payments (3.6 percent) that did not have the required supporting documentation for the subrecipients’ assigned risk level. We consider these internal control deficiencies to be a material weakness. Cause of Condition The Department’s established procedures allowed for paying subrecipients without ensuring program staff reviewed and determined the payment was allowable and adequately supported. Furthermore, program management did not ensure staff followed the existing review procedures. Effect of Condition and Questioned Costs Without establishing adequate internal controls, the Department cannot reasonably ensure it is using federal funds for allowable purposes and within the period of performance. By not ensuring subrecipients submitted required supporting documentation, staff could not adequately verify the reimbursement claims, and the Department could not ensure its subrecipients complied with the subaward’s terms and conditions. The two payments for which the Department did not have required supporting documentation from subrecipients totaled $1,735 in known questioned costs. Based on these results, we estimate that the total amount of likely improper payments using federal funds to be $46,169. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our “best estimate of total questioned costs,” as required by 2 CFR 200.516(3). To ensure a representative sample, we stratified the population by dollar amount. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Department: • Improve internal controls to ensure that it obtains adequate supporting documentation from subrecipients before reimbursing them • Improve internal controls to ensure program staff review and approve expenditures to verify they are for allowable activities prior to payment • Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Department’s Response We appreciate the State Auditor’s Office audit of the ELC grant. DOH is committed to ensuring our programs comply with federal regulations. The Department does not concur with the finding. While the Department has taken steps to ensure payments to providers contain proper support in line with our A19 matrix for risk assessed of our subrecipients, we continue to disagree with SAO’s assessment of a material weakness in internal controls over the consolidated contract provider payment process. As noted in the finding, program staff now document their review and approval of consolidated contract reimbursement requests. If the payment has no issues or concerns, the total payment is logged in a spreadsheet with documented review and approval to denote no issues and that full payment can be made. If there is a question on allowable cost, period of performance, a need for additional backup or an error, program ELC staff will update spreadsheet with the amounts in question and communicate with the Local Health Jurisdiction (LHJ), document the correspondence, and contact the accounting consolidated contract payment desk to withhold the specific amount of payment until the issue is resolved. Once resolved staff update the spreadsheet to denote the issue has been resolved and email accounting to release the payment amount in question. The defined process of consolidated contract payments has been in place for well over a decade and was implemented in response to issues arising with timely payment of funds to our local government partners. The consolidated contracts are an essential tool in providing such funding on a large scale. This process balances many needs in tracking payments, providing documentation to the programs for review as well as allowing for timely distribution of funding to the local health jurisdictions for state and federal programs in order to serve the residents of the State of Washington. It also simplifies the invoicing and payment process as well as reconciliation between DOH and the LHJs. Auditor’s Remarks While management has implemented a new procedure for program staff to document their review and approval of subrecipient reimbursement requests, this approval is not communicated to fiscal staff before payments are issued. As a result, approval is assumed and not verified by fiscal staff when no response is received from the program staff. The amount of supporting documentation submitted by a subrecipient utilizing consolidated contracts is extensive and often covers multiple reimbursement requests for more than one federally funded program. In our judgment, this increases the risk that a proper review is not performed before payments are issued. We reaffirm our finding and will follow up on the status of the Department’s corrective action during our next audit period. Applicable Laws and Regulations 45 U.S. Code of Federal Regulations (CFR) Part 75, section 2, Definitions, includes the definition of improper payment. Title 45 CFR Part 75, section 303, Internal Controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. 45 CFR Part 75, section 403, Factors Affecting Allowability of Costs. 45 CFR Part 75, section 410, Collection of Unallowable Costs. Title 45 CFR Part 75, section 516, Audit findings, establishes reporting requirements for audit findings. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Washington State Department of Health A-19 Documentation Matrix Approved by FMU 7/1/2022 This is the backup documentation required based on the determined risk level. Please ensure the detailed GL expenditure report clearly aligns with the A19 form. More supporting documentation may be requested by programs at any time due to programmatic requirements regardless of risk category. NOTE: Indirect costs included on A19s must include verification of the following: • Indirect plan is current and on file with DOH • Indirect rate is being applied accurately to allowable expenditures • If the indirect cost rate plan has expired, no indirect costs can be charged If the subrecipient is using 10% de minimis they must complete DOH de minimis certification
2023-046 The Department of Health did not have adequate internal controls to ensure payments to subrecipients were allowable, met cost principles, and were within the period of performance for the Epidemiology and Laboratory Capacity for Infectious Diseases program. Assistance Listing Number and Title: 93.323 Epidemiology and Laboratory Capacity for Infectious Diseases 93.323 COVID-19 Epidemiology and Laboratory Capacity for Infectious Diseases Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: NU50CK000515-05-00; NU50CK000515-01-06; NU50CK000515-01-07; NU50CK000515-01-08; NU50CK000515-02-04; NU50CK000515-01-09; NU50CK000515-02-01; NU50CK000515-02-06; NU50CK000515-02-03; NU50CK000515-02-09; NU50CK000515-02-07; NU50CK000515-03-03; NU50CK000515-03-01; NU50CK000515-04-00; NU50CK000515-04-03 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs / Cost Principles Period of Performance Known Questioned Cost Amount: $1,735 Prior Year Audit Finding: Yes, Finding 2022-033 Background The Department of Health administers the Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) program. The goal of the program is to support state, local, and territories’ public health efforts to reduce morbidity and associated deaths caused by a wide range of infectious disease threats. ELC provides annual funding, strategic direction, and technical assistance to domestic jurisdictions for strengthening core capacities in epidemiology, laboratory, and health information systems activities. In addition to strengthening core infectious disease capacities nationwide, the program also supports several specific infectious disease programs and projects, and provides special appropriations in response to infectious disease emergencies. The Department spent about $198.5 million in federal grant funds in fiscal year 2023, about $17 million of which was disbursed to subrecipients. To help carry out the program’s objectives, the Department issues consolidated contracts to Local Health Jurisdictions that are classified as subrecipients. A consolidated contract is for one subrecipient that combines funding for multiple federal programs. Subrecipients are awarded federal funds on a reimbursement basis only. The Department assigns each subrecipient a risk level based on standardized criteria, and it maintains a matrix that specifies the documentation that subrecipients at each risk level are required to submit with every reimbursement. There are varying requirements among low, moderate and high-risk subrecipients for each of the following expense categories: • Salaries and benefits • Equipment ($5,000 or more) • Materials, supplies, and other • Travel (in-state and out-of-state) • Contracts and sub-subrecipients • Administrative/indirect costs During the audit period, subrecipients submitted invoices to the Department’s accounting unit where staff, on a weekly basis, compiled a list of all consolidated contract invoices into one email. The emails were sent to Department program staff requesting review to ensure the payment was allowable. The emails consisted of 30 to 50 invoice requests with hundreds of pages of supporting documentation. Each invoice listed in the email would be considered approved if program staff did not respond. To address concerns about an invoice, program staff were required to email the accounting unit within 10 business days to withhold payment until the items in question were resolved. Beginning in February 2023, program staff documented their review and approval of the reimbursement request on a spreadsheet. The spreadsheet was only used at the program level, so it was not shared with the fiscal staff to communicate approval prior to issuing payment. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the prior audit, we reported the Department did not have adequate internal controls over and did not comply with fiscal monitoring requirements to ensure subrecipients of the ELC program only used funds for allowable activities and met cost principles. The prior finding number was 2022-033. Description of Condition The Department did not have adequate internal controls to ensure payments to subrecipients were allowable, met cost principles, and were within the period of performance for the ELC program. Department program staff were required to use the documentation matrix when reviewing subrecipient payments to ensure they were for allowable activities, met cost principles, were within the period of performance and included required supporting documentation. However, program staff did not communicate their approval to the accounting unit that issues payment. As a result, the Department paid the subrecipients without knowing whether these expenditures had been reviewed and approved by the program staff. We used a statistically valid sampling method to randomly select and examine 55 out of 441 subrecipient payments. Additionally, we judgmentally reviewed one individually significant payment that totaled $939,182. In total, we examined more than $8.8 million in subrecipient payments as part of the audit. Of the 55 randomly selected payments examined, we identified two payments (3.6 percent) that did not have the required supporting documentation for the subrecipients’ assigned risk level. We consider these internal control deficiencies to be a material weakness. Cause of Condition The Department’s established procedures allowed for paying subrecipients without ensuring program staff reviewed and determined the payment was allowable and adequately supported. Furthermore, program management did not ensure staff followed the existing review procedures. Effect of Condition and Questioned Costs Without establishing adequate internal controls, the Department cannot reasonably ensure it is using federal funds for allowable purposes and within the period of performance. By not ensuring subrecipients submitted required supporting documentation, staff could not adequately verify the reimbursement claims, and the Department could not ensure its subrecipients complied with the subaward’s terms and conditions. The two payments for which the Department did not have required supporting documentation from subrecipients totaled $1,735 in known questioned costs. Based on these results, we estimate that the total amount of likely improper payments using federal funds to be $46,169. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our “best estimate of total questioned costs,” as required by 2 CFR 200.516(3). To ensure a representative sample, we stratified the population by dollar amount. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Department: • Improve internal controls to ensure that it obtains adequate supporting documentation from subrecipients before reimbursing them • Improve internal controls to ensure program staff review and approve expenditures to verify they are for allowable activities prior to payment • Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Department’s Response We appreciate the State Auditor’s Office audit of the ELC grant. DOH is committed to ensuring our programs comply with federal regulations. The Department does not concur with the finding. While the Department has taken steps to ensure payments to providers contain proper support in line with our A19 matrix for risk assessed of our subrecipients, we continue to disagree with SAO’s assessment of a material weakness in internal controls over the consolidated contract provider payment process. As noted in the finding, program staff now document their review and approval of consolidated contract reimbursement requests. If the payment has no issues or concerns, the total payment is logged in a spreadsheet with documented review and approval to denote no issues and that full payment can be made. If there is a question on allowable cost, period of performance, a need for additional backup or an error, program ELC staff will update spreadsheet with the amounts in question and communicate with the Local Health Jurisdiction (LHJ), document the correspondence, and contact the accounting consolidated contract payment desk to withhold the specific amount of payment until the issue is resolved. Once resolved staff update the spreadsheet to denote the issue has been resolved and email accounting to release the payment amount in question. The defined process of consolidated contract payments has been in place for well over a decade and was implemented in response to issues arising with timely payment of funds to our local government partners. The consolidated contracts are an essential tool in providing such funding on a large scale. This process balances many needs in tracking payments, providing documentation to the programs for review as well as allowing for timely distribution of funding to the local health jurisdictions for state and federal programs in order to serve the residents of the State of Washington. It also simplifies the invoicing and payment process as well as reconciliation between DOH and the LHJs. Auditor’s Remarks While management has implemented a new procedure for program staff to document their review and approval of subrecipient reimbursement requests, this approval is not communicated to fiscal staff before payments are issued. As a result, approval is assumed and not verified by fiscal staff when no response is received from the program staff. The amount of supporting documentation submitted by a subrecipient utilizing consolidated contracts is extensive and often covers multiple reimbursement requests for more than one federally funded program. In our judgment, this increases the risk that a proper review is not performed before payments are issued. We reaffirm our finding and will follow up on the status of the Department’s corrective action during our next audit period. Applicable Laws and Regulations 45 U.S. Code of Federal Regulations (CFR) Part 75, section 2, Definitions, includes the definition of improper payment. Title 45 CFR Part 75, section 303, Internal Controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. 45 CFR Part 75, section 403, Factors Affecting Allowability of Costs. 45 CFR Part 75, section 410, Collection of Unallowable Costs. Title 45 CFR Part 75, section 516, Audit findings, establishes reporting requirements for audit findings. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Washington State Department of Health A-19 Documentation Matrix Approved by FMU 7/1/2022 This is the backup documentation required based on the determined risk level. Please ensure the detailed GL expenditure report clearly aligns with the A19 form. More supporting documentation may be requested by programs at any time due to programmatic requirements regardless of risk category. NOTE: Indirect costs included on A19s must include verification of the following: • Indirect plan is current and on file with DOH • Indirect rate is being applied accurately to allowable expenditures • If the indirect cost rate plan has expired, no indirect costs can be charged If the subrecipient is using 10% de minimis they must complete DOH de minimis certification
PRAIRIE-HILLS ELEMENTARY SCHOOL DISTRICT 144 07‐016‐1440‐02 SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ending June 30, 2023 SECTION III - FEDERAL AWARD FINDINGS AND QUESTIONED COSTS 1. FINDING NUMBER:14 2023 - 003 2. THIS FINDING IS: X New Repeat from Prior year? Year originally reported? 3. Federal Program Name and Year: Title I Grants to Local Education Agencies 4. Project No.: 2023-4300-00, 2022-4300-00, 2023-4331-00, 2022-4331-00 5. AL No.: 84.010 6. Passed Through: Illinois State Board of Education 7. Federal Agency: US Department of Education 8. Criteria or specific requirement (including statutory, regulatory, or other citation) Per the Uniform Guidance (2 CFR Part 200), all costs charged to Federal awards must be adequately documented and supported by the accounting records. 9. Condition15 During the audit we noted that the District claimed expenditures in excess of amounts that could be supported by the accounting records by $52,112. 10. Questioned Costs16 We identified $52,112 in known questioned costs. 11. Context17 The District's expenditure claim for the 2900 Function/400 object claim had unsupported expenditures of $11,702, the 3000 Function/400 object claim had unsupported expenditures of $11,485 and the 3700 Function/400 object had unsupported expenditures of $28,926. 12. Effect The District is not in compliance with the Uniform Guidance and claimed expenditures that were unsupported and resulted in questioned costs of $52,212. 13. Cause The cause of the condition appears to be an oversight on the part of The District. Although the District has policies in place to review and approve expenditures and charge them to a designated source of funds code, this was not enforced throughout the fiscal year and documentation was not maintained that reconciled the expenditure claim to the District's internal accounting records. 14. Recommendation We recommend that The District implement a formal policy requiring all expenditures to be supported by adequate documentation as well as consistently utilizing the relevant souce of funds code. The District should also provide training to all relevant personnel about this policy. 15. Management's response18 The District agrees with the finding and intends to implement the recommended actions. 14 See footnote 11. 15 Include facts that support the deficiency identified on the audit finding (§200.516 (b)(3)). 16 Identify questioned costs as required by §200.516 (a)(3 - 4). 17 See footnote 12. 18 To the extent practical, indicate when management does not agree with the finding, questioned cost, or both.
PRAIRIE-HILLS ELEMENTARY SCHOOL DISTRICT 144 07‐016‐1440‐02 SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ending June 30, 2023 SECTION III - FEDERAL AWARD FINDINGS AND QUESTIONED COSTS 1. FINDING NUMBER:14 2023 - 003 2. THIS FINDING IS: X New Repeat from Prior year? Year originally reported? 3. Federal Program Name and Year: Title I Grants to Local Education Agencies 4. Project No.: 2023-4300-00, 2022-4300-00, 2023-4331-00, 2022-4331-00 5. AL No.: 84.010 6. Passed Through: Illinois State Board of Education 7. Federal Agency: US Department of Education 8. Criteria or specific requirement (including statutory, regulatory, or other citation) Per the Uniform Guidance (2 CFR Part 200), all costs charged to Federal awards must be adequately documented and supported by the accounting records. 9. Condition15 During the audit we noted that the District claimed expenditures in excess of amounts that could be supported by the accounting records by $52,112. 10. Questioned Costs16 We identified $52,112 in known questioned costs. 11. Context17 The District's expenditure claim for the 2900 Function/400 object claim had unsupported expenditures of $11,702, the 3000 Function/400 object claim had unsupported expenditures of $11,485 and the 3700 Function/400 object had unsupported expenditures of $28,926. 12. Effect The District is not in compliance with the Uniform Guidance and claimed expenditures that were unsupported and resulted in questioned costs of $52,212. 13. Cause The cause of the condition appears to be an oversight on the part of The District. Although the District has policies in place to review and approve expenditures and charge them to a designated source of funds code, this was not enforced throughout the fiscal year and documentation was not maintained that reconciled the expenditure claim to the District's internal accounting records. 14. Recommendation We recommend that The District implement a formal policy requiring all expenditures to be supported by adequate documentation as well as consistently utilizing the relevant souce of funds code. The District should also provide training to all relevant personnel about this policy. 15. Management's response18 The District agrees with the finding and intends to implement the recommended actions. 14 See footnote 11. 15 Include facts that support the deficiency identified on the audit finding (§200.516 (b)(3)). 16 Identify questioned costs as required by §200.516 (a)(3 - 4). 17 See footnote 12. 18 To the extent practical, indicate when management does not agree with the finding, questioned cost, or both.
PRAIRIE-HILLS ELEMENTARY SCHOOL DISTRICT 144 07‐016‐1440‐02 SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ending June 30, 2023 SECTION III - FEDERAL AWARD FINDINGS AND QUESTIONED COSTS 1. FINDING NUMBER:14 2023 - 002 2. THIS FINDING IS: X New Repeat from Prior year? Year originally reported? 3. Federal Program Name and Year: Education Stabilization Fund 4. Project No.: 22-4998-ER, 22-4998-E3, 23-4998-D3, 22-4998-HL, 23-4998-JK 5. AL No.: 84.425 6. Passed Through: Illinois State Board of Education 7. Federal Agency: US Department of Education 8. Criteria or specific requirement (including statutory, regulatory, or other citation) Per the Uniform Guidance (2 CFR Part 200), all costs charged to Federal awards must be adequately documented and supported by the accounting records. 9. Condition15 During the audit we noted that the District claimed expenditures in excess of amounts that could be supported by the accounting records by $102,438. 10. Questioned Costs16 We identified $102,438 in known questioned costs in our audit. 11. Context17 The District's expenditure claim for the 2540 Function/400 object claim had unsupported expenditures of $1,189, the 2550 Function/300 object claim had unsupported expenditures of $101,249. 12. Effect The District is not in compliance with the Uniform Guidance and claimed expenditures that were unsupported and resulted in questioned costs of $101,249. 13. Cause The cause of the condition appears to be an oversight on the part of The District. Although the District has policies in place to review and approve expenditures and charge them to a designated source of funds code, this was not enforced throughout the fiscal year and documentation was not maintained that reconciled the expenditure claim to the District's internal accounting records. 14. Recommendation We recommend that The District implement a formal policy requiring all expenditures to be supported by adequate documentation as well as consistently utilizing the relevant souce of funds code. The District should also provide training to all relevant personnel about this policy. 15. Management's response18 The District agrees with the finding and intends to implement the recommended actions. 14 See footnote 11. 15 Include facts that support the deficiency identified on the audit finding (§200.516 (b)(3)). 16 Identify questioned costs as required by §200.516 (a)(3 - 4). 17 See footnote 12. 18 To the extent practical, indicate when management does not agree with the finding, questioned cost, or both.
PRAIRIE-HILLS ELEMENTARY SCHOOL DISTRICT 144 07‐016‐1440‐02 SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ending June 30, 2023 SECTION III - FEDERAL AWARD FINDINGS AND QUESTIONED COSTS 1. FINDING NUMBER:14 2023 - 002 2. THIS FINDING IS: X New Repeat from Prior year? Year originally reported? 3. Federal Program Name and Year: Education Stabilization Fund 4. Project No.: 22-4998-ER, 22-4998-E3, 23-4998-D3, 22-4998-HL, 23-4998-JK 5. AL No.: 84.425 6. Passed Through: Illinois State Board of Education 7. Federal Agency: US Department of Education 8. Criteria or specific requirement (including statutory, regulatory, or other citation) Per the Uniform Guidance (2 CFR Part 200), all costs charged to Federal awards must be adequately documented and supported by the accounting records. 9. Condition15 During the audit we noted that the District claimed expenditures in excess of amounts that could be supported by the accounting records by $102,438. 10. Questioned Costs16 We identified $102,438 in known questioned costs in our audit. 11. Context17 The District's expenditure claim for the 2540 Function/400 object claim had unsupported expenditures of $1,189, the 2550 Function/300 object claim had unsupported expenditures of $101,249. 12. Effect The District is not in compliance with the Uniform Guidance and claimed expenditures that were unsupported and resulted in questioned costs of $101,249. 13. Cause The cause of the condition appears to be an oversight on the part of The District. Although the District has policies in place to review and approve expenditures and charge them to a designated source of funds code, this was not enforced throughout the fiscal year and documentation was not maintained that reconciled the expenditure claim to the District's internal accounting records. 14. Recommendation We recommend that The District implement a formal policy requiring all expenditures to be supported by adequate documentation as well as consistently utilizing the relevant souce of funds code. The District should also provide training to all relevant personnel about this policy. 15. Management's response18 The District agrees with the finding and intends to implement the recommended actions. 14 See footnote 11. 15 Include facts that support the deficiency identified on the audit finding (§200.516 (b)(3)). 16 Identify questioned costs as required by §200.516 (a)(3 - 4). 17 See footnote 12. 18 To the extent practical, indicate when management does not agree with the finding, questioned cost, or both.
PRAIRIE-HILLS ELEMENTARY SCHOOL DISTRICT 144 07‐016‐1440‐02 SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ending June 30, 2023 SECTION III - FEDERAL AWARD FINDINGS AND QUESTIONED COSTS 1. FINDING NUMBER:14 2023 - 002 2. THIS FINDING IS: X New Repeat from Prior year? Year originally reported? 3. Federal Program Name and Year: Education Stabilization Fund 4. Project No.: 22-4998-ER, 22-4998-E3, 23-4998-D3, 22-4998-HL, 23-4998-JK 5. AL No.: 84.425 6. Passed Through: Illinois State Board of Education 7. Federal Agency: US Department of Education 8. Criteria or specific requirement (including statutory, regulatory, or other citation) Per the Uniform Guidance (2 CFR Part 200), all costs charged to Federal awards must be adequately documented and supported by the accounting records. 9. Condition15 During the audit we noted that the District claimed expenditures in excess of amounts that could be supported by the accounting records by $102,438. 10. Questioned Costs16 We identified $102,438 in known questioned costs in our audit. 11. Context17 The District's expenditure claim for the 2540 Function/400 object claim had unsupported expenditures of $1,189, the 2550 Function/300 object claim had unsupported expenditures of $101,249. 12. Effect The District is not in compliance with the Uniform Guidance and claimed expenditures that were unsupported and resulted in questioned costs of $101,249. 13. Cause The cause of the condition appears to be an oversight on the part of The District. Although the District has policies in place to review and approve expenditures and charge them to a designated source of funds code, this was not enforced throughout the fiscal year and documentation was not maintained that reconciled the expenditure claim to the District's internal accounting records. 14. Recommendation We recommend that The District implement a formal policy requiring all expenditures to be supported by adequate documentation as well as consistently utilizing the relevant souce of funds code. The District should also provide training to all relevant personnel about this policy. 15. Management's response18 The District agrees with the finding and intends to implement the recommended actions. 14 See footnote 11. 15 Include facts that support the deficiency identified on the audit finding (§200.516 (b)(3)). 16 Identify questioned costs as required by §200.516 (a)(3 - 4). 17 See footnote 12. 18 To the extent practical, indicate when management does not agree with the finding, questioned cost, or both.
Criteria: Per federal regulation 2 CFR section 200.516(b)(1), the School District is required to develop and maintain procedures regarding equipment acquired with federal funds. Condition: The School District has not adopted written procedures regarding the inventory and safeguarding of equipment purchased with federal funds. Cause: The School District was unaware of the detailed procedures required with respect to the accountability of federally funded equipment. Effect: The School District is not in compliance with the equipment requirements. Recommendation: We recommend that the School District adopt procedures to maintain property records on federally acquired equipment consistent with the required components identified in 2 CFR section 200.516; the safeguarding of such equipment; and perform an inventory of such equipment no less than once every two years. Management’s Response: Management agrees with this finding. Status: The School District has implemented policies and procedures regarding equipment acquired with federal funds, but has not prepared an existing inventory of equipment acquired with federal funds from past years. There were no purchases that would be applicable that were made during the fiscal year ended June 30, 2023.
Criteria: Per federal regulation 2 CFR section 200.516(b)(1), the School District is required to develop and maintain procedures regarding equipment acquired with federal funds. Condition: The School District has not adopted written procedures regarding the inventory and safeguarding of equipment purchased with federal funds. Cause: The School District was unaware of the detailed procedures required with respect to the accountability of federally funded equipment. Effect: The School District is not in compliance with the equipment requirements. Recommendation: We recommend that the School District adopt procedures to maintain property records on federally acquired equipment consistent with the required components identified in 2 CFR section 200.516; the safeguarding of such equipment; and perform an inventory of such equipment no less than once every two years. Management’s Response: Management agrees with this finding. Status: The School District has implemented policies and procedures regarding equipment acquired with federal funds, but has not prepared an existing inventory of equipment acquired with federal funds from past years. There were no purchases that would be applicable that were made during the fiscal year ended June 30, 2023.
Federal Program Information: Highway Planning and Construction (ALN 20.205), Motor Carrier Safety Assistance High Priority Activities Grants and Cooperative Agreements (ALN 20.237), State and Community Highway Safety Grants (ALN 20.600) and Mineta Consortium for Transportation Mobility (“MCTM”) (ALN 20.701) Criteria or Specific Requirement (Including Statutory, Regulatory or Other Citation): § 200.516(4) and (6) requires the auditor to report the following as audit findings in a schedule of findings and questioned costs: a) Known questioned costs greater than $25,000 for a Federal program that is not audited as a major program. Except for audit follow-up, the auditor is not required to perform audit procedures for such a Federal program; therefore, the auditor will normally not find questioned costs for a program that is not audited as a major program. However, if the auditor does become aware of questioned costs for a Federal program that is not audited as a major program (for example, as part of audit follow-up or other audit procedures) and the known questioned costs are greater than $25,000, the auditor must report this as an audit finding. b) Known or likely fraud affecting a Federal award, unless such fraud is otherwise reported as an audit finding in the schedule of findings and questioned costs for Federal awards. This paragraph does not require the auditor to report publicly information which could compromise investigative or legal proceedings or to make an additional reporting when the auditor confirms that the fraud was reported outside the auditor's reports under the direct reporting requirements of Generally Accepted Government Auditing Standards (“GAGAS”). B. Allowable Costs – In order for costs to be allowable under federal awards, they must be necessary and reasonable for the performance of the federal award and be allocable thereto under the principles in 2 CFR Part 200, Subpart E, be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-federal entity, be accorded consistent treatment, and be determined in accordance with generally accepted accounting principles. Condition: Certain expenditures reported on the schedule of expenditures and federal awards were not allowable under federal guidelines, and were not appropriately approved nor supported by sufficient documentation. Cause: Suspected misappropriation of assets arising from insufficient internal controls and administrative oversight with respect to review of federal expenditures for allowable costs. Effect or Potential Effect: These costs were inappropriately reimbursed with federal funds during the year. Questioned Costs: $141,060. Context: As discussed in Finding 2023-001, there was a failure with respect to the system of internal control that allowed for suspected misappropriation from specific individuals. The University performed an investigation that covered expenditures as presented on the schedule of expenditure of federal awards for the year ended June 30, 2023 that identified both the suspected abuse/misappropriation and the related questioned costs. Management’s investigation is ongoing and the appropriate law enforcement authorities have been notified. Additional questioned costs related to fiscal years prior to and subsequent to the year ended June 30, 2023 may be identified. Identification as a Repeat Finding: No similar findings noted in the prior year. Recommendation: We recommend the University revise its procedures and internal controls surrounding the review of expenditures charged to federal grants by defining the expectations of those that are approving the various aspects of expenditures, including clarifying expectations for reviewing supporting documentation. We also recommend that the University engage in additional training for those that are a part of the approval process for such expenditures, with the objective of renewing understanding of the procurement requirements under the Uniform Guidance as well as the expectations commensurate with their roles as approvers. Such changes will help the University ensure that expenditures are allowable based on the grant agreement and federal regulations. Views of Responsible Officials: The process to review Payment Request Forms (“PRFs”), used for payment to vendors that do not require the use of a purchase order, will be improved by requiring the review of supporting documents to ensure expenses are allowable by the newly established Sponsored Program Office (SPO) post award team. This team will thoroughly review supporting documents to ensure expenses are allowable, allocable, and reasonable according to university policies and grant terms. PRFs will be reviewed by SPO and will serve as the key control point before transactions are forwarded to accounting to post to sponsored awards. The Director of Compliance will conduct spot checks on all sponsored transactional activity involving PRFs, especially for high-risk grants to provide an additional layer of oversight. The new review process and training for these responsibilities will be implemented by spring 2025 as part of the broader campus-wide workflow training and staffing up of the new SPO post-award office. The Director of Post Award Compliance will be hired by March 2025. As part of the compliance program, quarterly audit samples will be conducted of PRFs and other high risk sponsored research transactions.
Federal Program Information: Highway Planning and Construction (ALN 20.205), Motor Carrier Safety Assistance High Priority Activities Grants and Cooperative Agreements (ALN 20.237), State and Community Highway Safety Grants (ALN 20.600) and Mineta Consortium for Transportation Mobility (“MCTM”) (ALN 20.701) Criteria or Specific Requirement (Including Statutory, Regulatory or Other Citation): § 200.516(4) and (6) requires the auditor to report the following as audit findings in a schedule of findings and questioned costs: a) Known questioned costs greater than $25,000 for a Federal program that is not audited as a major program. Except for audit follow-up, the auditor is not required to perform audit procedures for such a Federal program; therefore, the auditor will normally not find questioned costs for a program that is not audited as a major program. However, if the auditor does become aware of questioned costs for a Federal program that is not audited as a major program (for example, as part of audit follow-up or other audit procedures) and the known questioned costs are greater than $25,000, the auditor must report this as an audit finding. b) Known or likely fraud affecting a Federal award, unless such fraud is otherwise reported as an audit finding in the schedule of findings and questioned costs for Federal awards. This paragraph does not require the auditor to report publicly information which could compromise investigative or legal proceedings or to make an additional reporting when the auditor confirms that the fraud was reported outside the auditor's reports under the direct reporting requirements of Generally Accepted Government Auditing Standards (“GAGAS”). B. Allowable Costs – In order for costs to be allowable under federal awards, they must be necessary and reasonable for the performance of the federal award and be allocable thereto under the principles in 2 CFR Part 200, Subpart E, be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-federal entity, be accorded consistent treatment, and be determined in accordance with generally accepted accounting principles. Condition: Certain expenditures reported on the schedule of expenditures and federal awards were not allowable under federal guidelines, and were not appropriately approved nor supported by sufficient documentation. Cause: Suspected misappropriation of assets arising from insufficient internal controls and administrative oversight with respect to review of federal expenditures for allowable costs. Effect or Potential Effect: These costs were inappropriately reimbursed with federal funds during the year. Questioned Costs: $141,060. Context: As discussed in Finding 2023-001, there was a failure with respect to the system of internal control that allowed for suspected misappropriation from specific individuals. The University performed an investigation that covered expenditures as presented on the schedule of expenditure of federal awards for the year ended June 30, 2023 that identified both the suspected abuse/misappropriation and the related questioned costs. Management’s investigation is ongoing and the appropriate law enforcement authorities have been notified. Additional questioned costs related to fiscal years prior to and subsequent to the year ended June 30, 2023 may be identified. Identification as a Repeat Finding: No similar findings noted in the prior year. Recommendation: We recommend the University revise its procedures and internal controls surrounding the review of expenditures charged to federal grants by defining the expectations of those that are approving the various aspects of expenditures, including clarifying expectations for reviewing supporting documentation. We also recommend that the University engage in additional training for those that are a part of the approval process for such expenditures, with the objective of renewing understanding of the procurement requirements under the Uniform Guidance as well as the expectations commensurate with their roles as approvers. Such changes will help the University ensure that expenditures are allowable based on the grant agreement and federal regulations. Views of Responsible Officials: The process to review Payment Request Forms (“PRFs”), used for payment to vendors that do not require the use of a purchase order, will be improved by requiring the review of supporting documents to ensure expenses are allowable by the newly established Sponsored Program Office (SPO) post award team. This team will thoroughly review supporting documents to ensure expenses are allowable, allocable, and reasonable according to university policies and grant terms. PRFs will be reviewed by SPO and will serve as the key control point before transactions are forwarded to accounting to post to sponsored awards. The Director of Compliance will conduct spot checks on all sponsored transactional activity involving PRFs, especially for high-risk grants to provide an additional layer of oversight. The new review process and training for these responsibilities will be implemented by spring 2025 as part of the broader campus-wide workflow training and staffing up of the new SPO post-award office. The Director of Post Award Compliance will be hired by March 2025. As part of the compliance program, quarterly audit samples will be conducted of PRFs and other high risk sponsored research transactions.
Federal Program Information: Highway Planning and Construction (ALN 20.205), Motor Carrier Safety Assistance High Priority Activities Grants and Cooperative Agreements (ALN 20.237), State and Community Highway Safety Grants (ALN 20.600) and Mineta Consortium for Transportation Mobility (“MCTM”) (ALN 20.701) Criteria or Specific Requirement (Including Statutory, Regulatory or Other Citation): § 200.516(4) and (6) requires the auditor to report the following as audit findings in a schedule of findings and questioned costs: a) Known questioned costs greater than $25,000 for a Federal program that is not audited as a major program. Except for audit follow-up, the auditor is not required to perform audit procedures for such a Federal program; therefore, the auditor will normally not find questioned costs for a program that is not audited as a major program. However, if the auditor does become aware of questioned costs for a Federal program that is not audited as a major program (for example, as part of audit follow-up or other audit procedures) and the known questioned costs are greater than $25,000, the auditor must report this as an audit finding. b) Known or likely fraud affecting a Federal award, unless such fraud is otherwise reported as an audit finding in the schedule of findings and questioned costs for Federal awards. This paragraph does not require the auditor to report publicly information which could compromise investigative or legal proceedings or to make an additional reporting when the auditor confirms that the fraud was reported outside the auditor's reports under the direct reporting requirements of Generally Accepted Government Auditing Standards (“GAGAS”). B. Allowable Costs – In order for costs to be allowable under federal awards, they must be necessary and reasonable for the performance of the federal award and be allocable thereto under the principles in 2 CFR Part 200, Subpart E, be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-federal entity, be accorded consistent treatment, and be determined in accordance with generally accepted accounting principles. Condition: Certain expenditures reported on the schedule of expenditures and federal awards were not allowable under federal guidelines, and were not appropriately approved nor supported by sufficient documentation. Cause: Suspected misappropriation of assets arising from insufficient internal controls and administrative oversight with respect to review of federal expenditures for allowable costs. Effect or Potential Effect: These costs were inappropriately reimbursed with federal funds during the year. Questioned Costs: $141,060. Context: As discussed in Finding 2023-001, there was a failure with respect to the system of internal control that allowed for suspected misappropriation from specific individuals. The University performed an investigation that covered expenditures as presented on the schedule of expenditure of federal awards for the year ended June 30, 2023 that identified both the suspected abuse/misappropriation and the related questioned costs. Management’s investigation is ongoing and the appropriate law enforcement authorities have been notified. Additional questioned costs related to fiscal years prior to and subsequent to the year ended June 30, 2023 may be identified. Identification as a Repeat Finding: No similar findings noted in the prior year. Recommendation: We recommend the University revise its procedures and internal controls surrounding the review of expenditures charged to federal grants by defining the expectations of those that are approving the various aspects of expenditures, including clarifying expectations for reviewing supporting documentation. We also recommend that the University engage in additional training for those that are a part of the approval process for such expenditures, with the objective of renewing understanding of the procurement requirements under the Uniform Guidance as well as the expectations commensurate with their roles as approvers. Such changes will help the University ensure that expenditures are allowable based on the grant agreement and federal regulations. Views of Responsible Officials: The process to review Payment Request Forms (“PRFs”), used for payment to vendors that do not require the use of a purchase order, will be improved by requiring the review of supporting documents to ensure expenses are allowable by the newly established Sponsored Program Office (SPO) post award team. This team will thoroughly review supporting documents to ensure expenses are allowable, allocable, and reasonable according to university policies and grant terms. PRFs will be reviewed by SPO and will serve as the key control point before transactions are forwarded to accounting to post to sponsored awards. The Director of Compliance will conduct spot checks on all sponsored transactional activity involving PRFs, especially for high-risk grants to provide an additional layer of oversight. The new review process and training for these responsibilities will be implemented by spring 2025 as part of the broader campus-wide workflow training and staffing up of the new SPO post-award office. The Director of Post Award Compliance will be hired by March 2025. As part of the compliance program, quarterly audit samples will be conducted of PRFs and other high risk sponsored research transactions.
Federal Program Information: Highway Planning and Construction (ALN 20.205), Motor Carrier Safety Assistance High Priority Activities Grants and Cooperative Agreements (ALN 20.237), State and Community Highway Safety Grants (ALN 20.600) and Mineta Consortium for Transportation Mobility (“MCTM”) (ALN 20.701) Criteria or Specific Requirement (Including Statutory, Regulatory or Other Citation): § 200.516(4) and (6) requires the auditor to report the following as audit findings in a schedule of findings and questioned costs: a) Known questioned costs greater than $25,000 for a Federal program that is not audited as a major program. Except for audit follow-up, the auditor is not required to perform audit procedures for such a Federal program; therefore, the auditor will normally not find questioned costs for a program that is not audited as a major program. However, if the auditor does become aware of questioned costs for a Federal program that is not audited as a major program (for example, as part of audit follow-up or other audit procedures) and the known questioned costs are greater than $25,000, the auditor must report this as an audit finding. b) Known or likely fraud affecting a Federal award, unless such fraud is otherwise reported as an audit finding in the schedule of findings and questioned costs for Federal awards. This paragraph does not require the auditor to report publicly information which could compromise investigative or legal proceedings or to make an additional reporting when the auditor confirms that the fraud was reported outside the auditor's reports under the direct reporting requirements of Generally Accepted Government Auditing Standards (“GAGAS”). B. Allowable Costs – In order for costs to be allowable under federal awards, they must be necessary and reasonable for the performance of the federal award and be allocable thereto under the principles in 2 CFR Part 200, Subpart E, be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-federal entity, be accorded consistent treatment, and be determined in accordance with generally accepted accounting principles. Condition: Certain expenditures reported on the schedule of expenditures and federal awards were not allowable under federal guidelines, and were not appropriately approved nor supported by sufficient documentation. Cause: Suspected misappropriation of assets arising from insufficient internal controls and administrative oversight with respect to review of federal expenditures for allowable costs. Effect or Potential Effect: These costs were inappropriately reimbursed with federal funds during the year. Questioned Costs: $141,060. Context: As discussed in Finding 2023-001, there was a failure with respect to the system of internal control that allowed for suspected misappropriation from specific individuals. The University performed an investigation that covered expenditures as presented on the schedule of expenditure of federal awards for the year ended June 30, 2023 that identified both the suspected abuse/misappropriation and the related questioned costs. Management’s investigation is ongoing and the appropriate law enforcement authorities have been notified. Additional questioned costs related to fiscal years prior to and subsequent to the year ended June 30, 2023 may be identified. Identification as a Repeat Finding: No similar findings noted in the prior year. Recommendation: We recommend the University revise its procedures and internal controls surrounding the review of expenditures charged to federal grants by defining the expectations of those that are approving the various aspects of expenditures, including clarifying expectations for reviewing supporting documentation. We also recommend that the University engage in additional training for those that are a part of the approval process for such expenditures, with the objective of renewing understanding of the procurement requirements under the Uniform Guidance as well as the expectations commensurate with their roles as approvers. Such changes will help the University ensure that expenditures are allowable based on the grant agreement and federal regulations. Views of Responsible Officials: The process to review Payment Request Forms (“PRFs”), used for payment to vendors that do not require the use of a purchase order, will be improved by requiring the review of supporting documents to ensure expenses are allowable by the newly established Sponsored Program Office (SPO) post award team. This team will thoroughly review supporting documents to ensure expenses are allowable, allocable, and reasonable according to university policies and grant terms. PRFs will be reviewed by SPO and will serve as the key control point before transactions are forwarded to accounting to post to sponsored awards. The Director of Compliance will conduct spot checks on all sponsored transactional activity involving PRFs, especially for high-risk grants to provide an additional layer of oversight. The new review process and training for these responsibilities will be implemented by spring 2025 as part of the broader campus-wide workflow training and staffing up of the new SPO post-award office. The Director of Post Award Compliance will be hired by March 2025. As part of the compliance program, quarterly audit samples will be conducted of PRFs and other high risk sponsored research transactions.
Federal Program Information: Highway Planning and Construction (ALN 20.205), Motor Carrier Safety Assistance High Priority Activities Grants and Cooperative Agreements (ALN 20.237), State and Community Highway Safety Grants (ALN 20.600) and Mineta Consortium for Transportation Mobility (“MCTM”) (ALN 20.701) Criteria or Specific Requirement (Including Statutory, Regulatory or Other Citation): § 200.516(4) and (6) requires the auditor to report the following as audit findings in a schedule of findings and questioned costs: a) Known questioned costs greater than $25,000 for a Federal program that is not audited as a major program. Except for audit follow-up, the auditor is not required to perform audit procedures for such a Federal program; therefore, the auditor will normally not find questioned costs for a program that is not audited as a major program. However, if the auditor does become aware of questioned costs for a Federal program that is not audited as a major program (for example, as part of audit follow-up or other audit procedures) and the known questioned costs are greater than $25,000, the auditor must report this as an audit finding. b) Known or likely fraud affecting a Federal award, unless such fraud is otherwise reported as an audit finding in the schedule of findings and questioned costs for Federal awards. This paragraph does not require the auditor to report publicly information which could compromise investigative or legal proceedings or to make an additional reporting when the auditor confirms that the fraud was reported outside the auditor's reports under the direct reporting requirements of Generally Accepted Government Auditing Standards (“GAGAS”). B. Allowable Costs – In order for costs to be allowable under federal awards, they must be necessary and reasonable for the performance of the federal award and be allocable thereto under the principles in 2 CFR Part 200, Subpart E, be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-federal entity, be accorded consistent treatment, and be determined in accordance with generally accepted accounting principles. Condition: Certain expenditures reported on the schedule of expenditures and federal awards were not allowable under federal guidelines, and were not appropriately approved nor supported by sufficient documentation. Cause: Suspected misappropriation of assets arising from insufficient internal controls and administrative oversight with respect to review of federal expenditures for allowable costs. Effect or Potential Effect: These costs were inappropriately reimbursed with federal funds during the year. Questioned Costs: $141,060. Context: As discussed in Finding 2023-001, there was a failure with respect to the system of internal control that allowed for suspected misappropriation from specific individuals. The University performed an investigation that covered expenditures as presented on the schedule of expenditure of federal awards for the year ended June 30, 2023 that identified both the suspected abuse/misappropriation and the related questioned costs. Management’s investigation is ongoing and the appropriate law enforcement authorities have been notified. Additional questioned costs related to fiscal years prior to and subsequent to the year ended June 30, 2023 may be identified. Identification as a Repeat Finding: No similar findings noted in the prior year. Recommendation: We recommend the University revise its procedures and internal controls surrounding the review of expenditures charged to federal grants by defining the expectations of those that are approving the various aspects of expenditures, including clarifying expectations for reviewing supporting documentation. We also recommend that the University engage in additional training for those that are a part of the approval process for such expenditures, with the objective of renewing understanding of the procurement requirements under the Uniform Guidance as well as the expectations commensurate with their roles as approvers. Such changes will help the University ensure that expenditures are allowable based on the grant agreement and federal regulations. Views of Responsible Officials: The process to review Payment Request Forms (“PRFs”), used for payment to vendors that do not require the use of a purchase order, will be improved by requiring the review of supporting documents to ensure expenses are allowable by the newly established Sponsored Program Office (SPO) post award team. This team will thoroughly review supporting documents to ensure expenses are allowable, allocable, and reasonable according to university policies and grant terms. PRFs will be reviewed by SPO and will serve as the key control point before transactions are forwarded to accounting to post to sponsored awards. The Director of Compliance will conduct spot checks on all sponsored transactional activity involving PRFs, especially for high-risk grants to provide an additional layer of oversight. The new review process and training for these responsibilities will be implemented by spring 2025 as part of the broader campus-wide workflow training and staffing up of the new SPO post-award office. The Director of Post Award Compliance will be hired by March 2025. As part of the compliance program, quarterly audit samples will be conducted of PRFs and other high risk sponsored research transactions.
Federal Program Information: Highway Planning and Construction (ALN 20.205), Motor Carrier Safety Assistance High Priority Activities Grants and Cooperative Agreements (ALN 20.237), State and Community Highway Safety Grants (ALN 20.600) and Mineta Consortium for Transportation Mobility (“MCTM”) (ALN 20.701) Criteria or Specific Requirement (Including Statutory, Regulatory or Other Citation): § 200.516(4) and (6) requires the auditor to report the following as audit findings in a schedule of findings and questioned costs: a) Known questioned costs greater than $25,000 for a Federal program that is not audited as a major program. Except for audit follow-up, the auditor is not required to perform audit procedures for such a Federal program; therefore, the auditor will normally not find questioned costs for a program that is not audited as a major program. However, if the auditor does become aware of questioned costs for a Federal program that is not audited as a major program (for example, as part of audit follow-up or other audit procedures) and the known questioned costs are greater than $25,000, the auditor must report this as an audit finding. b) Known or likely fraud affecting a Federal award, unless such fraud is otherwise reported as an audit finding in the schedule of findings and questioned costs for Federal awards. This paragraph does not require the auditor to report publicly information which could compromise investigative or legal proceedings or to make an additional reporting when the auditor confirms that the fraud was reported outside the auditor's reports under the direct reporting requirements of Generally Accepted Government Auditing Standards (“GAGAS”). B. Allowable Costs – In order for costs to be allowable under federal awards, they must be necessary and reasonable for the performance of the federal award and be allocable thereto under the principles in 2 CFR Part 200, Subpart E, be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-federal entity, be accorded consistent treatment, and be determined in accordance with generally accepted accounting principles. Condition: Certain expenditures reported on the schedule of expenditures and federal awards were not allowable under federal guidelines, and were not appropriately approved nor supported by sufficient documentation. Cause: Suspected misappropriation of assets arising from insufficient internal controls and administrative oversight with respect to review of federal expenditures for allowable costs. Effect or Potential Effect: These costs were inappropriately reimbursed with federal funds during the year. Questioned Costs: $141,060. Context: As discussed in Finding 2023-001, there was a failure with respect to the system of internal control that allowed for suspected misappropriation from specific individuals. The University performed an investigation that covered expenditures as presented on the schedule of expenditure of federal awards for the year ended June 30, 2023 that identified both the suspected abuse/misappropriation and the related questioned costs. Management’s investigation is ongoing and the appropriate law enforcement authorities have been notified. Additional questioned costs related to fiscal years prior to and subsequent to the year ended June 30, 2023 may be identified. Identification as a Repeat Finding: No similar findings noted in the prior year. Recommendation: We recommend the University revise its procedures and internal controls surrounding the review of expenditures charged to federal grants by defining the expectations of those that are approving the various aspects of expenditures, including clarifying expectations for reviewing supporting documentation. We also recommend that the University engage in additional training for those that are a part of the approval process for such expenditures, with the objective of renewing understanding of the procurement requirements under the Uniform Guidance as well as the expectations commensurate with their roles as approvers. Such changes will help the University ensure that expenditures are allowable based on the grant agreement and federal regulations. Views of Responsible Officials: The process to review Payment Request Forms (“PRFs”), used for payment to vendors that do not require the use of a purchase order, will be improved by requiring the review of supporting documents to ensure expenses are allowable by the newly established Sponsored Program Office (SPO) post award team. This team will thoroughly review supporting documents to ensure expenses are allowable, allocable, and reasonable according to university policies and grant terms. PRFs will be reviewed by SPO and will serve as the key control point before transactions are forwarded to accounting to post to sponsored awards. The Director of Compliance will conduct spot checks on all sponsored transactional activity involving PRFs, especially for high-risk grants to provide an additional layer of oversight. The new review process and training for these responsibilities will be implemented by spring 2025 as part of the broader campus-wide workflow training and staffing up of the new SPO post-award office. The Director of Post Award Compliance will be hired by March 2025. As part of the compliance program, quarterly audit samples will be conducted of PRFs and other high risk sponsored research transactions.
Federal Program Information: Highway Planning and Construction (ALN 20.205), Motor Carrier Safety Assistance High Priority Activities Grants and Cooperative Agreements (ALN 20.237), State and Community Highway Safety Grants (ALN 20.600) and Mineta Consortium for Transportation Mobility (“MCTM”) (ALN 20.701) Criteria or Specific Requirement (Including Statutory, Regulatory or Other Citation): § 200.516(4) and (6) requires the auditor to report the following as audit findings in a schedule of findings and questioned costs: a) Known questioned costs greater than $25,000 for a Federal program that is not audited as a major program. Except for audit follow-up, the auditor is not required to perform audit procedures for such a Federal program; therefore, the auditor will normally not find questioned costs for a program that is not audited as a major program. However, if the auditor does become aware of questioned costs for a Federal program that is not audited as a major program (for example, as part of audit follow-up or other audit procedures) and the known questioned costs are greater than $25,000, the auditor must report this as an audit finding. b) Known or likely fraud affecting a Federal award, unless such fraud is otherwise reported as an audit finding in the schedule of findings and questioned costs for Federal awards. This paragraph does not require the auditor to report publicly information which could compromise investigative or legal proceedings or to make an additional reporting when the auditor confirms that the fraud was reported outside the auditor's reports under the direct reporting requirements of Generally Accepted Government Auditing Standards (“GAGAS”). B. Allowable Costs – In order for costs to be allowable under federal awards, they must be necessary and reasonable for the performance of the federal award and be allocable thereto under the principles in 2 CFR Part 200, Subpart E, be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-federal entity, be accorded consistent treatment, and be determined in accordance with generally accepted accounting principles. Condition: Certain expenditures reported on the schedule of expenditures and federal awards were not allowable under federal guidelines, and were not appropriately approved nor supported by sufficient documentation. Cause: Suspected misappropriation of assets arising from insufficient internal controls and administrative oversight with respect to review of federal expenditures for allowable costs. Effect or Potential Effect: These costs were inappropriately reimbursed with federal funds during the year. Questioned Costs: $141,060. Context: As discussed in Finding 2023-001, there was a failure with respect to the system of internal control that allowed for suspected misappropriation from specific individuals. The University performed an investigation that covered expenditures as presented on the schedule of expenditure of federal awards for the year ended June 30, 2023 that identified both the suspected abuse/misappropriation and the related questioned costs. Management’s investigation is ongoing and the appropriate law enforcement authorities have been notified. Additional questioned costs related to fiscal years prior to and subsequent to the year ended June 30, 2023 may be identified. Identification as a Repeat Finding: No similar findings noted in the prior year. Recommendation: We recommend the University revise its procedures and internal controls surrounding the review of expenditures charged to federal grants by defining the expectations of those that are approving the various aspects of expenditures, including clarifying expectations for reviewing supporting documentation. We also recommend that the University engage in additional training for those that are a part of the approval process for such expenditures, with the objective of renewing understanding of the procurement requirements under the Uniform Guidance as well as the expectations commensurate with their roles as approvers. Such changes will help the University ensure that expenditures are allowable based on the grant agreement and federal regulations. Views of Responsible Officials: The process to review Payment Request Forms (“PRFs”), used for payment to vendors that do not require the use of a purchase order, will be improved by requiring the review of supporting documents to ensure expenses are allowable by the newly established Sponsored Program Office (SPO) post award team. This team will thoroughly review supporting documents to ensure expenses are allowable, allocable, and reasonable according to university policies and grant terms. PRFs will be reviewed by SPO and will serve as the key control point before transactions are forwarded to accounting to post to sponsored awards. The Director of Compliance will conduct spot checks on all sponsored transactional activity involving PRFs, especially for high-risk grants to provide an additional layer of oversight. The new review process and training for these responsibilities will be implemented by spring 2025 as part of the broader campus-wide workflow training and staffing up of the new SPO post-award office. The Director of Post Award Compliance will be hired by March 2025. As part of the compliance program, quarterly audit samples will be conducted of PRFs and other high risk sponsored research transactions.
Federal Program Information: Highway Planning and Construction (ALN 20.205), Motor Carrier Safety Assistance High Priority Activities Grants and Cooperative Agreements (ALN 20.237), State and Community Highway Safety Grants (ALN 20.600) and Mineta Consortium for Transportation Mobility (“MCTM”) (ALN 20.701) Criteria or Specific Requirement (Including Statutory, Regulatory or Other Citation): § 200.516(4) and (6) requires the auditor to report the following as audit findings in a schedule of findings and questioned costs: a) Known questioned costs greater than $25,000 for a Federal program that is not audited as a major program. Except for audit follow-up, the auditor is not required to perform audit procedures for such a Federal program; therefore, the auditor will normally not find questioned costs for a program that is not audited as a major program. However, if the auditor does become aware of questioned costs for a Federal program that is not audited as a major program (for example, as part of audit follow-up or other audit procedures) and the known questioned costs are greater than $25,000, the auditor must report this as an audit finding. b) Known or likely fraud affecting a Federal award, unless such fraud is otherwise reported as an audit finding in the schedule of findings and questioned costs for Federal awards. This paragraph does not require the auditor to report publicly information which could compromise investigative or legal proceedings or to make an additional reporting when the auditor confirms that the fraud was reported outside the auditor's reports under the direct reporting requirements of Generally Accepted Government Auditing Standards (“GAGAS”). B. Allowable Costs – In order for costs to be allowable under federal awards, they must be necessary and reasonable for the performance of the federal award and be allocable thereto under the principles in 2 CFR Part 200, Subpart E, be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-federal entity, be accorded consistent treatment, and be determined in accordance with generally accepted accounting principles. Condition: Certain expenditures reported on the schedule of expenditures and federal awards were not allowable under federal guidelines, and were not appropriately approved nor supported by sufficient documentation. Cause: Suspected misappropriation of assets arising from insufficient internal controls and administrative oversight with respect to review of federal expenditures for allowable costs. Effect or Potential Effect: These costs were inappropriately reimbursed with federal funds during the year. Questioned Costs: $141,060. Context: As discussed in Finding 2023-001, there was a failure with respect to the system of internal control that allowed for suspected misappropriation from specific individuals. The University performed an investigation that covered expenditures as presented on the schedule of expenditure of federal awards for the year ended June 30, 2023 that identified both the suspected abuse/misappropriation and the related questioned costs. Management’s investigation is ongoing and the appropriate law enforcement authorities have been notified. Additional questioned costs related to fiscal years prior to and subsequent to the year ended June 30, 2023 may be identified. Identification as a Repeat Finding: No similar findings noted in the prior year. Recommendation: We recommend the University revise its procedures and internal controls surrounding the review of expenditures charged to federal grants by defining the expectations of those that are approving the various aspects of expenditures, including clarifying expectations for reviewing supporting documentation. We also recommend that the University engage in additional training for those that are a part of the approval process for such expenditures, with the objective of renewing understanding of the procurement requirements under the Uniform Guidance as well as the expectations commensurate with their roles as approvers. Such changes will help the University ensure that expenditures are allowable based on the grant agreement and federal regulations. Views of Responsible Officials: The process to review Payment Request Forms (“PRFs”), used for payment to vendors that do not require the use of a purchase order, will be improved by requiring the review of supporting documents to ensure expenses are allowable by the newly established Sponsored Program Office (SPO) post award team. This team will thoroughly review supporting documents to ensure expenses are allowable, allocable, and reasonable according to university policies and grant terms. PRFs will be reviewed by SPO and will serve as the key control point before transactions are forwarded to accounting to post to sponsored awards. The Director of Compliance will conduct spot checks on all sponsored transactional activity involving PRFs, especially for high-risk grants to provide an additional layer of oversight. The new review process and training for these responsibilities will be implemented by spring 2025 as part of the broader campus-wide workflow training and staffing up of the new SPO post-award office. The Director of Post Award Compliance will be hired by March 2025. As part of the compliance program, quarterly audit samples will be conducted of PRFs and other high risk sponsored research transactions.
Federal Program Information: Highway Planning and Construction (ALN 20.205), Motor Carrier Safety Assistance High Priority Activities Grants and Cooperative Agreements (ALN 20.237), State and Community Highway Safety Grants (ALN 20.600) and Mineta Consortium for Transportation Mobility (“MCTM”) (ALN 20.701) Criteria or Specific Requirement (Including Statutory, Regulatory or Other Citation): § 200.516(4) and (6) requires the auditor to report the following as audit findings in a schedule of findings and questioned costs: a) Known questioned costs greater than $25,000 for a Federal program that is not audited as a major program. Except for audit follow-up, the auditor is not required to perform audit procedures for such a Federal program; therefore, the auditor will normally not find questioned costs for a program that is not audited as a major program. However, if the auditor does become aware of questioned costs for a Federal program that is not audited as a major program (for example, as part of audit follow-up or other audit procedures) and the known questioned costs are greater than $25,000, the auditor must report this as an audit finding. b) Known or likely fraud affecting a Federal award, unless such fraud is otherwise reported as an audit finding in the schedule of findings and questioned costs for Federal awards. This paragraph does not require the auditor to report publicly information which could compromise investigative or legal proceedings or to make an additional reporting when the auditor confirms that the fraud was reported outside the auditor's reports under the direct reporting requirements of Generally Accepted Government Auditing Standards (“GAGAS”). B. Allowable Costs – In order for costs to be allowable under federal awards, they must be necessary and reasonable for the performance of the federal award and be allocable thereto under the principles in 2 CFR Part 200, Subpart E, be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-federal entity, be accorded consistent treatment, and be determined in accordance with generally accepted accounting principles. Condition: Certain expenditures reported on the schedule of expenditures and federal awards were not allowable under federal guidelines, and were not appropriately approved nor supported by sufficient documentation. Cause: Suspected misappropriation of assets arising from insufficient internal controls and administrative oversight with respect to review of federal expenditures for allowable costs. Effect or Potential Effect: These costs were inappropriately reimbursed with federal funds during the year. Questioned Costs: $141,060. Context: As discussed in Finding 2023-001, there was a failure with respect to the system of internal control that allowed for suspected misappropriation from specific individuals. The University performed an investigation that covered expenditures as presented on the schedule of expenditure of federal awards for the year ended June 30, 2023 that identified both the suspected abuse/misappropriation and the related questioned costs. Management’s investigation is ongoing and the appropriate law enforcement authorities have been notified. Additional questioned costs related to fiscal years prior to and subsequent to the year ended June 30, 2023 may be identified. Identification as a Repeat Finding: No similar findings noted in the prior year. Recommendation: We recommend the University revise its procedures and internal controls surrounding the review of expenditures charged to federal grants by defining the expectations of those that are approving the various aspects of expenditures, including clarifying expectations for reviewing supporting documentation. We also recommend that the University engage in additional training for those that are a part of the approval process for such expenditures, with the objective of renewing understanding of the procurement requirements under the Uniform Guidance as well as the expectations commensurate with their roles as approvers. Such changes will help the University ensure that expenditures are allowable based on the grant agreement and federal regulations. Views of Responsible Officials: The process to review Payment Request Forms (“PRFs”), used for payment to vendors that do not require the use of a purchase order, will be improved by requiring the review of supporting documents to ensure expenses are allowable by the newly established Sponsored Program Office (SPO) post award team. This team will thoroughly review supporting documents to ensure expenses are allowable, allocable, and reasonable according to university policies and grant terms. PRFs will be reviewed by SPO and will serve as the key control point before transactions are forwarded to accounting to post to sponsored awards. The Director of Compliance will conduct spot checks on all sponsored transactional activity involving PRFs, especially for high-risk grants to provide an additional layer of oversight. The new review process and training for these responsibilities will be implemented by spring 2025 as part of the broader campus-wide workflow training and staffing up of the new SPO post-award office. The Director of Post Award Compliance will be hired by March 2025. As part of the compliance program, quarterly audit samples will be conducted of PRFs and other high risk sponsored research transactions.
Federal Program Information: Highway Planning and Construction (ALN 20.205), Motor Carrier Safety Assistance High Priority Activities Grants and Cooperative Agreements (ALN 20.237), State and Community Highway Safety Grants (ALN 20.600) and Mineta Consortium for Transportation Mobility (“MCTM”) (ALN 20.701) Criteria or Specific Requirement (Including Statutory, Regulatory or Other Citation): § 200.516(4) and (6) requires the auditor to report the following as audit findings in a schedule of findings and questioned costs: a) Known questioned costs greater than $25,000 for a Federal program that is not audited as a major program. Except for audit follow-up, the auditor is not required to perform audit procedures for such a Federal program; therefore, the auditor will normally not find questioned costs for a program that is not audited as a major program. However, if the auditor does become aware of questioned costs for a Federal program that is not audited as a major program (for example, as part of audit follow-up or other audit procedures) and the known questioned costs are greater than $25,000, the auditor must report this as an audit finding. b) Known or likely fraud affecting a Federal award, unless such fraud is otherwise reported as an audit finding in the schedule of findings and questioned costs for Federal awards. This paragraph does not require the auditor to report publicly information which could compromise investigative or legal proceedings or to make an additional reporting when the auditor confirms that the fraud was reported outside the auditor's reports under the direct reporting requirements of Generally Accepted Government Auditing Standards (“GAGAS”). B. Allowable Costs – In order for costs to be allowable under federal awards, they must be necessary and reasonable for the performance of the federal award and be allocable thereto under the principles in 2 CFR Part 200, Subpart E, be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-federal entity, be accorded consistent treatment, and be determined in accordance with generally accepted accounting principles. Condition: Certain expenditures reported on the schedule of expenditures and federal awards were not allowable under federal guidelines, and were not appropriately approved nor supported by sufficient documentation. Cause: Suspected misappropriation of assets arising from insufficient internal controls and administrative oversight with respect to review of federal expenditures for allowable costs. Effect or Potential Effect: These costs were inappropriately reimbursed with federal funds during the year. Questioned Costs: $141,060. Context: As discussed in Finding 2023-001, there was a failure with respect to the system of internal control that allowed for suspected misappropriation from specific individuals. The University performed an investigation that covered expenditures as presented on the schedule of expenditure of federal awards for the year ended June 30, 2023 that identified both the suspected abuse/misappropriation and the related questioned costs. Management’s investigation is ongoing and the appropriate law enforcement authorities have been notified. Additional questioned costs related to fiscal years prior to and subsequent to the year ended June 30, 2023 may be identified. Identification as a Repeat Finding: No similar findings noted in the prior year. Recommendation: We recommend the University revise its procedures and internal controls surrounding the review of expenditures charged to federal grants by defining the expectations of those that are approving the various aspects of expenditures, including clarifying expectations for reviewing supporting documentation. We also recommend that the University engage in additional training for those that are a part of the approval process for such expenditures, with the objective of renewing understanding of the procurement requirements under the Uniform Guidance as well as the expectations commensurate with their roles as approvers. Such changes will help the University ensure that expenditures are allowable based on the grant agreement and federal regulations. Views of Responsible Officials: The process to review Payment Request Forms (“PRFs”), used for payment to vendors that do not require the use of a purchase order, will be improved by requiring the review of supporting documents to ensure expenses are allowable by the newly established Sponsored Program Office (SPO) post award team. This team will thoroughly review supporting documents to ensure expenses are allowable, allocable, and reasonable according to university policies and grant terms. PRFs will be reviewed by SPO and will serve as the key control point before transactions are forwarded to accounting to post to sponsored awards. The Director of Compliance will conduct spot checks on all sponsored transactional activity involving PRFs, especially for high-risk grants to provide an additional layer of oversight. The new review process and training for these responsibilities will be implemented by spring 2025 as part of the broader campus-wide workflow training and staffing up of the new SPO post-award office. The Director of Post Award Compliance will be hired by March 2025. As part of the compliance program, quarterly audit samples will be conducted of PRFs and other high risk sponsored research transactions.
Federal Program Information: Highway Planning and Construction (ALN 20.205), Motor Carrier Safety Assistance High Priority Activities Grants and Cooperative Agreements (ALN 20.237), State and Community Highway Safety Grants (ALN 20.600) and Mineta Consortium for Transportation Mobility (“MCTM”) (ALN 20.701) Criteria or Specific Requirement (Including Statutory, Regulatory or Other Citation): § 200.516(4) and (6) requires the auditor to report the following as audit findings in a schedule of findings and questioned costs: a) Known questioned costs greater than $25,000 for a Federal program that is not audited as a major program. Except for audit follow-up, the auditor is not required to perform audit procedures for such a Federal program; therefore, the auditor will normally not find questioned costs for a program that is not audited as a major program. However, if the auditor does become aware of questioned costs for a Federal program that is not audited as a major program (for example, as part of audit follow-up or other audit procedures) and the known questioned costs are greater than $25,000, the auditor must report this as an audit finding. b) Known or likely fraud affecting a Federal award, unless such fraud is otherwise reported as an audit finding in the schedule of findings and questioned costs for Federal awards. This paragraph does not require the auditor to report publicly information which could compromise investigative or legal proceedings or to make an additional reporting when the auditor confirms that the fraud was reported outside the auditor's reports under the direct reporting requirements of Generally Accepted Government Auditing Standards (“GAGAS”). B. Allowable Costs – In order for costs to be allowable under federal awards, they must be necessary and reasonable for the performance of the federal award and be allocable thereto under the principles in 2 CFR Part 200, Subpart E, be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-federal entity, be accorded consistent treatment, and be determined in accordance with generally accepted accounting principles. Condition: Certain expenditures reported on the schedule of expenditures and federal awards were not allowable under federal guidelines, and were not appropriately approved nor supported by sufficient documentation. Cause: Suspected misappropriation of assets arising from insufficient internal controls and administrative oversight with respect to review of federal expenditures for allowable costs. Effect or Potential Effect: These costs were inappropriately reimbursed with federal funds during the year. Questioned Costs: $141,060. Context: As discussed in Finding 2023-001, there was a failure with respect to the system of internal control that allowed for suspected misappropriation from specific individuals. The University performed an investigation that covered expenditures as presented on the schedule of expenditure of federal awards for the year ended June 30, 2023 that identified both the suspected abuse/misappropriation and the related questioned costs. Management’s investigation is ongoing and the appropriate law enforcement authorities have been notified. Additional questioned costs related to fiscal years prior to and subsequent to the year ended June 30, 2023 may be identified. Identification as a Repeat Finding: No similar findings noted in the prior year. Recommendation: We recommend the University revise its procedures and internal controls surrounding the review of expenditures charged to federal grants by defining the expectations of those that are approving the various aspects of expenditures, including clarifying expectations for reviewing supporting documentation. We also recommend that the University engage in additional training for those that are a part of the approval process for such expenditures, with the objective of renewing understanding of the procurement requirements under the Uniform Guidance as well as the expectations commensurate with their roles as approvers. Such changes will help the University ensure that expenditures are allowable based on the grant agreement and federal regulations. Views of Responsible Officials: The process to review Payment Request Forms (“PRFs”), used for payment to vendors that do not require the use of a purchase order, will be improved by requiring the review of supporting documents to ensure expenses are allowable by the newly established Sponsored Program Office (SPO) post award team. This team will thoroughly review supporting documents to ensure expenses are allowable, allocable, and reasonable according to university policies and grant terms. PRFs will be reviewed by SPO and will serve as the key control point before transactions are forwarded to accounting to post to sponsored awards. The Director of Compliance will conduct spot checks on all sponsored transactional activity involving PRFs, especially for high-risk grants to provide an additional layer of oversight. The new review process and training for these responsibilities will be implemented by spring 2025 as part of the broader campus-wide workflow training and staffing up of the new SPO post-award office. The Director of Post Award Compliance will be hired by March 2025. As part of the compliance program, quarterly audit samples will be conducted of PRFs and other high risk sponsored research transactions.
2 CFR § 200.439(b)(1) states that capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. Further, 2 CFR § 200.439(b)(2) states that capital expenditures for special purpose equipment are allowable as direct costs, provided that items with a unit cost of $5,000 or more have the prior written approval of the Federal awarding agency or pass-through entity. 2 CFR § 200.439(b)(3) states, in part, that capital expenditures for improvements to land, buildings, or equipment which materially increase their value or useful life are unallowable as a direct cost except with the prior written approval of the Federal awarding agency, or pass-through entity. 2 CFR § 200.421(e)(3) states, in part, that unallowable advertising and public relations costs include the costs of promotional items and memorabilia, including models, gifts, and souvenirs. Additionally, the federal grant agreement states, in part, that all construction and other capital expenditures/improvements supported with federal funds must be pre-approved by the Ohio Department of Education through the CCIP Application Process. Construction means (A) the preparation of drawings and specifications for school facilities; (B) erecting, building, acquiring, altering, remodeling, repairing, or extending school facilities; and (C) inspecting and supervising the construction of school facilities. Capital expenditures means expenditures to acquire capital assets (i.e., land, facilities, or equipment over $5,000 per unit) or expenditures to make additions, improvements, modifications, replacements, rearrangements, reinstallations, renovations, or alterations to capital assets that materially increase their value or useful life. During our testing of the ESSER Federal grant monies, we sampled 60 non-payroll transactions totaling $923,224 and two individually important items totaling $372,000. We noted the following exceptions: • 18 out of 60 transactions totaling $344,620 and one out of two individually important items totally $198,000 were not allowable per the programmatic requirements listed above. These noncompliant expenditures resulted in a projected noncompliant amount of $1,168,544. • One of the above expenditures is unallowable per the Federal grant agreement and per CFR § 200.421(e)(3) which was for the purchase of new hire t-shirts in the amount of $288; and • Seventeen of the above expenditures and one individually important item were for the purchase of various capital expenditures (the Patterson Field project, scoreboard, gym floor resurfacing, electrical repairs, garage roof repairs, gymnasium sound system, boiler repairs, security cameras, riding floor scrubber, copiers, a tractor, classroom expansion project and an ice machine) which were unallowable per the Federal grant agreement and 2 CFR § 200.439(b)(1), 2 CFR § 200.439(b)(2), and 2 CFR § 200.439(b)(3). The unallowable activities/costs paid with these Federal grant monies is in excess of $25,000 and therefore considered questioned costs under 2 CFR § 200.516. District management should review all grant award documents in order to execute policies and procedures which help ensure compliance with grant requirements. The District should thoroughly review all grant documentation to ensure all expenditures spent using Federal funds are in compliance with requirements.
2 CFR § 200.439(b)(1) states that capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. Further, 2 CFR § 200.439(b)(2) states that capital expenditures for special purpose equipment are allowable as direct costs, provided that items with a unit cost of $5,000 or more have the prior written approval of the Federal awarding agency or pass-through entity. 2 CFR § 200.439(b)(3) states, in part, that capital expenditures for improvements to land, buildings, or equipment which materially increase their value or useful life are unallowable as a direct cost except with the prior written approval of the Federal awarding agency, or pass-through entity. 2 CFR § 200.421(e)(3) states, in part, that unallowable advertising and public relations costs include the costs of promotional items and memorabilia, including models, gifts, and souvenirs. Additionally, the federal grant agreement states, in part, that all construction and other capital expenditures/improvements supported with federal funds must be pre-approved by the Ohio Department of Education through the CCIP Application Process. Construction means (A) the preparation of drawings and specifications for school facilities; (B) erecting, building, acquiring, altering, remodeling, repairing, or extending school facilities; and (C) inspecting and supervising the construction of school facilities. Capital expenditures means expenditures to acquire capital assets (i.e., land, facilities, or equipment over $5,000 per unit) or expenditures to make additions, improvements, modifications, replacements, rearrangements, reinstallations, renovations, or alterations to capital assets that materially increase their value or useful life. During our testing of the ESSER Federal grant monies, we sampled 60 non-payroll transactions totaling $923,224 and two individually important items totaling $372,000. We noted the following exceptions: • 18 out of 60 transactions totaling $344,620 and one out of two individually important items totally $198,000 were not allowable per the programmatic requirements listed above. These noncompliant expenditures resulted in a projected noncompliant amount of $1,168,544. • One of the above expenditures is unallowable per the Federal grant agreement and per CFR § 200.421(e)(3) which was for the purchase of new hire t-shirts in the amount of $288; and • Seventeen of the above expenditures and one individually important item were for the purchase of various capital expenditures (the Patterson Field project, scoreboard, gym floor resurfacing, electrical repairs, garage roof repairs, gymnasium sound system, boiler repairs, security cameras, riding floor scrubber, copiers, a tractor, classroom expansion project and an ice machine) which were unallowable per the Federal grant agreement and 2 CFR § 200.439(b)(1), 2 CFR § 200.439(b)(2), and 2 CFR § 200.439(b)(3). The unallowable activities/costs paid with these Federal grant monies is in excess of $25,000 and therefore considered questioned costs under 2 CFR § 200.516. District management should review all grant award documents in order to execute policies and procedures which help ensure compliance with grant requirements. The District should thoroughly review all grant documentation to ensure all expenditures spent using Federal funds are in compliance with requirements.
1. Summary of auditors' results (i) Type of report issued on the financial statements: Unmodified (ii) Internal control over financial reporting: Material weaknesses identified? No Significant deficiencies identified? Yes, Finding 2022-001 (iii) Noncompliance material to the financial statements noted? No (iv) Internal control over major federal programs: Material weaknesses identified? No Significant deficiencies identified? Yes, Finding 2022-001 (v) Type of report issued on compliance for major programs: Unmodified opinion. (vi) Any audit findings disclosed that are required to be reported in accordance with 2 CFR 200.516(a)? Yes (vii) Major program: Section 202 Capital Advance ALN: 14.157 (viii) Dollar threshold used for distinguishing Types A and B programs: $750,000 (ix) Auditee qualified as a low-risk auditee? No 2. Findings required to be reported in accordance with generally accepted government auditing standards 2022-001: Capital Advance ALN: 14.157 ? Replacement Reserve Deposits ? Finding Resolution Status: In Process ? Information on Universe Population Size: Twelve monthly deposits ? Sample Size Information: Twelve ? Identification of Repeat Finding and Finding Reference Number: 2021-001 ? Criteria: Under the Capital Advance agreement, HUD requires monthly deposits to the replacement reserve account for future capital expenditures.
SUMMARY OF AUDITOR?S RESULTS 1. The Independent Auditor?s Report expresses an unmodified opinion on the financial statements of Genesee Valley Presbyterian Nursing Center d/b/a Kirkhaven, HUD Project 014-43199 (Kirkhaven) prepared in accordance with generally accepted accounting principles. 2. No significant deficiencies or material weaknesses related to the audit of the financial statements are reported in the Independent Auditor?s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards. 3. No instances of noncompliance material to the financial statements of Kirkhaven which would be required to be reported in accordance with Government Auditing Standards were disclosed during the audit. 4. No material weaknesses or significant deficiencies were identified relating to the audit of each major federal award program in the Independent Auditor?s Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by the Uniform Guidance. 5. The independent auditor?s report on compliance for Kirkhaven?s major federal award programs expresses an unmodified opinion. 6. Audit finding (2022-001) that is required to be reported in accordance with 2 CFR section 200.516(a) are reported in this schedule. 7. The program tested as a major program was: ? United States Department of Housing and Urban Development (HUD), Assistance Listing No. 14.129 8. The threshold for distinguishing Types A and B programs was $750,000. 9. Kirkhaven was determined to be a low-risk auditee. B. FINDINGS - FINANCIAL STATEMENT AUDIT None. FINDINGS AND QUESTIONED COSTS - MAJOR FEDERAL AWARDS PROGRAM Finding 2022-001 ? Assistance Listing No. 14.129 ? United States Department of Housing and Urban Development Criteria Under the terms of the related regulatory agreement Kirkhaven is required to make timely monthly debt payments and deposits in certain escrow accounts. Condition/Context As part of our compliance testing, we reviewed the debt and escrow schedules and noted that the debt payments and escrow payments due in October through December of 2022 were not made.
SCHEDULE OF FINDINGS AND QUESTIONED COSTS Part A: Summary of Audit Results: 1. The audited financial statements were prepared in accordance with GAAP. 2. The auditor?s report expresses an unmodified opinion on the financial statements of HFF. 3. No material weaknesses were identified in relation to internal control over financial reporting. 4. No significant deficiencies were reported in relation to internal control over financial reporting. 5. No instances of noncompliance material to the financial statements of HFF were disclosed during the audit. 6. No material weaknesses related to internal control over major federal programs were identified during the audit. 7. No significant deficiencies related to internal control over major federal programs were reported during the audit. 8. The auditor?s report on compliance for the major federal award programs for HFF expresses an unmodified opinion. 9. There were no audit findings relative to the major federal award programs for HFF in accordance with 2 CFR 200.516(a). 10. One audit finding was disclosed that is required to be reported in accordance with 2 CFR 200.516(a). 11. Identification of major federal programs: Assistance Listing Number 14.231 12. The programs tested as major programs were: Assistance Listing Number 14.231 13. The threshold for distinguishing Types A and B programs was $750,000. 14. HFF was determined to be a low-risk auditee. Part B: Findings at the financial statement level: None Part C: Findings and Questioned Costs ? Major Federal Award Program Audit: None Findings and Questioned Cost ? Other Matters: 1) Finding 2022-001: Assistance Listing #14.267 US Department of Housing and Urban Development Passed through Community Shelter Board ? Transitional Age Youth Program Condition: Subrecipients not reimbursed on a timely basis. During the period, the Organization oversaw subrecipient grantees under CFDA #14.267. The Organization received and held funds from grantor intended for subrecipients for an amount of time in excess of what is considered timely for reimbursement to the subrecipient. Criteria: This is deemed a matter of untimely subrecipient reimbursement. Cause: The Organization had an incorrect understanding of their role as sub-grantee, in which they believed that additional information was required to be provided by subrecipient before funds were disbursed. Effect: The result is a backlog of monthly reimbursements not disbursed to subrecipient in a timely manner. Recommendations: That the Organization implement controls to align subrecipient reimbursement requests with collection of required subrecipient information, as well as establish a formal timeline for approving reimbursements to subrecipients. Comments: The finding was discussed with Board and Management, and they communicated in the Corrective Action Plan that the Organization will implement additional controls surrounding their subrecipient relationships, and that they consult Uniform Guidance guidelines when implementing these controls. It should be noted that the Organization does not maintain subrecipient relationships under any other federal grants, and hence, the issue at hand does not impact other grants/programs.
U.S. Department of Treasury. Program Name: COVID 19: Emergency Rental Assistance Program. Assistance Listing Number: 21.023. Finding: 21.023. Criteria: In accordance with Uniform Guidance 2 CFR 200.516 - Audit Findings, known or likely fraud affecting a Federal Award, as well as known questioned costs that are greater than $25,000 must be reported as audit findings in the schedule of findings and questioned costs. Condition: Although the County has controls in place to ensure compliance with their Emergency Rental Assistance Program's policies and procedures, which include fraud prevention procedures, fraud did occur. During 2022, the County discovered (and reported to the auditors) that eight (8) landlord applicants committed fraudulent activity that included the submission of documents that were modified electronically prior to their submission, stolen identity, misrepresentation and inability to repay funds within a timely manner. Funds were disbursed to these applicants prior to the County becoming aware of the fraud. Cause: Eight (8) landlord applicants committed fraudulent activity. Effects: Eight (8) applicants received funding, although the fraudulent activity was committed by the applicants. Questioned Costs: $144,692. Recommendation: We recommend the County strengthen procedures and/or implement additional procedures to reduce the potential of fraud occuring. Auditee's Reponse: In addition to continuing to follow the County's policies and procedures developed in accordance with Emergency Rental Assistance guidelines established by the U.S. Department of Treasury, the County implemented additional procedures in May 2022 to enhance fraud prevention activities. The updated procedures required HomeFirst Gwinnett, the subrecipient managing the Emergency Rental Assistance Program, to perform additional verification and approval procedures to detect fraudulent applications before they are presented for payment. HomeFirst Gwinnett would no longer accept documentation that had been completely generated electronically as sole proof of property ownership and added another level of file review of property deed records for landlord property owners utilizing the authorized property deed record website. All assistance above $10,000 will require final review/approval by the HomeFirst Gwinnet director or manager. As new applicants input their information into the County's vendor portal, the Treasury Division in the Department of Financial Services would verify the validity of those records and would not allow the registration to complete unless they met the required criteria. Any suspicious activity was reported to management promptly, and for suspected fraudulent applicants, those applicants accounts were locked as a preventative control so that no future transactions could be processed while the account was under investigation. For individual landlords, ACH payment was no longer an option and they were required to physically present present a valid picture ID to receive a check at the Program Office. Additional training on the revised procedures was provided to program staff. While the additional prevention measures noted above did deter fraudulent attempts made on the program, Gwinnett County tracked and reported eight landlord cases of suspected fraud in 2022. The suspected fraud was forwarded to the Gwinnett County Police Department's (GCPD) Financial Crimes Unit. Any funds recovered will be returned to the U.S. Department of the Treasury. Gwinnett County's emergency rental assistance program, Project RESET 2.0 (PR2.0), concluded on Thursday, December 29, 2022.
FINDING 2022-002 Program Information: COVID-19 Governor?s Emergency Education Relief Fund (84.425C) and COVID-19 Elementary and Secondary School Emergency Relief Fund (84.425U) Criteria or Specific Requirement (Including Statutory, Regulatory or Other Citation): 2 CFR section 200.516(a)(6) (a) The auditor must report the following as audit findings in a schedule of findings and questioned costs: (6) Known or likely fraud affecting a Federal award, unless such fraud is otherwise reported as an audit finding in the schedule of findings and questioned costs for Federal awards. Condition: A subrecipient of the Organization reported alleged fraud arising from grant mismanagement and misuse related to GEER and ESSER funding. Cause: Alleged collusion between employees at the subrecipient entity. Effect or Potential Effect: Unknown at this time. Questioned Costs: Not determinable. Context: Two employees of the subrecipient entity are alleged to have colluded in order to perpetrate fraud against the entity. The alleged fraud is purported to include alleged misappropriation of assets as well as alleged direct financial fraud. Once the Organization was alerted to the fraud, a funding hold was placed on the subrecipient entity, pending the results of ongoing investigations. Both employees alleged to have committed the fraud are no longer employed at the subrecipient organization. Identification as a Repeat Finding: No similar findings noted in the prior year. Recommendation: We recommend that the Organization continue to monitor the various investigations of the alleged fraud currently taking place. We further recommend that the Organization consider requiring subrecipient entities to submit disclosures of any workplace nepotism related to personnel with financial or reporting responsibilities. If personnel with reporting responsibilities are related to one another, the organization should require that subrecipient entities detail what additional review process or internal controls will take place to mitigate potential risks that may arise from workplace nepotism. Views of Responsible Officials and Planned Corrective Actions: Management will continue to closely monitor the situation.
Section III - Federal Award Findings and Questioned Costs (2 CFR 200.516(a)) Finding 2022-001: Payroll Allocations Information on the Federal Programs: 98.001 and 19.519 Criteria or specific requirement (including statutory, regulatory, or other citation): Under 2 CFR 200.430 all charges to federal awards for salaries and wages must be based on records that accurately reflect work performed, and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable and properly allocated. Condition: MdMUSA keeps a payroll allocation spreadsheet for each federal grant on a monthly basis to allocate time. MdMUSA determines percentage of time worked on each grant on the basis of hours worked during the month divided by total hours in the month. Instances were noted in which the total number of hours in a month was different for various grants in the same month. Additionally, there were instances in which employee timesheets were changed after the fact, and the finance department had to re-allocate significant values of time to reflect the modified timesheet. Cause: Total hours in the month is a manual input on each grant's allocation sheet and is calculated by multiplying 8 hours times the total number of working days in the month. Instances in which total number of hours in the month varied across different grants were the result of management oversight. There is no documented review and approval of employee timesheets. Effect or Potential Effect: When using the incorrect basis for the number of hours during a month, MdMUSA could inadvertently charge more or less time to certain awards than was actually spent. This could result in the Federal Government over-paying for salaries associated with the award. Additionally, lack of documented supervisory review of timesheets could result in timesheets being incorrect and time not being appropriately allocated to federal awards. Questioned Costs: Not determined. Context: Our audit procedures consisted of testwork performed over various payroll transactions during the year. We consisted our testwork to be representative of the population. The condition appears to be systematic in nature. Identification as a Repeat Finding, if Applicable: Not a repeat finding. Recommendation: We recommend that MdMUSA implement a review process over each grant's monthly payroll allocation sheet. This will ensure that the total hours for the month will be accurate and consistent across all awards. Additionally, we recommend that management implement a monthly review process over employee timesheets. Employee timesheets should be reviewed by an appropriate supervisor, or by the executive director, whichever is appropriate.
Section III - Federal Award Findings and Questioned Costs (2 CFR 200.516(a)) Finding 2022-001: Payroll Allocations Information on the Federal Programs: 98.001 and 19.519 Criteria or specific requirement (including statutory, regulatory, or other citation): Under 2 CFR 200.430 all charges to federal awards for salaries and wages must be based on records that accurately reflect work performed, and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable and properly allocated. Condition: MdMUSA keeps a payroll allocation spreadsheet for each federal grant on a monthly basis to allocate time. MdMUSA determines percentage of time worked on each grant on the basis of hours worked during the month divided by total hours in the month. Instances were noted in which the total number of hours in a month was different for various grants in the same month. Additionally, there were instances in which employee timesheets were changed after the fact, and the finance department had to re-allocate significant values of time to reflect the modified timesheet. Cause: Total hours in the month is a manual input on each grant's allocation sheet and is calculated by multiplying 8 hours times the total number of working days in the month. Instances in which total number of hours in the month varied across different grants were the result of management oversight. There is no documented review and approval of employee timesheets. Effect or Potential Effect: When using the incorrect basis for the number of hours during a month, MdMUSA could inadvertently charge more or less time to certain awards than was actually spent. This could result in the Federal Government over-paying for salaries associated with the award. Additionally, lack of documented supervisory review of timesheets could result in timesheets being incorrect and time not being appropriately allocated to federal awards. Questioned Costs: Not determined. Context: Our audit procedures consisted of testwork performed over various payroll transactions during the year. We consisted our testwork to be representative of the population. The condition appears to be systematic in nature. Identification as a Repeat Finding, if Applicable: Not a repeat finding. Recommendation: We recommend that MdMUSA implement a review process over each grant's monthly payroll allocation sheet. This will ensure that the total hours for the month will be accurate and consistent across all awards. Additionally, we recommend that management implement a monthly review process over employee timesheets. Employee timesheets should be reviewed by an appropriate supervisor, or by the executive director, whichever is appropriate.
Section III - Federal Award Findings and Questioned Costs (2 CFR 200.516(a)) Finding 2022-001: Payroll Allocations Information on the Federal Programs: 98.001 and 19.519 Criteria or specific requirement (including statutory, regulatory, or other citation): Under 2 CFR 200.430 all charges to federal awards for salaries and wages must be based on records that accurately reflect work performed, and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable and properly allocated. Condition: MdMUSA keeps a payroll allocation spreadsheet for each federal grant on a monthly basis to allocate time. MdMUSA determines percentage of time worked on each grant on the basis of hours worked during the month divided by total hours in the month. Instances were noted in which the total number of hours in a month was different for various grants in the same month. Additionally, there were instances in which employee timesheets were changed after the fact, and the finance department had to re-allocate significant values of time to reflect the modified timesheet. Cause: Total hours in the month is a manual input on each grant's allocation sheet and is calculated by multiplying 8 hours times the total number of working days in the month. Instances in which total number of hours in the month varied across different grants were the result of management oversight. There is no documented review and approval of employee timesheets. Effect or Potential Effect: When using the incorrect basis for the number of hours during a month, MdMUSA could inadvertently charge more or less time to certain awards than was actually spent. This could result in the Federal Government over-paying for salaries associated with the award. Additionally, lack of documented supervisory review of timesheets could result in timesheets being incorrect and time not being appropriately allocated to federal awards. Questioned Costs: Not determined. Context: Our audit procedures consisted of testwork performed over various payroll transactions during the year. We consisted our testwork to be representative of the population. The condition appears to be systematic in nature. Identification as a Repeat Finding, if Applicable: Not a repeat finding. Recommendation: We recommend that MdMUSA implement a review process over each grant's monthly payroll allocation sheet. This will ensure that the total hours for the month will be accurate and consistent across all awards. Additionally, we recommend that management implement a monthly review process over employee timesheets. Employee timesheets should be reviewed by an appropriate supervisor, or by the executive director, whichever is appropriate.
Section III - Federal Award Findings and Questioned Costs (2 CFR 200.516(a)) Finding 2022-001: Payroll Allocations Information on the Federal Programs: 98.001 and 19.519 Criteria or specific requirement (including statutory, regulatory, or other citation): Under 2 CFR 200.430 all charges to federal awards for salaries and wages must be based on records that accurately reflect work performed, and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable and properly allocated. Condition: MdMUSA keeps a payroll allocation spreadsheet for each federal grant on a monthly basis to allocate time. MdMUSA determines percentage of time worked on each grant on the basis of hours worked during the month divided by total hours in the month. Instances were noted in which the total number of hours in a month was different for various grants in the same month. Additionally, there were instances in which employee timesheets were changed after the fact, and the finance department had to re-allocate significant values of time to reflect the modified timesheet. Cause: Total hours in the month is a manual input on each grant's allocation sheet and is calculated by multiplying 8 hours times the total number of working days in the month. Instances in which total number of hours in the month varied across different grants were the result of management oversight. There is no documented review and approval of employee timesheets. Effect or Potential Effect: When using the incorrect basis for the number of hours during a month, MdMUSA could inadvertently charge more or less time to certain awards than was actually spent. This could result in the Federal Government over-paying for salaries associated with the award. Additionally, lack of documented supervisory review of timesheets could result in timesheets being incorrect and time not being appropriately allocated to federal awards. Questioned Costs: Not determined. Context: Our audit procedures consisted of testwork performed over various payroll transactions during the year. We consisted our testwork to be representative of the population. The condition appears to be systematic in nature. Identification as a Repeat Finding, if Applicable: Not a repeat finding. Recommendation: We recommend that MdMUSA implement a review process over each grant's monthly payroll allocation sheet. This will ensure that the total hours for the month will be accurate and consistent across all awards. Additionally, we recommend that management implement a monthly review process over employee timesheets. Employee timesheets should be reviewed by an appropriate supervisor, or by the executive director, whichever is appropriate.
Section III - Federal Award Findings and Questioned Costs (2 CFR 200.516(a)) Finding 2022-001: Payroll Allocations Information on the Federal Programs: 98.001 and 19.519 Criteria or specific requirement (including statutory, regulatory, or other citation): Under 2 CFR 200.430 all charges to federal awards for salaries and wages must be based on records that accurately reflect work performed, and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable and properly allocated. Condition: MdMUSA keeps a payroll allocation spreadsheet for each federal grant on a monthly basis to allocate time. MdMUSA determines percentage of time worked on each grant on the basis of hours worked during the month divided by total hours in the month. Instances were noted in which the total number of hours in a month was different for various grants in the same month. Additionally, there were instances in which employee timesheets were changed after the fact, and the finance department had to re-allocate significant values of time to reflect the modified timesheet. Cause: Total hours in the month is a manual input on each grant's allocation sheet and is calculated by multiplying 8 hours times the total number of working days in the month. Instances in which total number of hours in the month varied across different grants were the result of management oversight. There is no documented review and approval of employee timesheets. Effect or Potential Effect: When using the incorrect basis for the number of hours during a month, MdMUSA could inadvertently charge more or less time to certain awards than was actually spent. This could result in the Federal Government over-paying for salaries associated with the award. Additionally, lack of documented supervisory review of timesheets could result in timesheets being incorrect and time not being appropriately allocated to federal awards. Questioned Costs: Not determined. Context: Our audit procedures consisted of testwork performed over various payroll transactions during the year. We consisted our testwork to be representative of the population. The condition appears to be systematic in nature. Identification as a Repeat Finding, if Applicable: Not a repeat finding. Recommendation: We recommend that MdMUSA implement a review process over each grant's monthly payroll allocation sheet. This will ensure that the total hours for the month will be accurate and consistent across all awards. Additionally, we recommend that management implement a monthly review process over employee timesheets. Employee timesheets should be reviewed by an appropriate supervisor, or by the executive director, whichever is appropriate.
Section III - Federal Award Findings and Questioned Costs (2 CFR 200.516(a)) Finding 2022-001: Payroll Allocations Information on the Federal Programs: 98.001 and 19.519 Criteria or specific requirement (including statutory, regulatory, or other citation): Under 2 CFR 200.430 all charges to federal awards for salaries and wages must be based on records that accurately reflect work performed, and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable and properly allocated. Condition: MdMUSA keeps a payroll allocation spreadsheet for each federal grant on a monthly basis to allocate time. MdMUSA determines percentage of time worked on each grant on the basis of hours worked during the month divided by total hours in the month. Instances were noted in which the total number of hours in a month was different for various grants in the same month. Additionally, there were instances in which employee timesheets were changed after the fact, and the finance department had to re-allocate significant values of time to reflect the modified timesheet. Cause: Total hours in the month is a manual input on each grant's allocation sheet and is calculated by multiplying 8 hours times the total number of working days in the month. Instances in which total number of hours in the month varied across different grants were the result of management oversight. There is no documented review and approval of employee timesheets. Effect or Potential Effect: When using the incorrect basis for the number of hours during a month, MdMUSA could inadvertently charge more or less time to certain awards than was actually spent. This could result in the Federal Government over-paying for salaries associated with the award. Additionally, lack of documented supervisory review of timesheets could result in timesheets being incorrect and time not being appropriately allocated to federal awards. Questioned Costs: Not determined. Context: Our audit procedures consisted of testwork performed over various payroll transactions during the year. We consisted our testwork to be representative of the population. The condition appears to be systematic in nature. Identification as a Repeat Finding, if Applicable: Not a repeat finding. Recommendation: We recommend that MdMUSA implement a review process over each grant's monthly payroll allocation sheet. This will ensure that the total hours for the month will be accurate and consistent across all awards. Additionally, we recommend that management implement a monthly review process over employee timesheets. Employee timesheets should be reviewed by an appropriate supervisor, or by the executive director, whichever is appropriate.
Section III - Federal Award Findings and Questioned Costs (2 CFR 200.516(a)) Finding 2022-001: Payroll Allocations Information on the Federal Programs: 98.001 and 19.519 Criteria or specific requirement (including statutory, regulatory, or other citation): Under 2 CFR 200.430 all charges to federal awards for salaries and wages must be based on records that accurately reflect work performed, and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable and properly allocated. Condition: MdMUSA keeps a payroll allocation spreadsheet for each federal grant on a monthly basis to allocate time. MdMUSA determines percentage of time worked on each grant on the basis of hours worked during the month divided by total hours in the month. Instances were noted in which the total number of hours in a month was different for various grants in the same month. Additionally, there were instances in which employee timesheets were changed after the fact, and the finance department had to re-allocate significant values of time to reflect the modified timesheet. Cause: Total hours in the month is a manual input on each grant's allocation sheet and is calculated by multiplying 8 hours times the total number of working days in the month. Instances in which total number of hours in the month varied across different grants were the result of management oversight. There is no documented review and approval of employee timesheets. Effect or Potential Effect: When using the incorrect basis for the number of hours during a month, MdMUSA could inadvertently charge more or less time to certain awards than was actually spent. This could result in the Federal Government over-paying for salaries associated with the award. Additionally, lack of documented supervisory review of timesheets could result in timesheets being incorrect and time not being appropriately allocated to federal awards. Questioned Costs: Not determined. Context: Our audit procedures consisted of testwork performed over various payroll transactions during the year. We consisted our testwork to be representative of the population. The condition appears to be systematic in nature. Identification as a Repeat Finding, if Applicable: Not a repeat finding. Recommendation: We recommend that MdMUSA implement a review process over each grant's monthly payroll allocation sheet. This will ensure that the total hours for the month will be accurate and consistent across all awards. Additionally, we recommend that management implement a monthly review process over employee timesheets. Employee timesheets should be reviewed by an appropriate supervisor, or by the executive director, whichever is appropriate.
Section III - Federal Award Findings and Questioned Costs (2 CFR 200.516(a)) Finding 2022-001: Payroll Allocations Information on the Federal Programs: 98.001 and 19.519 Criteria or specific requirement (including statutory, regulatory, or other citation): Under 2 CFR 200.430 all charges to federal awards for salaries and wages must be based on records that accurately reflect work performed, and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable and properly allocated. Condition: MdMUSA keeps a payroll allocation spreadsheet for each federal grant on a monthly basis to allocate time. MdMUSA determines percentage of time worked on each grant on the basis of hours worked during the month divided by total hours in the month. Instances were noted in which the total number of hours in a month was different for various grants in the same month. Additionally, there were instances in which employee timesheets were changed after the fact, and the finance department had to re-allocate significant values of time to reflect the modified timesheet. Cause: Total hours in the month is a manual input on each grant's allocation sheet and is calculated by multiplying 8 hours times the total number of working days in the month. Instances in which total number of hours in the month varied across different grants were the result of management oversight. There is no documented review and approval of employee timesheets. Effect or Potential Effect: When using the incorrect basis for the number of hours during a month, MdMUSA could inadvertently charge more or less time to certain awards than was actually spent. This could result in the Federal Government over-paying for salaries associated with the award. Additionally, lack of documented supervisory review of timesheets could result in timesheets being incorrect and time not being appropriately allocated to federal awards. Questioned Costs: Not determined. Context: Our audit procedures consisted of testwork performed over various payroll transactions during the year. We consisted our testwork to be representative of the population. The condition appears to be systematic in nature. Identification as a Repeat Finding, if Applicable: Not a repeat finding. Recommendation: We recommend that MdMUSA implement a review process over each grant's monthly payroll allocation sheet. This will ensure that the total hours for the month will be accurate and consistent across all awards. Additionally, we recommend that management implement a monthly review process over employee timesheets. Employee timesheets should be reviewed by an appropriate supervisor, or by the executive director, whichever is appropriate.
Section III - Federal Award Findings and Questioned Costs (2 CFR 200.516(a)) Finding 2022-001: Payroll Allocations Information on the Federal Programs: 98.001 and 19.519 Criteria or specific requirement (including statutory, regulatory, or other citation): Under 2 CFR 200.430 all charges to federal awards for salaries and wages must be based on records that accurately reflect work performed, and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable and properly allocated. Condition: MdMUSA keeps a payroll allocation spreadsheet for each federal grant on a monthly basis to allocate time. MdMUSA determines percentage of time worked on each grant on the basis of hours worked during the month divided by total hours in the month. Instances were noted in which the total number of hours in a month was different for various grants in the same month. Additionally, there were instances in which employee timesheets were changed after the fact, and the finance department had to re-allocate significant values of time to reflect the modified timesheet. Cause: Total hours in the month is a manual input on each grant's allocation sheet and is calculated by multiplying 8 hours times the total number of working days in the month. Instances in which total number of hours in the month varied across different grants were the result of management oversight. There is no documented review and approval of employee timesheets. Effect or Potential Effect: When using the incorrect basis for the number of hours during a month, MdMUSA could inadvertently charge more or less time to certain awards than was actually spent. This could result in the Federal Government over-paying for salaries associated with the award. Additionally, lack of documented supervisory review of timesheets could result in timesheets being incorrect and time not being appropriately allocated to federal awards. Questioned Costs: Not determined. Context: Our audit procedures consisted of testwork performed over various payroll transactions during the year. We consisted our testwork to be representative of the population. The condition appears to be systematic in nature. Identification as a Repeat Finding, if Applicable: Not a repeat finding. Recommendation: We recommend that MdMUSA implement a review process over each grant's monthly payroll allocation sheet. This will ensure that the total hours for the month will be accurate and consistent across all awards. Additionally, we recommend that management implement a monthly review process over employee timesheets. Employee timesheets should be reviewed by an appropriate supervisor, or by the executive director, whichever is appropriate.
Section III - Federal Award Findings and Questioned Costs (2 CFR 200.516(a)) Finding 2022-001: Payroll Allocations Information on the Federal Programs: 98.001 and 19.519 Criteria or specific requirement (including statutory, regulatory, or other citation): Under 2 CFR 200.430 all charges to federal awards for salaries and wages must be based on records that accurately reflect work performed, and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable and properly allocated. Condition: MdMUSA keeps a payroll allocation spreadsheet for each federal grant on a monthly basis to allocate time. MdMUSA determines percentage of time worked on each grant on the basis of hours worked during the month divided by total hours in the month. Instances were noted in which the total number of hours in a month was different for various grants in the same month. Additionally, there were instances in which employee timesheets were changed after the fact, and the finance department had to re-allocate significant values of time to reflect the modified timesheet. Cause: Total hours in the month is a manual input on each grant's allocation sheet and is calculated by multiplying 8 hours times the total number of working days in the month. Instances in which total number of hours in the month varied across different grants were the result of management oversight. There is no documented review and approval of employee timesheets. Effect or Potential Effect: When using the incorrect basis for the number of hours during a month, MdMUSA could inadvertently charge more or less time to certain awards than was actually spent. This could result in the Federal Government over-paying for salaries associated with the award. Additionally, lack of documented supervisory review of timesheets could result in timesheets being incorrect and time not being appropriately allocated to federal awards. Questioned Costs: Not determined. Context: Our audit procedures consisted of testwork performed over various payroll transactions during the year. We consisted our testwork to be representative of the population. The condition appears to be systematic in nature. Identification as a Repeat Finding, if Applicable: Not a repeat finding. Recommendation: We recommend that MdMUSA implement a review process over each grant's monthly payroll allocation sheet. This will ensure that the total hours for the month will be accurate and consistent across all awards. Additionally, we recommend that management implement a monthly review process over employee timesheets. Employee timesheets should be reviewed by an appropriate supervisor, or by the executive director, whichever is appropriate.
Section III - Federal Award Findings and Questioned Costs (2 CFR 200.516(a)) Finding 2022-001: Payroll Allocations Information on the Federal Programs: 98.001 and 19.519 Criteria or specific requirement (including statutory, regulatory, or other citation): Under 2 CFR 200.430 all charges to federal awards for salaries and wages must be based on records that accurately reflect work performed, and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable and properly allocated. Condition: MdMUSA keeps a payroll allocation spreadsheet for each federal grant on a monthly basis to allocate time. MdMUSA determines percentage of time worked on each grant on the basis of hours worked during the month divided by total hours in the month. Instances were noted in which the total number of hours in a month was different for various grants in the same month. Additionally, there were instances in which employee timesheets were changed after the fact, and the finance department had to re-allocate significant values of time to reflect the modified timesheet. Cause: Total hours in the month is a manual input on each grant's allocation sheet and is calculated by multiplying 8 hours times the total number of working days in the month. Instances in which total number of hours in the month varied across different grants were the result of management oversight. There is no documented review and approval of employee timesheets. Effect or Potential Effect: When using the incorrect basis for the number of hours during a month, MdMUSA could inadvertently charge more or less time to certain awards than was actually spent. This could result in the Federal Government over-paying for salaries associated with the award. Additionally, lack of documented supervisory review of timesheets could result in timesheets being incorrect and time not being appropriately allocated to federal awards. Questioned Costs: Not determined. Context: Our audit procedures consisted of testwork performed over various payroll transactions during the year. We consisted our testwork to be representative of the population. The condition appears to be systematic in nature. Identification as a Repeat Finding, if Applicable: Not a repeat finding. Recommendation: We recommend that MdMUSA implement a review process over each grant's monthly payroll allocation sheet. This will ensure that the total hours for the month will be accurate and consistent across all awards. Additionally, we recommend that management implement a monthly review process over employee timesheets. Employee timesheets should be reviewed by an appropriate supervisor, or by the executive director, whichever is appropriate.
Section III - Federal Award Findings and Questioned Costs (2 CFR 200.516(a)) Finding 2022-001: Payroll Allocations Information on the Federal Programs: 98.001 and 19.519 Criteria or specific requirement (including statutory, regulatory, or other citation): Under 2 CFR 200.430 all charges to federal awards for salaries and wages must be based on records that accurately reflect work performed, and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable and properly allocated. Condition: MdMUSA keeps a payroll allocation spreadsheet for each federal grant on a monthly basis to allocate time. MdMUSA determines percentage of time worked on each grant on the basis of hours worked during the month divided by total hours in the month. Instances were noted in which the total number of hours in a month was different for various grants in the same month. Additionally, there were instances in which employee timesheets were changed after the fact, and the finance department had to re-allocate significant values of time to reflect the modified timesheet. Cause: Total hours in the month is a manual input on each grant's allocation sheet and is calculated by multiplying 8 hours times the total number of working days in the month. Instances in which total number of hours in the month varied across different grants were the result of management oversight. There is no documented review and approval of employee timesheets. Effect or Potential Effect: When using the incorrect basis for the number of hours during a month, MdMUSA could inadvertently charge more or less time to certain awards than was actually spent. This could result in the Federal Government over-paying for salaries associated with the award. Additionally, lack of documented supervisory review of timesheets could result in timesheets being incorrect and time not being appropriately allocated to federal awards. Questioned Costs: Not determined. Context: Our audit procedures consisted of testwork performed over various payroll transactions during the year. We consisted our testwork to be representative of the population. The condition appears to be systematic in nature. Identification as a Repeat Finding, if Applicable: Not a repeat finding. Recommendation: We recommend that MdMUSA implement a review process over each grant's monthly payroll allocation sheet. This will ensure that the total hours for the month will be accurate and consistent across all awards. Additionally, we recommend that management implement a monthly review process over employee timesheets. Employee timesheets should be reviewed by an appropriate supervisor, or by the executive director, whichever is appropriate.