Statement of condition: The Organization expended federal funds during its fiscal years ended June 30, 2023 and 2022 totaling $876,797 and $807,292, respectively. These amounts were in excess of $750,000 and an audit of major federal program compliance (hereinafter “Single Audit”) was not performed within the required nine (9) months after year-end. Criteria: The audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (hereinafter “Uniform Guidance”) require a Single Audit to be performed when expenditures of federal awards exceed $750,000 for the fiscal years ended June 30, 2023 and 2022. Cause of condition: Failure by the Organization to properly prepare its Schedule of Federal Expenditures and its predecessor audit firm to properly identify federal funds included in the Organization’s routine funding. Effect of condition and context: Specifically, this is not in compliance with 2 CFR 200.516 of the Uniform Guidance. Recommendation: We strongly recommend the Organization engage an audit firm to complete the required Single Audits for its fiscal 2023 and 2022 year-ends. Management’s response: Management has engaged its current auditing firm to complete the required Single Audits for its fiscal 2023 and 2022 year-ends.
Statement of condition: The Organization expended federal funds during its fiscal years ended June 30, 2023 and 2022 totaling $876,797 and $807,292, respectively. These amounts were in excess of $750,000 and an audit of major federal program compliance (hereinafter “Single Audit”) was not performed within the required nine (9) months after year-end. Criteria: The audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (hereinafter “Uniform Guidance”) require a Single Audit to be performed when expenditures of federal awards exceed $750,000 for the fiscal years ended June 30, 2023 and 2022. Cause of condition: Failure by the Organization to properly prepare its Schedule of Federal Expenditures and its predecessor audit firm to properly identify federal funds included in the Organization’s routine funding. Effect of condition and context: Specifically, this is not in compliance with 2 CFR 200.516 of the Uniform Guidance. Recommendation: We strongly recommend the Organization engage an audit firm to complete the required Single Audits for its fiscal 2023 and 2022 year-ends. Management’s response: Management has engaged its current auditing firm to complete the required Single Audits for its fiscal 2023 and 2022 year-ends.
Statement of condition: The Organization expended federal funds during its fiscal years ended June 30, 2023 and 2022 totaling $876,797 and $807,292, respectively. These amounts were in excess of $750,000 and an audit of major federal program compliance (hereinafter “Single Audit”) was not performed within the required nine (9) months after year-end. Criteria: The audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (hereinafter “Uniform Guidance”) require a Single Audit to be performed when expenditures of federal awards exceed $750,000 for the fiscal years ended June 30, 2023 and 2022. Cause of condition: Failure by the Organization to properly prepare its Schedule of Federal Expenditures and its predecessor audit firm to properly identify federal funds included in the Organization’s routine funding. Effect of condition and context: Specifically, this is not in compliance with 2 CFR 200.516 of the Uniform Guidance. Recommendation: We strongly recommend the Organization engage an audit firm to complete the required Single Audits for its fiscal 2023 and 2022 year-ends. Management’s response: Management has engaged its current auditing firm to complete the required Single Audits for its fiscal 2023 and 2022 year-ends.
Statement of condition: The Organization expended federal funds during its fiscal years ended June 30, 2023 and 2022 totaling $876,797 and $807,292, respectively. These amounts were in excess of $750,000 and an audit of major federal program compliance (hereinafter “Single Audit”) was not performed within the required nine (9) months after year-end. Criteria: The audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (hereinafter “Uniform Guidance”) require a Single Audit to be performed when expenditures of federal awards exceed $750,000 for the fiscal years ended June 30, 2023 and 2022. Cause of condition: Failure by the Organization to properly prepare its Schedule of Federal Expenditures and its predecessor audit firm to properly identify federal funds included in the Organization’s routine funding. Effect of condition and context: Specifically, this is not in compliance with 2 CFR 200.516 of the Uniform Guidance. Recommendation: We strongly recommend the Organization engage an audit firm to complete the required Single Audits for its fiscal 2023 and 2022 year-ends. Management’s response: Management has engaged its current auditing firm to complete the required Single Audits for its fiscal 2023 and 2022 year-ends.
Statement of condition: The Organization expended federal funds during its fiscal years ended June 30, 2023 and 2022 totaling $876,797 and $807,292, respectively. These amounts were in excess of $750,000 and an audit of major federal program compliance (hereinafter “Single Audit”) was not performed within the required nine (9) months after year-end. Criteria: The audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (hereinafter “Uniform Guidance”) require a Single Audit to be performed when expenditures of federal awards exceed $750,000 for the fiscal years ended June 30, 2023 and 2022. Cause of condition: Failure by the Organization to properly prepare its Schedule of Federal Expenditures and its predecessor audit firm to properly identify federal funds included in the Organization’s routine funding. Effect of condition and context: Specifically, this is not in compliance with 2 CFR 200.516 of the Uniform Guidance. Recommendation: We strongly recommend the Organization engage an audit firm to complete the required Single Audits for its fiscal 2023 and 2022 year-ends. Management’s response: Management has engaged its current auditing firm to complete the required Single Audits for its fiscal 2023 and 2022 year-ends.
Statement of condition: The Organization expended federal funds during its fiscal years ended June 30, 2023 and 2022 totaling $876,797 and $807,292, respectively. These amounts were in excess of $750,000 and an audit of major federal program compliance (hereinafter “Single Audit”) was not performed within the required nine (9) months after year-end. Criteria: The audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (hereinafter “Uniform Guidance”) require a Single Audit to be performed when expenditures of federal awards exceed $750,000 for the fiscal years ended June 30, 2023 and 2022. Cause of condition: Failure by the Organization to properly prepare its Schedule of Federal Expenditures and its predecessor audit firm to properly identify federal funds included in the Organization’s routine funding. Effect of condition and context: Specifically, this is not in compliance with 2 CFR 200.516 of the Uniform Guidance. Recommendation: We strongly recommend the Organization engage an audit firm to complete the required Single Audits for its fiscal 2023 and 2022 year-ends. Management’s response: Management has engaged its current auditing firm to complete the required Single Audits for its fiscal 2023 and 2022 year-ends.
Statement of condition: The Organization expended federal funds during its fiscal years ended June 30, 2023 and 2022 totaling $876,797 and $807,292, respectively. These amounts were in excess of $750,000 and an audit of major federal program compliance (hereinafter “Single Audit”) was not performed within the required nine (9) months after year-end. Criteria: The audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (hereinafter “Uniform Guidance”) require a Single Audit to be performed when expenditures of federal awards exceed $750,000 for the fiscal years ended June 30, 2023 and 2022. Cause of condition: Failure by the Organization to properly prepare its Schedule of Federal Expenditures and its predecessor audit firm to properly identify federal funds included in the Organization’s routine funding. Effect of condition and context: Specifically, this is not in compliance with 2 CFR 200.516 of the Uniform Guidance. Recommendation: We strongly recommend the Organization engage an audit firm to complete the required Single Audits for its fiscal 2023 and 2022 year-ends. Management’s response: Management has engaged its current auditing firm to complete the required Single Audits for its fiscal 2023 and 2022 year-ends.
OAK PARK ELEMENTARY SCHOOL DISTRICT 97 06-016-0970-02 SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ending June 30, 2024 SECTION III - FEDERAL AWARD FINDINGS AND QUESTIONED COSTS 1. FINDING NUMBER:14 2024 - 004 2. THIS FINDING IS: X New Repeat from Prior year? Year originally reported? 3. Federal Program Name and Year: SPECIAL EDUCATION CLUSTER (IDEA) 4. Project No.: 024-4620-00, 024-4625-00, 024-4998-ID, 024-4998-PS, 024-4600-00, 023-4600-00 5. AL No.: 84.173 & 84.027 6. Passed Through: Illinois State Board of Education 7. Federal Agency: U.S. Department of Education 8. Criteria or specific requirement (including statutory, regulatory, or other citation) "IDEA, Part B funds received by an LEA cannot be used, except under certain limited circumstances, to reduce the level of expenditures for the education of children with disabilities made by the LEA from local funds, or a combination of State and local funds, below the level of those expenditures for the preceding fiscal year. To meet this requirement, LEAs must meet (1) the eligibility standard of 34 CFR section 300.203(a)) and (2) the compliance standard of 34 CFR section 300.203(b)." 9. Condition15 The District did not meet its maintenance of effort on either the aggregate or the per capita basis for fiscal year 2024. The shortfall in maintenance of effort was $401,982. 10. Questioned Costs16 The District's maintenance of effort calculation identified a decrease in non-federally funded special education related expenditures from the prior year of $401,982 in addition to a per capita decrease of $2,591 from fiscal year 2023 amounts. 11. Context17 N/A- there is only one MOE requirement. The grant was out of compliance. This is not a transactional level requirement. 12. Effect As the District is out of compliance with the maintenance of effort requirements, it is at risk of having to return federal funds. 13. Cause The finding was caused by a lack of monitoring over the maintenance of effort requirement. 14. Recommendation It is recommended that the District monitor compliance with maintenance of effort throughout the fiscal year to ensure it is met at year end. 15. Management's response18 See corrective action plan. 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.
OAK PARK ELEMENTARY SCHOOL DISTRICT 97 06-016-0970-02 SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ending June 30, 2024 SECTION III - FEDERAL AWARD FINDINGS AND QUESTIONED COSTS 1. FINDING NUMBER:14 2024 - 004 2. THIS FINDING IS: X New Repeat from Prior year? Year originally reported? 3. Federal Program Name and Year: SPECIAL EDUCATION CLUSTER (IDEA) 4. Project No.: 024-4620-00, 024-4625-00, 024-4998-ID, 024-4998-PS, 024-4600-00, 023-4600-00 5. AL No.: 84.173 & 84.027 6. Passed Through: Illinois State Board of Education 7. Federal Agency: U.S. Department of Education 8. Criteria or specific requirement (including statutory, regulatory, or other citation) "IDEA, Part B funds received by an LEA cannot be used, except under certain limited circumstances, to reduce the level of expenditures for the education of children with disabilities made by the LEA from local funds, or a combination of State and local funds, below the level of those expenditures for the preceding fiscal year. To meet this requirement, LEAs must meet (1) the eligibility standard of 34 CFR section 300.203(a)) and (2) the compliance standard of 34 CFR section 300.203(b)." 9. Condition15 The District did not meet its maintenance of effort on either the aggregate or the per capita basis for fiscal year 2024. The shortfall in maintenance of effort was $401,982. 10. Questioned Costs16 The District's maintenance of effort calculation identified a decrease in non-federally funded special education related expenditures from the prior year of $401,982 in addition to a per capita decrease of $2,591 from fiscal year 2023 amounts. 11. Context17 N/A- there is only one MOE requirement. The grant was out of compliance. This is not a transactional level requirement. 12. Effect As the District is out of compliance with the maintenance of effort requirements, it is at risk of having to return federal funds. 13. Cause The finding was caused by a lack of monitoring over the maintenance of effort requirement. 14. Recommendation It is recommended that the District monitor compliance with maintenance of effort throughout the fiscal year to ensure it is met at year end. 15. Management's response18 See corrective action plan. 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.
OAK PARK ELEMENTARY SCHOOL DISTRICT 97 06-016-0970-02 SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ending June 30, 2024 SECTION III - FEDERAL AWARD FINDINGS AND QUESTIONED COSTS 1. FINDING NUMBER:14 2024 - 004 2. THIS FINDING IS: X New Repeat from Prior year? Year originally reported? 3. Federal Program Name and Year: SPECIAL EDUCATION CLUSTER (IDEA) 4. Project No.: 024-4620-00, 024-4625-00, 024-4998-ID, 024-4998-PS, 024-4600-00, 023-4600-00 5. AL No.: 84.173 & 84.027 6. Passed Through: Illinois State Board of Education 7. Federal Agency: U.S. Department of Education 8. Criteria or specific requirement (including statutory, regulatory, or other citation) "IDEA, Part B funds received by an LEA cannot be used, except under certain limited circumstances, to reduce the level of expenditures for the education of children with disabilities made by the LEA from local funds, or a combination of State and local funds, below the level of those expenditures for the preceding fiscal year. To meet this requirement, LEAs must meet (1) the eligibility standard of 34 CFR section 300.203(a)) and (2) the compliance standard of 34 CFR section 300.203(b)." 9. Condition15 The District did not meet its maintenance of effort on either the aggregate or the per capita basis for fiscal year 2024. The shortfall in maintenance of effort was $401,982. 10. Questioned Costs16 The District's maintenance of effort calculation identified a decrease in non-federally funded special education related expenditures from the prior year of $401,982 in addition to a per capita decrease of $2,591 from fiscal year 2023 amounts. 11. Context17 N/A- there is only one MOE requirement. The grant was out of compliance. This is not a transactional level requirement. 12. Effect As the District is out of compliance with the maintenance of effort requirements, it is at risk of having to return federal funds. 13. Cause The finding was caused by a lack of monitoring over the maintenance of effort requirement. 14. Recommendation It is recommended that the District monitor compliance with maintenance of effort throughout the fiscal year to ensure it is met at year end. 15. Management's response18 See corrective action plan. 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.
OAK PARK ELEMENTARY SCHOOL DISTRICT 97 06-016-0970-02 SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ending June 30, 2024 SECTION III - FEDERAL AWARD FINDINGS AND QUESTIONED COSTS 1. FINDING NUMBER:14 2024 - 004 2. THIS FINDING IS: X New Repeat from Prior year? Year originally reported? 3. Federal Program Name and Year: SPECIAL EDUCATION CLUSTER (IDEA) 4. Project No.: 024-4620-00, 024-4625-00, 024-4998-ID, 024-4998-PS, 024-4600-00, 023-4600-00 5. AL No.: 84.173 & 84.027 6. Passed Through: Illinois State Board of Education 7. Federal Agency: U.S. Department of Education 8. Criteria or specific requirement (including statutory, regulatory, or other citation) "IDEA, Part B funds received by an LEA cannot be used, except under certain limited circumstances, to reduce the level of expenditures for the education of children with disabilities made by the LEA from local funds, or a combination of State and local funds, below the level of those expenditures for the preceding fiscal year. To meet this requirement, LEAs must meet (1) the eligibility standard of 34 CFR section 300.203(a)) and (2) the compliance standard of 34 CFR section 300.203(b)." 9. Condition15 The District did not meet its maintenance of effort on either the aggregate or the per capita basis for fiscal year 2024. The shortfall in maintenance of effort was $401,982. 10. Questioned Costs16 The District's maintenance of effort calculation identified a decrease in non-federally funded special education related expenditures from the prior year of $401,982 in addition to a per capita decrease of $2,591 from fiscal year 2023 amounts. 11. Context17 N/A- there is only one MOE requirement. The grant was out of compliance. This is not a transactional level requirement. 12. Effect As the District is out of compliance with the maintenance of effort requirements, it is at risk of having to return federal funds. 13. Cause The finding was caused by a lack of monitoring over the maintenance of effort requirement. 14. Recommendation It is recommended that the District monitor compliance with maintenance of effort throughout the fiscal year to ensure it is met at year end. 15. Management's response18 See corrective action plan. 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: 2 CFR 200.319 states that all procurement transactions under the Federal award must be conducted in a manner that provides full and open competition and is consistent with Federal procurement standards. 2 CFR 200.214 states in part that recipients and subrecipients are subject to the nonprocurement debarment and suspension regulations. In addition, 2 CFR 200.303 in part states that a recipient of a Federal award must establish, document, and maintain effective internal control over the Federal award. Condition: We have selected and tested three of the largest vendors from the Child Nutrition Cluster for compliance with procurement and suspension and debarment. We identified that one vendor was not properly procured, in accordance with 2 CFR 200.319–2 CFR 200.324. As a result, the District incurred questioned costs in the amount of $31,401.63, which was in excess of $25,000 Federal requirement, based on 2 CFR 200.516. Also, the District did not perform procedures to verify suspension and debarment on the same vendor. Cause: District’s internal controls over procurement in the Child Nutrition Cluster were properly designed but not operating effectively to verify that all vendors are properly procured and verified for suspension and debarment. The District did not properly procure one vendor within the Child Nutrition Cluster that incurred questioned costs in excess of the $25,000 threshold, based on 2 CFR 200.516. Effect: The District did not properly procure one vendor within the Child Nutrition Cluster that incurred questioned costs in excess of the $25,000 threshold, based on 2 CFR 200.516, and, as a result, revealed a significant deficiency in internal controls over procurement in the Child Nutrition Cluster. Repeat Finding: No. Recommendation: We recommend that the District re-evaluate the procurement processes in the Child Nutrition Services program and re-evaluate the design of internal controls over procurement and suspension and debarment to be in compliance with the Federal requirements and the District’s procurement policy.
2024-002 Finding in accordance with 2 CFR section 200.516(a) Program Titles: COVID-19 Education Stabilization Fund Assistance Listing Number: 84.425 Pass-through Entity: Virginia Department of Education Compliance Requirement: Special Tests and Provisions Finding Type: Noncompliance Criteria: Construction contracts, in excess of $2,000 financed by federal assistance funds, shall include a provision that the contractor or subcontractor pay prevailing wage rates established by the Department of Labor (DOL). In addition, the contractor or subcontractor must submit to the nonfederal entity a copy of the payroll and a statement of compliance weekly. Condition: A Federally funded construction contract did not include the provision that the contractor or subcontractor must pay prevailing wage rates established by the DOL nor did the School Board receive certified payrolls from the contractor. Questioned Costs: Unknown Context: The contracts with this vendor in total were in the amount of $165,720 for renovations at Blue Ridge Elementary. The School Board had program expenditures totaling $1,042,347 and it appears there were only two vendors that were required to comply with these Special Tests and Provisions. The other contractor complied with these requirements. Effect: Unable to determine if prevailing wage rates were paid on the construction contract. Cause: The federal program is fairly new and the compliance requirement was not known by School Board personnel. In addition, guidance from the federal government was not provided by the State Funding Agency. Recommendation: Management should implement a process to review compliance requirements for all federal assistance funds grants to ensure that all compliance requirements have been met. Management's Response: Management will review its process for reviewing compliance requirements for all federal assistance funds.
2024-002 Finding in accordance with 2 CFR section 200.516(a) Program Titles: COVID-19 Education Stabilization Fund Assistance Listing Number: 84.425 Pass-through Entity: Virginia Department of Education Compliance Requirement: Special Tests and Provisions Finding Type: Noncompliance Criteria: Construction contracts, in excess of $2,000 financed by federal assistance funds, shall include a provision that the contractor or subcontractor pay prevailing wage rates established by the Department of Labor (DOL). In addition, the contractor or subcontractor must submit to the nonfederal entity a copy of the payroll and a statement of compliance weekly. Condition: A Federally funded construction contract did not include the provision that the contractor or subcontractor must pay prevailing wage rates established by the DOL nor did the School Board receive certified payrolls from the contractor. Questioned Costs: Unknown Context: The contracts with this vendor in total were in the amount of $165,720 for renovations at Blue Ridge Elementary. The School Board had program expenditures totaling $1,042,347 and it appears there were only two vendors that were required to comply with these Special Tests and Provisions. The other contractor complied with these requirements. Effect: Unable to determine if prevailing wage rates were paid on the construction contract. Cause: The federal program is fairly new and the compliance requirement was not known by School Board personnel. In addition, guidance from the federal government was not provided by the State Funding Agency. Recommendation: Management should implement a process to review compliance requirements for all federal assistance funds grants to ensure that all compliance requirements have been met. Management's Response: Management will review its process for reviewing compliance requirements for all federal assistance funds.
2024-002 – MATERIAL WEAKNESS - FEDERAL COMPLIANCE – CHILD NUTRITION CLUSTER (50000) FEDERAL PROGRAM: Child Nutrition Cluster FEDERAL AGENCY: U.S. Department of Agriculture AWARD YEAR: 2023-2024 ASSISTANCE LISTING NUMBER: 10.555 NAME OF PASS-THROUGH ENTITY: California Department of Education Criteria: The Uniform Guidance Department of Agriculture section under the compliance requirements Activities Allowed or Unallowed, and Allowable Costs state that costs charged be supported by appropriate documentation, and correctly charged as to account, amount and period. Condition: As a result of our audit procedures, accounts receivable was not recorded for the March 2024, April 2024 and June 2024 funds once the monthly reimbursement was submitted to CNIPS. There were no instances noted of unallowable costs but rather not recording the revenue in the proper period. Cause: The District does not have proper controls in place to track accounts receivable and detect when funds have not been received for an extended period of time. Context: 10.555 Child Nutrition Cluster was audited as a major program in fiscal year 2022-23. Procedures were performed as a follow up to the finding noted at 2023-002 in accordance with 2CFR 200.516(a). Effect: Child Nutrition revenue related to the March, April and June 2024 reimbursements was not recorded and the Cafeteria Fund Revenue and Accounts Receivable was understated by $47,404. Fiscal Impact/Questioned Costs: The net questioned costs totaled $47,404. Recommendation: This is a repeat finding. We recommend the District implement controls to properly record accounts receivable for all federal programs and monitor funds to ensure the District is receiving federal awards timely. Views of Responsible Officials and Planned Corrective Actions: The District agrees and has already implemented processed to ensure receivables are created with each claim created in CNIP.
2024-002 – MATERIAL WEAKNESS - FEDERAL COMPLIANCE – CHILD NUTRITION CLUSTER (50000) FEDERAL PROGRAM: Child Nutrition Cluster FEDERAL AGENCY: U.S. Department of Agriculture AWARD YEAR: 2023-2024 ASSISTANCE LISTING NUMBER: 10.555 NAME OF PASS-THROUGH ENTITY: California Department of Education Criteria: The Uniform Guidance Department of Agriculture section under the compliance requirements Activities Allowed or Unallowed, and Allowable Costs state that costs charged be supported by appropriate documentation, and correctly charged as to account, amount and period. Condition: As a result of our audit procedures, accounts receivable was not recorded for the March 2024, April 2024 and June 2024 funds once the monthly reimbursement was submitted to CNIPS. There were no instances noted of unallowable costs but rather not recording the revenue in the proper period. Cause: The District does not have proper controls in place to track accounts receivable and detect when funds have not been received for an extended period of time. Context: 10.555 Child Nutrition Cluster was audited as a major program in fiscal year 2022-23. Procedures were performed as a follow up to the finding noted at 2023-002 in accordance with 2CFR 200.516(a). Effect: Child Nutrition revenue related to the March, April and June 2024 reimbursements was not recorded and the Cafeteria Fund Revenue and Accounts Receivable was understated by $47,404. Fiscal Impact/Questioned Costs: The net questioned costs totaled $47,404. Recommendation: This is a repeat finding. We recommend the District implement controls to properly record accounts receivable for all federal programs and monitor funds to ensure the District is receiving federal awards timely. Views of Responsible Officials and Planned Corrective Actions: The District agrees and has already implemented processed to ensure receivables are created with each claim created in CNIP.
Finding 2024-001 Payment to fraudulent subrecipient account - cyber incident Repeat Finding No Federal Program Title U.S. Department of Health and Human Services 93.600 Head Start Award # 05CH012065-02-00 Award Year 9/1/2022 – 8/31/2023 Finding In connection with a cyber incident at a subrecipient, Chicago Commons Association (Commons) sent two federal fund payments to a fraudulent party acting as the subrecipient. Criteria 2 CFR 200.305 (b) describes federal payments for recipients and subrecipients other than states, whether the payment is made by electronic funds transfer or by other means. Per 2 CFR 200.516(a), the auditor must report as an audit finding various items including known or likely fraud affecting a federal award. Audit finding detail and clarity is described in the next section, 2 CFR 200.516(b), which requires specific information to be included such as “(3) The condition found, including facts that support the deficiency found in the audit finding.” Condition The design and execution of certain internal controls were not successful in preventing or detecting Commons’ payments to a bank account controlled by a fraudulent party posing as a subrecipient. This resulted from a scheme related to a cyber incident at the subrecipient. Gads Hill Center (GHC), a nonprofit after-school program located in Chicago and a subrecipient/delegate agency of Commons, was victim to a cyber incident whereby a fraudulent party was able to take control of GHC’s email and telephone systems. This fraudulent party then contacted Commons AP manager via email on August 7, 2023, posing as the GHC Chief Financial Officer. Through email communications with the Commons AP manager and VP of Finance, this fraudulent party submitted updated banking/ACH information for GHC to change their ACH information from Fifth Third Bank (the valid GHC bank account) to Truist Bank (the fraudulent party’s bank account). An email was sent from the Commons AP manager to the Commons VP of Finance to have the information updated in the system. Commons’ policies require that a request received for this type of change to be substantiated through a direct phone call to the subrecipient. The Commons AP manager called the GHC CFO (the number used was Pilsen location shown on the GHC website) but the call went unanswered (and voicemail was full). The AP manager and GHC CFO scheduled a call for the next week and the AP manager received a phone call from an identical phone number from an individual who identified himself as the GHC CFO, and completed the verification process. New banking information was then entered and approved in Commons’ primary banking partner’s system (US Bank). These emails and calls happened between August 7 and August 15, 2023. Commons received a voucher from GHC and made a $70,121.99 payment to Truist Bank on August 17, using the updated ACH information. The primary banking partner of Commons flagged this payment as potentially fraudulent because the name on the ACH payment did not match the name listed on the bank account, and contacted Commons. Commons communicated that the banking information was correct, and the payment was then released on August 22. Another GHC-submitted voucher was received, and $640,318.83 was also paid to Truist Bank on August 24, 2023. The payments were not received by GHC. GHC subsequently contacted Commons to follow up about the status of the payments due and through the ensuing discussion the payments to the fraudulent Truist Bank account were ultimately discovered. The two submitted vouchers for expenses incurred by GHC were valid, in connection with program services performed by GHC. Commons reviewed, approved and submitted the two vouchers to the U.S. Department of Health and Human Services (the funder) for reimbursement. The funder approved the expenses, funds were released to Commons and then disbursed by Commons to the Truist Bank account which management believed belonged to GHC. Commons recorded and reported revenue and expense (payment to subrecipient) for the amounts of the vouchers received and paid. Because GHC incurred the expenses but never received the reimbursement funds, GHC absorbed the loss. Cause Commons personnel had followed established processes and internal controls as intended. However, the design and execution of the controls were not successful in preventing or detecting payments to a fraudulent account. Management believes the sophistication of the fraud scheme exceeded the effectiveness of the controls. Effect The change in ACH information resulted in two Commons’ payments of federal funds totaling $710,440.82 made to a bank account controlled by the fraudulent party acting as the subrecipient. Context Chicago Commons made us aware of this matter which appears to be an isolated incident for the year ended June 30, 2024. Questioned Costs There were no known questioned costs. Recommendation We recommend that Commons strengthens its internal controls in verifying a requested bank account change. For example, the procedure can include a requirement for the phone call to be made by an individual at Commons with personal knowledge and familiarity with a specific individual at the organization requesting the change. Views of Responsible Officials Management is in agreement with this finding. See corrective action plan.
Federal Program – Student Financial Assistance Cluster – Assistance Listing Numbers 84.063, 84.007 and 84.268 – U.S. Department of Education Program Year 2023-2024 Criteria or Specific Requirement – 2 CFR 200.516(a), Paragraph 13.39(e) – Known or Likely Fraud Affecting a Federal Award Condition – Financial aid funds were provided to six fraudulent student accounts; the issue was identified by the school and reported to the U.S. Department of Education. Questioned Costs – $54,112 Context – During a review of the awards population for fiscal year 2024, the University identified six accounts that had duplicate contact and bank information. After further investigation, these accounts were determined to be fraudulently created. In total, $54,112 in funds were paid out. The school worked with the U.S. Department of Education’s CyberIncident Division to inform the Department of the fraudulent activity. Effect – The University allowed refunds to be made from financial aid awarded to fraudulent student accounts resulting in questioned costs. Cause – The University had detective rather than preventative controls in place regarding distributions of financial aid funds to repeating accounts or individuals. Identification as a Repeat Finding, if Applicable – N/A Recommendation – The University should implement procedures to identify duplicate contact and bank information across student accounts automatically or a process to check for duplicates prior to financial aid distribution. Views of Responsible Officials and Planned Corrective Actions – Management agrees with the findings and has put the following in place. The Bursar will work with ITS to perform a scan of all students’ accounts for duplicate contact and banking information. If duplicates are found, students will be notified and accounts frozen until students are identified. This will be critical before refund checks are dispersed to students every semester. The amount of $54,112 will be paid back with the next draw down before February 28, 2025.
Federal Program – Student Financial Assistance Cluster – Assistance Listing Numbers 84.063, 84.007 and 84.268 – U.S. Department of Education Program Year 2023-2024 Criteria or Specific Requirement – 2 CFR 200.516(a), Paragraph 13.39(e) – Known or Likely Fraud Affecting a Federal Award Condition – Financial aid funds were provided to six fraudulent student accounts; the issue was identified by the school and reported to the U.S. Department of Education. Questioned Costs – $54,112 Context – During a review of the awards population for fiscal year 2024, the University identified six accounts that had duplicate contact and bank information. After further investigation, these accounts were determined to be fraudulently created. In total, $54,112 in funds were paid out. The school worked with the U.S. Department of Education’s CyberIncident Division to inform the Department of the fraudulent activity. Effect – The University allowed refunds to be made from financial aid awarded to fraudulent student accounts resulting in questioned costs. Cause – The University had detective rather than preventative controls in place regarding distributions of financial aid funds to repeating accounts or individuals. Identification as a Repeat Finding, if Applicable – N/A Recommendation – The University should implement procedures to identify duplicate contact and bank information across student accounts automatically or a process to check for duplicates prior to financial aid distribution. Views of Responsible Officials and Planned Corrective Actions – Management agrees with the findings and has put the following in place. The Bursar will work with ITS to perform a scan of all students’ accounts for duplicate contact and banking information. If duplicates are found, students will be notified and accounts frozen until students are identified. This will be critical before refund checks are dispersed to students every semester. The amount of $54,112 will be paid back with the next draw down before February 28, 2025.
Federal Program – Student Financial Assistance Cluster – Assistance Listing Numbers 84.063, 84.007 and 84.268 – U.S. Department of Education Program Year 2023-2024 Criteria or Specific Requirement – 2 CFR 200.516(a), Paragraph 13.39(e) – Known or Likely Fraud Affecting a Federal Award Condition – Financial aid funds were provided to six fraudulent student accounts; the issue was identified by the school and reported to the U.S. Department of Education. Questioned Costs – $54,112 Context – During a review of the awards population for fiscal year 2024, the University identified six accounts that had duplicate contact and bank information. After further investigation, these accounts were determined to be fraudulently created. In total, $54,112 in funds were paid out. The school worked with the U.S. Department of Education’s CyberIncident Division to inform the Department of the fraudulent activity. Effect – The University allowed refunds to be made from financial aid awarded to fraudulent student accounts resulting in questioned costs. Cause – The University had detective rather than preventative controls in place regarding distributions of financial aid funds to repeating accounts or individuals. Identification as a Repeat Finding, if Applicable – N/A Recommendation – The University should implement procedures to identify duplicate contact and bank information across student accounts automatically or a process to check for duplicates prior to financial aid distribution. Views of Responsible Officials and Planned Corrective Actions – Management agrees with the findings and has put the following in place. The Bursar will work with ITS to perform a scan of all students’ accounts for duplicate contact and banking information. If duplicates are found, students will be notified and accounts frozen until students are identified. This will be critical before refund checks are dispersed to students every semester. The amount of $54,112 will be paid back with the next draw down before February 28, 2025.
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 developed procedures to implement its policies with regard to the inventory and safeguarding of equipment purchased with federal funds. Cause: The School District has not completed the adoption of the required policies. Effect: The School District is not in compliance with the equipment management requirements. Recommendation: We recommend that the School District adopt and implement procedures in accordance with its policies 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. The school policy committee will create/review policy.
Reference Number: 2024-001 Finding: Finding Type: Immaterial noncompliance with major program requirements Title and CFDA Number of Federal Program: 59.046 – Small Business Administration Microloan Program Finding Resolution Status: In review. Information on Universe and Population Size: Salaries and wages pursuant to approved budget for the period July 1, 2023 to June 30, 2024. Salaries and wages per approved budget is $1,885,028. Sample Size Information: A sample of 20 allocations of salaries and wages allocated to the program during the budget period were selected for testing compliance, including to approved time allocations within the payroll processor and as compared to the Executive Level II Salary max amounts in effect during the budget period. Identification of Repeat Finding and Finding Reference Number: N/A Criteria: The Organization is required to submit an award budget for approval, including direct costs to be allocated to the award. The Organization is then required to submit a schedule of actual allocated costs incurred for reimbursement. Statement of Condition: During our testing of allocated salaries and wages, we identified errors in how employee time was allocated to the program, and salaries and wages allocated to the program in excess of the Executive Level II Salary maximum. Specifically, one employee had salaries and wages allocated to the program in excess of hours tracked to the program for a selected month. Another employee had an inappropriate wage rate applied to allocated time to the program. Last, two employees had compensation levels allocated to the program in excess of the Executive Level II Salary max amount in effect for the respective period. Cause: The Organization did not have adequate procedures in place to ensure that payroll costs were supported by accurate time and rates reporting. Certain allocations were made subsequent to the approved budget amounts, however support was not substantiated for those allocations. Effect or Potential Effect: Salaries and wages charged to the program included unsupported amounts, resulting in projected questioned costs of $63,740. When the actual errors in the sample tested were projected across the population, the potential error exceeds $25,000, which requires reporting under 2 CFR 200.516(a). However, the total projected questioned costs were not material to the program. Auditor Noncompliance Code: A – Activities allowed or unallowed Reporting Views of Responsible Officials: Management agrees with the noncompliance with no sanctions imposed conclusion. Context: No additional context identified by the Organization which is not otherwise presented herein. Recommendation: The Organization should strengthen internal controls over payroll cost allocations, including regular reconciliation of payroll charges to actual time records and rates. Time and rate documentation should be properly reviewed and approved. Auditor’s Summary of the Auditee’s Comments on the Findings and Recommendations: Management should complete regular reconciliations of payroll charges to actual time records and rates. Time and rate documentation should be properly reviewed and approved. Response Indicator: Agree Completion Date: In process. Response: Management acknowledges noncompliance in the current fiscal year and is reviewing its internal controls over payroll cost allocations. Questioned Costs: $63,740
Reference Number: 2024-001 Finding: Finding Type: Immaterial noncompliance with major program requirements Title and CFDA Number of Federal Program: 59.046 – Small Business Administration Microloan Program Finding Resolution Status: In review. Information on Universe and Population Size: Salaries and wages pursuant to approved budget for the period July 1, 2023 to June 30, 2024. Salaries and wages per approved budget is $1,885,028. Sample Size Information: A sample of 20 allocations of salaries and wages allocated to the program during the budget period were selected for testing compliance, including to approved time allocations within the payroll processor and as compared to the Executive Level II Salary max amounts in effect during the budget period. Identification of Repeat Finding and Finding Reference Number: N/A Criteria: The Organization is required to submit an award budget for approval, including direct costs to be allocated to the award. The Organization is then required to submit a schedule of actual allocated costs incurred for reimbursement. Statement of Condition: During our testing of allocated salaries and wages, we identified errors in how employee time was allocated to the program, and salaries and wages allocated to the program in excess of the Executive Level II Salary maximum. Specifically, one employee had salaries and wages allocated to the program in excess of hours tracked to the program for a selected month. Another employee had an inappropriate wage rate applied to allocated time to the program. Last, two employees had compensation levels allocated to the program in excess of the Executive Level II Salary max amount in effect for the respective period. Cause: The Organization did not have adequate procedures in place to ensure that payroll costs were supported by accurate time and rates reporting. Certain allocations were made subsequent to the approved budget amounts, however support was not substantiated for those allocations. Effect or Potential Effect: Salaries and wages charged to the program included unsupported amounts, resulting in projected questioned costs of $63,740. When the actual errors in the sample tested were projected across the population, the potential error exceeds $25,000, which requires reporting under 2 CFR 200.516(a). However, the total projected questioned costs were not material to the program. Auditor Noncompliance Code: A – Activities allowed or unallowed Reporting Views of Responsible Officials: Management agrees with the noncompliance with no sanctions imposed conclusion. Context: No additional context identified by the Organization which is not otherwise presented herein. Recommendation: The Organization should strengthen internal controls over payroll cost allocations, including regular reconciliation of payroll charges to actual time records and rates. Time and rate documentation should be properly reviewed and approved. Auditor’s Summary of the Auditee’s Comments on the Findings and Recommendations: Management should complete regular reconciliations of payroll charges to actual time records and rates. Time and rate documentation should be properly reviewed and approved. Response Indicator: Agree Completion Date: In process. Response: Management acknowledges noncompliance in the current fiscal year and is reviewing its internal controls over payroll cost allocations. Questioned Costs: $63,740
(1) Summary of Auditors’ Results Financial Statements a. Type of report issued on whether the financial statements were prepared in accordance with generally accepted accounting principles: Unmodified b. Internal control deficiencies over financial reporting disclosed by the audit of the financial statements: • Material weaknesses: No • Significant deficiencies: No c. Noncompliance material to the financial statements: No Federal Awards d. Internal control deficiencies over major programs disclosed by the audit: • Material weaknesses: Yes • Significant deficiencies: No e. Type of report issued on compliance for major programs: Qualified f. Audit findings that are required to be reported in accordance with 2 CFR 200.516(a): Yes g. Major programs: • Student Financial Assistance Cluster – Various ALNs h. Dollar threshold used to distinguish between Type A and Type B programs: $750,000 i. Auditee qualified as a low-risk auditee: Yes (2) Findings Relating to the Financial Statements Reported in Accordance with Government Auditing Standards None (3) Findings and Questioned Costs Relating to Federal Awards Finding Number: 2024-001 Program: Student Financial Assistance Cluster ALN #: 84.063 and 84.268 Federal Award #’s: P063P235372, P268K225372 Federal Award Years: July 1, 2023 to June 30, 2024 Federal Agencies: U.S. Department of Education Pass-Through Entity: N/A – Direct Award Compliance Requirement: Enrollment Reporting Finding Type: Material Weakness and Material Noncompliance Criteria: Under the Pell grant and the Direct and Federal Family Education Loan programs, institutions are required to report enrollment information via the National Student Loan Data System (NSLDS) (OMB No. 845-0035). The administration of the Title IV programs depends heavily on the accuracy and timeliness of the enrollment information reported by institutions. Institutions must review, update and verify student enrollment statuses, program information and effective dates that appear on the Enrollment Reporting Roster file or on the Enrollment Maintenance page of the NSLDS Financial Aid Professionals (NSLDSFAP) website. The data on the institution’s Enrollment Reporting Roster, or Enrollment Maintenance page, is what NSLDS has as the most recently certified enrollment information. There are two categories of enrollment information, “Campus Level” and “Program Level,” both of which need to be reported accurately and have separate record types. The NSLDS Enrollment Reporting Guide provides the requirements and guidance for reporting enrollment details using the NSLDS Enrollment Reporting Process. Institutions are responsible for timely reporting, whether they report directly or via a third-party servicer. Institutions must complete and return the Enrollment Reporting roster file placed in their Student Aid Internet Gateway (SAIG) (OMB No. 1845-0002) mailboxes sent by ED via NSLDS within 15 days. An institution determines how often it receives the Enrollment Reporting roster file with the default set at a minimum of every 60 days. Once received, the institution must update for changes in the data elements for the Campus Record and the Program Record identified above, and submit the changes electronically through the batch method, spreadsheet submittal or the NSLDS website. Additionally, per 2 CFR section 200.303, non-federal entities must establish and maintain effective internal control over federal awards that provide reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Condition found: During our testwork over student enrollment reporting, we noted Regent did not report all changes to students’ status within the required 60 days. For a sample of 40 students who were recipients of Direct Loans or Pell Grants between July 1, 2023 and June 30, 2024 and that had been identified as having withdrawn, graduated, or modified their enrollment status as defined by Regent’s Satisfactory Academic Progress Policy through a change in course load, the following was noted: For 33 students out of the 40 selected for compliance testing, Regent did not transmit the students’ status change to NSLDS within 60 days. Additionally, based on management’s further investigation, it was determined that there were multiple submissions during the year that were delayed and resulted in enrollment reporting being outside of the 60- day window. Additionally, while Regent has controls in place to ensure that enrollment changes are reported timely to the National Student Clearinghouse (NSC), the control does not ensure that any required correspondence with NSC to resolve data matters is happening timely. Cause: For the students noted above, management communicated that there were delays in the data transmission from the NSC and the NSLDS. While the data was provided to the NSC in a timely manner, there were issues with the data that needed to be resolved between Regent and the NSC in order to proceed with the submission to NSLDS. For the reasons noted above, we determined the related control in place at Regent, which is designed to address the timeliness of the transmission reports, is not designed at a level to verify the timeliness of the data transmission to the NSC nor ensure that any subsequent issues are resolved timely and that the data is ultimately submitted to the NSLDS timely. Proper perspective: Regent’s policy is to submit enrollment data to the NSC on a predetermined schedule that allows Regent to comply with the enrollment reporting requirements. For our sample of 40 students with status changes, we identified 33 students where the status change was not reported within 60 days. Upon further review by management, there were a total of 13 submissions for which the delay in the resolution of issues between Regent and the NSC resulted in the enrollment information being reported outside of the 60-day reporting requirement. As a result of these delays, there were a significant number of changes that were not reporting timely. Possible asserted effect: Untimely submission of student enrollment information affects the determinations that lenders and servicers of students’ loans make related to in-school status, deferments, graces periods, and repayment schedules, as well as the federal government’s payment and interest schedules. Questioned costs: None noted. Statistical sampling: The sample was not intended to be, and was not, a statistically valid sample. Repeat finding: A similar finding was not reported in the prior year. Recommendation: We recommend that Regent implement additional controls to ensure that the transmission reports are received by NSLDS timely. Additionally, we recommend Regent evaluate its processes and procedures when submitting data to the NSC to ensure that any data issues impacting the timeliness of the transmissions are resolved. Views of responsible officials: Regent agrees with this finding. Regent intends to strengthen its controls and quality assurance measures over the timeliness of enrollment information to NSLDS.
(1) Summary of Auditors’ Results Financial Statements a. Type of report issued on whether the financial statements were prepared in accordance with generally accepted accounting principles: Unmodified b. Internal control deficiencies over financial reporting disclosed by the audit of the financial statements: • Material weaknesses: No • Significant deficiencies: No c. Noncompliance material to the financial statements: No Federal Awards d. Internal control deficiencies over major programs disclosed by the audit: • Material weaknesses: Yes • Significant deficiencies: No e. Type of report issued on compliance for major programs: Qualified f. Audit findings that are required to be reported in accordance with 2 CFR 200.516(a): Yes g. Major programs: • Student Financial Assistance Cluster – Various ALNs h. Dollar threshold used to distinguish between Type A and Type B programs: $750,000 i. Auditee qualified as a low-risk auditee: Yes (2) Findings Relating to the Financial Statements Reported in Accordance with Government Auditing Standards None (3) Findings and Questioned Costs Relating to Federal Awards Finding Number: 2024-001 Program: Student Financial Assistance Cluster ALN #: 84.063 and 84.268 Federal Award #’s: P063P235372, P268K225372 Federal Award Years: July 1, 2023 to June 30, 2024 Federal Agencies: U.S. Department of Education Pass-Through Entity: N/A – Direct Award Compliance Requirement: Enrollment Reporting Finding Type: Material Weakness and Material Noncompliance Criteria: Under the Pell grant and the Direct and Federal Family Education Loan programs, institutions are required to report enrollment information via the National Student Loan Data System (NSLDS) (OMB No. 845-0035). The administration of the Title IV programs depends heavily on the accuracy and timeliness of the enrollment information reported by institutions. Institutions must review, update and verify student enrollment statuses, program information and effective dates that appear on the Enrollment Reporting Roster file or on the Enrollment Maintenance page of the NSLDS Financial Aid Professionals (NSLDSFAP) website. The data on the institution’s Enrollment Reporting Roster, or Enrollment Maintenance page, is what NSLDS has as the most recently certified enrollment information. There are two categories of enrollment information, “Campus Level” and “Program Level,” both of which need to be reported accurately and have separate record types. The NSLDS Enrollment Reporting Guide provides the requirements and guidance for reporting enrollment details using the NSLDS Enrollment Reporting Process. Institutions are responsible for timely reporting, whether they report directly or via a third-party servicer. Institutions must complete and return the Enrollment Reporting roster file placed in their Student Aid Internet Gateway (SAIG) (OMB No. 1845-0002) mailboxes sent by ED via NSLDS within 15 days. An institution determines how often it receives the Enrollment Reporting roster file with the default set at a minimum of every 60 days. Once received, the institution must update for changes in the data elements for the Campus Record and the Program Record identified above, and submit the changes electronically through the batch method, spreadsheet submittal or the NSLDS website. Additionally, per 2 CFR section 200.303, non-federal entities must establish and maintain effective internal control over federal awards that provide reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Condition found: During our testwork over student enrollment reporting, we noted Regent did not report all changes to students’ status within the required 60 days. For a sample of 40 students who were recipients of Direct Loans or Pell Grants between July 1, 2023 and June 30, 2024 and that had been identified as having withdrawn, graduated, or modified their enrollment status as defined by Regent’s Satisfactory Academic Progress Policy through a change in course load, the following was noted: For 33 students out of the 40 selected for compliance testing, Regent did not transmit the students’ status change to NSLDS within 60 days. Additionally, based on management’s further investigation, it was determined that there were multiple submissions during the year that were delayed and resulted in enrollment reporting being outside of the 60- day window. Additionally, while Regent has controls in place to ensure that enrollment changes are reported timely to the National Student Clearinghouse (NSC), the control does not ensure that any required correspondence with NSC to resolve data matters is happening timely. Cause: For the students noted above, management communicated that there were delays in the data transmission from the NSC and the NSLDS. While the data was provided to the NSC in a timely manner, there were issues with the data that needed to be resolved between Regent and the NSC in order to proceed with the submission to NSLDS. For the reasons noted above, we determined the related control in place at Regent, which is designed to address the timeliness of the transmission reports, is not designed at a level to verify the timeliness of the data transmission to the NSC nor ensure that any subsequent issues are resolved timely and that the data is ultimately submitted to the NSLDS timely. Proper perspective: Regent’s policy is to submit enrollment data to the NSC on a predetermined schedule that allows Regent to comply with the enrollment reporting requirements. For our sample of 40 students with status changes, we identified 33 students where the status change was not reported within 60 days. Upon further review by management, there were a total of 13 submissions for which the delay in the resolution of issues between Regent and the NSC resulted in the enrollment information being reported outside of the 60-day reporting requirement. As a result of these delays, there were a significant number of changes that were not reporting timely. Possible asserted effect: Untimely submission of student enrollment information affects the determinations that lenders and servicers of students’ loans make related to in-school status, deferments, graces periods, and repayment schedules, as well as the federal government’s payment and interest schedules. Questioned costs: None noted. Statistical sampling: The sample was not intended to be, and was not, a statistically valid sample. Repeat finding: A similar finding was not reported in the prior year. Recommendation: We recommend that Regent implement additional controls to ensure that the transmission reports are received by NSLDS timely. Additionally, we recommend Regent evaluate its processes and procedures when submitting data to the NSC to ensure that any data issues impacting the timeliness of the transmissions are resolved. Views of responsible officials: Regent agrees with this finding. Regent intends to strengthen its controls and quality assurance measures over the timeliness of enrollment information to NSLDS.
SNAP CLUSTER – 10.551, 10.561 Federal Awarding Agency: U.S. Department of Agriculture (USDA), Food and Nutrition Service (FNS) Federal Award Fiscal Years: 2023; 2024 Federal Award Number: Not Applicable Administered by: Rhode Island Department of Human Services (DHS) Compliance Requirement: Allowable Costs/Cost Principles SNAP - ALLOWABLE COSTS – OTHER MATTERS Likely questioned costs were identified in conjunction with a fraud investigation performed by the Office of Internal Audit (OIA). Criteria: 2 CFR §200.516(a)(6) states that the auditor must report 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: During our fiscal 2024 audit of the State, we learned of a potential fraud relating to the SNAP Cluster. Based on a tip, OIA identified a claimant using multiple social security numbers. The OIA’s findings were communicated to law enforcement and charges were filed against the individual. While the alleged fraud is greater than $25,000, the case prosecution is ongoing and the actual amount of fraudulent payments is unknown at this time. Cause: Potential fraud committed by a claimant. Payments were allegedly made to an individual based on fraudulent identities and stolen information. Effect: Noncompliance with federal regulations for the Supplemental Nutrition Assistance Program. Questioned Costs: Undetermined Valid Statistical Sample: Not Applicable RECOMMENDATION 2024-031 Evaluate the underlying allegations of program fraud and return funds to the federal government that did not meet federal requirements.
SNAP CLUSTER – 10.551, 10.561 Federal Awarding Agency: U.S. Department of Agriculture (USDA), Food and Nutrition Service (FNS) Federal Award Fiscal Years: 2023; 2024 Federal Award Number: Not Applicable Administered by: Rhode Island Department of Human Services (DHS) Compliance Requirement: Allowable Costs/Cost Principles SNAP - ALLOWABLE COSTS – OTHER MATTERS Likely questioned costs were identified in conjunction with a fraud investigation performed by the Office of Internal Audit (OIA). Criteria: 2 CFR §200.516(a)(6) states that the auditor must report 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: During our fiscal 2024 audit of the State, we learned of a potential fraud relating to the SNAP Cluster. Based on a tip, OIA identified a claimant using multiple social security numbers. The OIA’s findings were communicated to law enforcement and charges were filed against the individual. While the alleged fraud is greater than $25,000, the case prosecution is ongoing and the actual amount of fraudulent payments is unknown at this time. Cause: Potential fraud committed by a claimant. Payments were allegedly made to an individual based on fraudulent identities and stolen information. Effect: Noncompliance with federal regulations for the Supplemental Nutrition Assistance Program. Questioned Costs: Undetermined Valid Statistical Sample: Not Applicable RECOMMENDATION 2024-031 Evaluate the underlying allegations of program fraud and return funds to the federal government that did not meet federal requirements.
SNAP CLUSTER – 10.551, 10.561 Federal Awarding Agency: U.S. Department of Agriculture (USDA), Food and Nutrition Service (FNS) Federal Award Fiscal Years: 2023; 2024 Federal Award Number: Not Applicable Administered by: Rhode Island Department of Human Services (DHS) Compliance Requirement: Allowable Costs/Cost Principles SNAP - ALLOWABLE COSTS – OTHER MATTERS Likely questioned costs were identified in conjunction with a fraud investigation performed by the Office of Internal Audit (OIA). Criteria: 2 CFR §200.516(a)(6) states that the auditor must report 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: During our fiscal 2024 audit of the State, we learned of a potential fraud relating to the SNAP Cluster. Based on a tip, OIA identified a claimant using multiple social security numbers. The OIA’s findings were communicated to law enforcement and charges were filed against the individual. While the alleged fraud is greater than $25,000, the case prosecution is ongoing and the actual amount of fraudulent payments is unknown at this time. Cause: Potential fraud committed by a claimant. Payments were allegedly made to an individual based on fraudulent identities and stolen information. Effect: Noncompliance with federal regulations for the Supplemental Nutrition Assistance Program. Questioned Costs: Undetermined Valid Statistical Sample: Not Applicable RECOMMENDATION 2024-031 Evaluate the underlying allegations of program fraud and return funds to the federal government that did not meet federal requirements.
Finding 2024-002: Time Tracking and Payroll Allocations (Material Weakness) See Section III - Federal Award Findings and Questioned Costs (2 CFR 200.516(a)) Information on the Federal Programs: Assistance Listing Number 98.001 Criteria: Title 2 U.S. Code of Federal Regulations (CFR) Part 200, paragraph 430 “Compensation – personal services” requires that charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed, and that these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Additionally, these records must comply with established accounting policies and practices of the non-Federal entity. Condition: As part of our audit procedures around payroll, we noted instances of payroll allocations to programs which did not accurately represent the time worked and/or salary rate of the employee. While misallocations were not significant in their amounts, the errors themselves suggest the need for more detailed review of the payroll allocation approval and entry process. Cause: The review of the payroll allocation entry and process was not sufficient to catch the errors. Context: The misallocations identified represent 10% of the sampled employees (4 out of 40). Although the majority of payroll allocations were supported by appropriate documentation, these four exceptions suggest a need for improved controls over time and effort reporting to prevent isolated errors from becoming more systemic issues. Effect: Astraea could inadvertently mischarge salaries and wages to its various programs. Questioned Costs: Undetermined. Identification as a Repeat Finding, if Applicable: Finding 2023-003 Recommendation: We recommend that the finance department perform a more detailed review of the monthly program allocations to ensure complete and accurate entry of payroll allocations.
Identification of the federal program: Assistance Listing Number 10.665 & 10.666 – Forest Service Schools and Rods Cluster, Department of Agriculture. Pass through entity: Department of Agriculture. Compliance Requirements Applicable to the Finding: Reporting Type of Finding: Significant Deficiency in Internal Control over Compliance with federal program requirements and noncompliance material to the program in accordance with 2 CFR 200.516(a). Questioned Costs: We are reporting no known or likely questioned costs. Criteria: Recipients are required to submit an annual certification of Title III expenditures and unobligated funds no later than February 1 of the year after the year in which Title III funds were expended. For the 2024 fiscal year, the certification was due by February 1, 2024. Condition and Context: Testing revealed that the annual certification was submitted on July 16, 2024, after the February 1, 2024 deadline. Cause: Turnover of main county management resulted in delays in gathering and submitting the required reporting. Controls were not in place to address succession planning for the duties of the responsible officials to ensure deadlines were met regardless of turnover. Effect: The late submission resulted in noncompliance with the federal program. Recommendation: The county staff and management should review roles and responsibilities related to the annual reporting requirements and develop controls to ensure that regardless of position turnover, the required reporting is able to be submitted in a timely manner. This may include ensuring multiple county personnel are aware of deadlines and required reporting. Views of Responsible Officials and Planned Corrective Actions: The county understands and concurs with this finding. The county will employ a system to ensure timely reporting that includes additional oversite of the program by the County administration. The position responsible for reporting has also undergone turnover and the new employee responsible for such reporting will be informed of the required deadlines
Identification of the federal program: Assistance Listing Number 10.665 & 10.666 – Forest Service Schools and Rods Cluster, Department of Agriculture. Pass through entity: Department of Agriculture. Compliance Requirements Applicable to the Finding: Reporting Type of Finding: Significant Deficiency in Internal Control over Compliance with federal program requirements and noncompliance material to the program in accordance with 2 CFR 200.516(a). Questioned Costs: We are reporting no known or likely questioned costs. Criteria: Recipients are required to submit an annual certification of Title III expenditures and unobligated funds no later than February 1 of the year after the year in which Title III funds were expended. For the 2024 fiscal year, the certification was due by February 1, 2024. Condition and Context: Testing revealed that the annual certification was submitted on July 16, 2024, after the February 1, 2024 deadline. Cause: Turnover of main county management resulted in delays in gathering and submitting the required reporting. Controls were not in place to address succession planning for the duties of the responsible officials to ensure deadlines were met regardless of turnover. Effect: The late submission resulted in noncompliance with the federal program. Recommendation: The county staff and management should review roles and responsibilities related to the annual reporting requirements and develop controls to ensure that regardless of position turnover, the required reporting is able to be submitted in a timely manner. This may include ensuring multiple county personnel are aware of deadlines and required reporting. Views of Responsible Officials and Planned Corrective Actions: The county understands and concurs with this finding. The county will employ a system to ensure timely reporting that includes additional oversite of the program by the County administration. The position responsible for reporting has also undergone turnover and the new employee responsible for such reporting will be informed of the required deadlines
Identification of the federal program: Assistance Listing Number 10.665 & 10.666 – Forest Service Schools and Rods Cluster, Department of Agriculture. Pass through entity: Department of Agriculture. Compliance Requirements Applicable to the Finding: Reporting Type of Finding: Significant Deficiency in Internal Control over Compliance with federal program requirements and noncompliance material to the program in accordance with 2 CFR 200.516(a). Questioned Costs: We are reporting no known or likely questioned costs. Criteria: Recipients are required to submit an annual certification of Title III expenditures and unobligated funds no later than February 1 of the year after the year in which Title III funds were expended. For the 2024 fiscal year, the certification was due by February 1, 2024. Condition and Context: Testing revealed that the annual certification was submitted on July 16, 2024, after the February 1, 2024 deadline. Cause: Turnover of main county management resulted in delays in gathering and submitting the required reporting. Controls were not in place to address succession planning for the duties of the responsible officials to ensure deadlines were met regardless of turnover. Effect: The late submission resulted in noncompliance with the federal program. Recommendation: The county staff and management should review roles and responsibilities related to the annual reporting requirements and develop controls to ensure that regardless of position turnover, the required reporting is able to be submitted in a timely manner. This may include ensuring multiple county personnel are aware of deadlines and required reporting. Views of Responsible Officials and Planned Corrective Actions: The county understands and concurs with this finding. The county will employ a system to ensure timely reporting that includes additional oversite of the program by the County administration. The position responsible for reporting has also undergone turnover and the new employee responsible for such reporting will be informed of the required deadlines
Finding 2024-001 Payment to fraudulent subrecipient account - cyber incident Repeat Finding No Federal Program Title U.S. Department of Health and Human Services 93.600 Head Start Award # 05CH012065-02-00 Award Year 9/1/2022 – 8/31/2023 Finding In connection with a cyber incident at a subrecipient, Chicago Commons Association (Commons) sent two federal fund payments to a fraudulent party acting as the subrecipient. Criteria 2 CFR 200.305 (b) describes federal payments for recipients and subrecipients other than states, whether the payment is made by electronic funds transfer or by other means. Per 2 CFR 200.516(a), the auditor must report as an audit finding various items including known or likely fraud affecting a federal award. Audit finding detail and clarity is described in the next section, 2 CFR 200.516(b), which requires specific information to be included such as “(3) The condition found, including facts that support the deficiency found in the audit finding.” Condition The design and execution of certain internal controls were not successful in preventing or detecting Commons’ payments to a bank account controlled by a fraudulent party posing as a subrecipient. This resulted from a scheme related to a cyber incident at the subrecipient. Gads Hill Center (GHC), a nonprofit after-school program located in Chicago and a subrecipient/delegate agency of Commons, was victim to a cyber incident whereby a fraudulent party was able to take control of GHC’s email and telephone systems. This fraudulent party then contacted Commons AP manager via email on August 7, 2023, posing as the GHC Chief Financial Officer. Through email communications with the Commons AP manager and VP of Finance, this fraudulent party submitted updated banking/ACH information for GHC to change their ACH information from Fifth Third Bank (the valid GHC bank account) to Truist Bank (the fraudulent party’s bank account). An email was sent from the Commons AP manager to the Commons VP of Finance to have the information updated in the system. Commons’ policies require that a request received for this type of change to be substantiated through a direct phone call to the subrecipient. The Commons AP manager called the GHC CFO (the number used was Pilsen location shown on the GHC website) but the call went unanswered (and voicemail was full). The AP manager and GHC CFO scheduled a call for the next week and the AP manager received a phone call from an identical phone number from an individual who identified himself as the GHC CFO, and completed the verification process. New banking information was then entered and approved in Commons’ primary banking partner’s system (US Bank). These emails and calls happened between August 7 and August 15, 2023. Commons received a voucher from GHC and made a $70,121.99 payment to Truist Bank on August 17, using the updated ACH information. The primary banking partner of Commons flagged this payment as potentially fraudulent because the name on the ACH payment did not match the name listed on the bank account, and contacted Commons. Commons communicated that the banking information was correct, and the payment was then released on August 22. Another GHC-submitted voucher was received, and $640,318.83 was also paid to Truist Bank on August 24, 2023. The payments were not received by GHC. GHC subsequently contacted Commons to follow up about the status of the payments due and through the ensuing discussion the payments to the fraudulent Truist Bank account were ultimately discovered. The two submitted vouchers for expenses incurred by GHC were valid, in connection with program services performed by GHC. Commons reviewed, approved and submitted the two vouchers to the U.S. Department of Health and Human Services (the funder) for reimbursement. The funder approved the expenses, funds were released to Commons and then disbursed by Commons to the Truist Bank account which management believed belonged to GHC. Commons recorded and reported revenue and expense (payment to subrecipient) for the amounts of the vouchers received and paid. Because GHC incurred the expenses but never received the reimbursement funds, GHC absorbed the loss. Cause Commons personnel had followed established processes and internal controls as intended. However, the design and execution of the controls were not successful in preventing or detecting payments to a fraudulent account. Management believes the sophistication of the fraud scheme exceeded the effectiveness of the controls. Effect The change in ACH information resulted in two Commons’ payments of federal funds totaling $710,440.82 made to a bank account controlled by the fraudulent party acting as the subrecipient. Context Chicago Commons made us aware of this matter which appears to be an isolated incident for the year ended June 30, 2024. Questioned Costs There were no known questioned costs. Recommendation We recommend that Commons strengthens its internal controls in verifying a requested bank account change. For example, the procedure can include a requirement for the phone call to be made by an individual at Commons with personal knowledge and familiarity with a specific individual at the organization requesting the change. Views of Responsible Officials Management is in agreement with this finding. See corrective action plan.
Finding 2024-001 – Unallowable Subrecipient Costs (Deficiency) Information on the Federal Programs: Continuum of Care – AL # 14.267 and Emergency Solutions Grant Program – AL # 14.231. Criteria: According to 2 CFR Part 200, Subpart F, 200.516, “the auditor must report the following as audit findings in a schedule of findings and questioned costs… 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: During the current fiscal year the Corporation, based on monitoring procedures performed, determined that one of their subrecipients had been making payments to fictitious vendors and/or vendors with a significant conflict of interest resulting in resulting in questioned or unallowable costs from fiscal year 2023 and fiscal year 2024 across the federal programs listed above. Cause: There was an apparent lack of internal controls and/or segregation of duties within the subrecipient entity that did not prevent these unallowable costs from being incurred at the subrecipient level. Additionally, Corporation management did not perform subrecipient monitoring procedures in a timely manner which resulted in unallowed costs being incurred before ultimately being detected by the Corporation. Effect: Questioned or unallowable known costs of $242,398 (as identified by the Corporation) from fiscal year 2023 and fiscal year 2024 were incurred across the federal programs listed below. Questioned Costs: Federal Program FY2024 Amount FY2023 Amount AL # 14.231 $24,753 $54,737 AL # 14.231 – COVID $0 $46,176 AL # 14.267 $37,602 $2,928 Unknown $6,813 $69,389 Context: As part of subrecipient monitoring, the Corporation identified some questioned costs related to one specific subrecipient. Management of the Corporation performed testing of the disbursements made to the subrecipient while the Executive Director was employed there (from July 31, 2022 through January 4, 2024) and determined that there were $242,398 of disbursements that were either unallowable based on the supporting documentation, or were questioned costs due to lack of supporting documentation. Crowe tested a sample of the disbursements from the same time period and the results from that sample agreed to the results the Corporation found.
Finding 2024-001 – Unallowable Subrecipient Costs (Deficiency) Information on the Federal Programs: Continuum of Care – AL # 14.267 and Emergency Solutions Grant Program – AL # 14.231. Criteria: According to 2 CFR Part 200, Subpart F, 200.516, “the auditor must report the following as audit findings in a schedule of findings and questioned costs… 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: During the current fiscal year the Corporation, based on monitoring procedures performed, determined that one of their subrecipients had been making payments to fictitious vendors and/or vendors with a significant conflict of interest resulting in resulting in questioned or unallowable costs from fiscal year 2023 and fiscal year 2024 across the federal programs listed above. Cause: There was an apparent lack of internal controls and/or segregation of duties within the subrecipient entity that did not prevent these unallowable costs from being incurred at the subrecipient level. Additionally, Corporation management did not perform subrecipient monitoring procedures in a timely manner which resulted in unallowed costs being incurred before ultimately being detected by the Corporation. Effect: Questioned or unallowable known costs of $242,398 (as identified by the Corporation) from fiscal year 2023 and fiscal year 2024 were incurred across the federal programs listed below. Questioned Costs: Federal Program FY2024 Amount FY2023 Amount AL # 14.231 $24,753 $54,737 AL # 14.231 – COVID $0 $46,176 AL # 14.267 $37,602 $2,928 Unknown $6,813 $69,389 Context: As part of subrecipient monitoring, the Corporation identified some questioned costs related to one specific subrecipient. Management of the Corporation performed testing of the disbursements made to the subrecipient while the Executive Director was employed there (from July 31, 2022 through January 4, 2024) and determined that there were $242,398 of disbursements that were either unallowable based on the supporting documentation, or were questioned costs due to lack of supporting documentation. Crowe tested a sample of the disbursements from the same time period and the results from that sample agreed to the results the Corporation found.
Finding 2024-001 – Unallowable Subrecipient Costs (Deficiency) Information on the Federal Programs: Continuum of Care – AL # 14.267 and Emergency Solutions Grant Program – AL # 14.231. Criteria: According to 2 CFR Part 200, Subpart F, 200.516, “the auditor must report the following as audit findings in a schedule of findings and questioned costs… 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: During the current fiscal year the Corporation, based on monitoring procedures performed, determined that one of their subrecipients had been making payments to fictitious vendors and/or vendors with a significant conflict of interest resulting in resulting in questioned or unallowable costs from fiscal year 2023 and fiscal year 2024 across the federal programs listed above. Cause: There was an apparent lack of internal controls and/or segregation of duties within the subrecipient entity that did not prevent these unallowable costs from being incurred at the subrecipient level. Additionally, Corporation management did not perform subrecipient monitoring procedures in a timely manner which resulted in unallowed costs being incurred before ultimately being detected by the Corporation. Effect: Questioned or unallowable known costs of $242,398 (as identified by the Corporation) from fiscal year 2023 and fiscal year 2024 were incurred across the federal programs listed below. Questioned Costs: Federal Program FY2024 Amount FY2023 Amount AL # 14.231 $24,753 $54,737 AL # 14.231 – COVID $0 $46,176 AL # 14.267 $37,602 $2,928 Unknown $6,813 $69,389 Context: As part of subrecipient monitoring, the Corporation identified some questioned costs related to one specific subrecipient. Management of the Corporation performed testing of the disbursements made to the subrecipient while the Executive Director was employed there (from July 31, 2022 through January 4, 2024) and determined that there were $242,398 of disbursements that were either unallowable based on the supporting documentation, or were questioned costs due to lack of supporting documentation. Crowe tested a sample of the disbursements from the same time period and the results from that sample agreed to the results the Corporation found.
Criteria: According to 2 CFR 200.516, recipients of federal awards must maintain effective internal control over the federal award that provides reasonable assurance that the recipient is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. This includes maintaining adequate documentation of all monitoring controls and approvals. As part of internal controls over compliance and monitoring, the CFO reviews and approves reports, summarized billings, and expense information from program managers. Condition: During our audit, we found that the monitoring control for program expenditures was not documented as having been performed for all program expenditures. Additionally, documentation of the CFO's review and approval was not maintained for all expenses submitted for reimbursement during the year. Cause: The reportable finding was due to insufficient documentation practices and lack of adherence to established procedures for monitoring and approval of program expenditures. Documentation of CFO review and approval was not maintained for all expenses submitted for reimbursement during the year. Effect: As a result of this deficiency, there is an increased risk that unapproved or improper expenses could be submitted for reimbursement, potentially leading to non-compliance with federal requirements. The lack of monitoring, review, and approval is a reportable audit finding in accordance with 2 CFR 200.516. Recommendation: We recommend that policies, procedures, and controls over program compliance be followed and documented for all applicable transactions and expenditures. View of Responsible Officials: Management concurs with the auditors.
Criteria: According to 2 CFR 200.516, recipients of federal awards must maintain effective internal control over the federal award that provides reasonable assurance that the recipient is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. This includes maintaining adequate documentation of all monitoring controls and approvals. As part of internal controls over compliance and monitoring, the CFO reviews and approves reports, summarized billings, and expense information from program managers. Condition: During our audit, we found that the monitoring control for program expenditures was not documented as having been performed for all program expenditures. Additionally, documentation of the CFO's review and approval was not maintained for all expenses submitted for reimbursement during the year. Cause: The reportable finding was due to insufficient documentation practices and lack of adherence to established procedures for monitoring and approval of program expenditures. Documentation of CFO review and approval was not maintained for all expenses submitted for reimbursement during the year. Effect: As a result of this deficiency, there is an increased risk that unapproved or improper expenses could be submitted for reimbursement, potentially leading to non-compliance with federal requirements. The lack of monitoring, review, and approval is a reportable audit finding in accordance with 2 CFR 200.516. Recommendation: We recommend that policies, procedures, and controls over program compliance be followed and documented for all applicable transactions and expenditures. View of Responsible Officials: Management concurs with the auditors.
Criteria: According to 2 CFR 200.516, recipients of federal awards must maintain effective internal control over the federal award that provides reasonable assurance that the recipient is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. This includes maintaining adequate documentation of all monitoring controls and approvals. As part of internal controls over compliance and monitoring, the CFO reviews and approves reports, summarized billings, and expense information from program managers. Condition: During our audit, we found that the monitoring control for program expenditures was not documented as having been performed for all program expenditures. Additionally, documentation of the CFO's review and approval was not maintained for all expenses submitted for reimbursement during the year. Cause: The reportable finding was due to insufficient documentation practices and lack of adherence to established procedures for monitoring and approval of program expenditures. Documentation of CFO review and approval was not maintained for all expenses submitted for reimbursement during the year. Effect: As a result of this deficiency, there is an increased risk that unapproved or improper expenses could be submitted for reimbursement, potentially leading to non-compliance with federal requirements. The lack of monitoring, review, and approval is a reportable audit finding in accordance with 2 CFR 200.516. Recommendation: We recommend that policies, procedures, and controls over program compliance be followed and documented for all applicable transactions and expenditures. View of Responsible Officials: Management concurs with the auditors.
2 CFR § 3474.1 gives regulatory effect to the Office of Management Budget guidance in 2 CFR § 200 for the Department of Education. 2 CFR § 200 Subpart E which states, in part, costs must be adequately documented in order to be considered allowable. 2 CFR § 200.430(g)(1)(i) states, in part, charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated. The Ohio Department of Education and Workforce’s Grants Manual states, in part, semi-annual certifications are allowed when an employee’s compensation is funded by only one federal grant and works solely on a single cost objective. An employee funded by a federal grant and the general fund would fall under this category. The Ohio Department of Education and Workforce’s Grants Management Guidance 2014-002 states, in part, employees who meet [the criteria to use semi-annual certifications] are not required to maintain time-and-effort records if their job description clearly shows the employee is assigned 100% to the program or single cost objective. Each employee must certify in writing, at least semi-annually, that he/she worked solely on the program or single cost objective for the period covered by the certification. The certification is signed by the employee or by the supervisor having first-hand knowledge. Charges to the grant must be supported by these semi-annual certifications. The semi-annual certification is executed after the work has been completed, and not before. Due to insufficient controls over records management, the District did not maintain semi-annual certifications, or other time and effort documentation, for employees paid from the Special Education Cluster. As a result, $170,293 of payroll and benefits charged to the Special Education Cluster were not supported by records that accurately reflect the work performed and are questioned costs under 2 CFR § 200.516. Lack of controls over records management could lead to the District not being able to support charges against federal programs and potentially losing funding. The District should ensure semi-annual certifications are accurately and timely completed and subsequently retained to support payroll and benefits charged to the program. This documentation should be used to determine the allocation of salary among the various programs, grants, activities, etc. We further recommend the District’s management review the requirements of the Uniform Guidance to determine the documentation needed and other requirements related to the allowability of costs to Federal awards to prevent such noncompliance in the future.
FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (Continued) Compliance and Internal Control over Compliance Finding Inaccurate Payroll Charges Due to Timesheet Discrepancies (Significant Deficiency) AL Number and Title: 84.362A - Native Hawaiian Education Program Award Number: S362A200024-22 Award Period: October 1, 2022 - September 30, 2024 Federal Agency: Department of Education Criteria: Under 2 CFR § 200.430(g)(1)(i), charges to federal awards for salaries and wages must be based on records that accurately reflect work performed and must be supported by a system of internal controls that provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Condition: During our testing of compliance and internal controls over compliance for Activities Allowed or Unallowed and Allowable Costs/Cost Principles, we selected a haphazard sample of 20 payroll disbursements. We noted discrepancies between employee timesheets and corresponding payroll registers for two disbursements, as follows: • For the pay period ending September 2, 2023, the employee’s approved timesheet indicated 44 hours, while the payroll register indicated 45 hours charged to the program. • For the pay period ending December 23, 2023, the employee’s approved timesheet indicated 42.62 hours, while the payroll register indicated 54.54 hours charged to the program. Cause: The discrepancies between the timesheet and payroll register hours appear to have resulted from manual data entry errors during payroll processing. Effect: The lack of adequate review procedures increases the risk that payroll charges to the program may not be based on accurate and approved time documentation. Although the extrapolated error identified during testing was below the $25,000 threshold for reporting questioned costs under 2 CFR §200.516(a)(3), the control deficiency represents a significant deficiency in internal control over compliance. Repeat Finding? No Recommendation: We recommend that the Organization implement a review and reconciliation process to ensure that hours recorded in payroll registers agree to approved timesheets before payroll is processed and charges are allocated to federal programs. Views of Responsible Officials and Planned Corrective Action: Mana Maoli agrees with the finding and the recommendation. See Part V, Corrective Action Plan.
Federal agency: U.S. Department of Agriculture Federal program title: Special Supplemental Nutrition Program for Women, Infants, and Children Assistance Listing Number: 10.557 Pass-Through Agency: Iowa Department of Public Health, Division of Family and Community Health Pass-Through Numbers: 5883A031 and 5884AO31 Award Period: October 1, 2017 through September 30, 2028 Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: 2 CFR Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Award contains various requirements for questioned costs under federal awards. §200.516 requires the auditor to provide information on known or likely questioned costs greater than $25,000 for a type of compliance requirement for a major program. Condition and Context: During our testing, we noted $97,969 was attributed to the federal award program and was determined to not be an allowable cost under the federal award program. Questioned Costs: $97,969 Cause: The Medical Center was unaware at the time of recognition that the costs were not allowable under the federal award program. Effect: The Medical Center is not in compliance with the requirements of 2 CFR Part 200 §200.516. Recommendation: We recommend the Medical Center review the WIC expenses monthly to ensure during month end close process that all costs are allowable and deemed to be reimbursable as a part of the federal award program. Views of responsible officials: There is no disagreement with the audit finding. Management will file an amendment to payback the questioned costs to the federal program.
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. One material weakness related to internal control over major federal programs was identified during the audit. 7. The auditor’s report on compliance for the major federal award programs for HFF expresses an unmodified opinion. 8. There was one audit finding relative to the major federal award programs for HFF in accordance with 2 CFR 200.516(a). 9. One audit finding was disclosed that is required to be reported in accordance with 2 CFR 200.516(a). 10. Identification of major federal programs: Assistance Listing Number 14.267 11. The programs tested as major programs were: Assistance Listing Number 14.267 12. The threshold for distinguishing Types A and B programs was $750,000. 13. HFF was determined not 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: 1) Finding 2023-001: 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 (Cash Management) During the period, the Organization oversaw subrecipient grantees under AL #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. 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 subrecipients 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 above finding was identified and disclosed during the audit for the period ending December 31, 2022, and was addressed by Board and Management at that time. However, the timing of the audit and subsequent finding lead to the issue continuing through mid-2023, when the audit took place. The Corrective Action Plan was certified by Board and Management effective September 26, 2023, and additional controls surrounding their subrecipient relationships were implemented at that time. 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.
2023-002 – Past-Due Single Audit Report Submission Criteria: Regulations require that the Organization must submit the single audit data collection form and reporting package within the earlier of 30 calendar days after receipt of the auditor’s report or 9 months after the end of the audit period, to comply with 2 CFR § 200.512(a)(1). Condition: The Organization submitted their 2022 Single Audit Data Collection form on September 5, 2024, which was 20 months after the end of the audit period. Effect: The Organization did not comply with 2 CFR § 200.512(a)(1). Per 2 CFR § 200.516(a)(2), this results in material noncompliance with the provisions of Federal statues, regulations, and terms and conditions of Federal awards related to major programs. Questioned Costs: No questioned costs were identified as a result of our procedures. Cause: The Organization failed to submit their 2022 Single Audit Data Collection form before the end of September 2023 – the 9 month post-audit period ending deadline. Recommendations: We recommend management finalize and submit their single audit data collection forms within the 9 month window moving forward. Views of Responsible Officials: The Organization agrees with the finding and will work to implement the recommendations.
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. One material weakness related to internal control over major federal programs was identified during the audit. 7. The auditor’s report on compliance for the major federal award programs for HFF expresses an unmodified opinion. 8. There was one audit finding relative to the major federal award programs for HFF in accordance with 2 CFR 200.516(a). 9. One audit finding was disclosed that is required to be reported in accordance with 2 CFR 200.516(a). 10. Identification of major federal programs: Assistance Listing Number 14.267 11. The programs tested as major programs were: Assistance Listing Number 14.267 12. The threshold for distinguishing Types A and B programs was $750,000. 13. HFF was determined not 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: 1) Finding 2023-001: 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 (Cash Management) During the period, the Organization oversaw subrecipient grantees under AL #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. 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 subrecipients 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 above finding was identified and disclosed during the audit for the period ending December 31, 2022, and was addressed by Board and Management at that time. However, the timing of the audit and subsequent finding lead to the issue continuing through mid-2023, when the audit took place. The Corrective Action Plan was certified by Board and Management effective September 26, 2023, and additional controls surrounding their subrecipient relationships were implemented at that time. 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.
2023-002 – Past-Due Single Audit Report Submission Criteria: Regulations require that the Organization must submit the single audit data collection form and reporting package within the earlier of 30 calendar days after receipt of the auditor’s report or 9 months after the end of the audit period, to comply with 2 CFR § 200.512(a)(1). Condition: The Organization submitted their 2022 Single Audit Data Collection form on September 5, 2024, which was 20 months after the end of the audit period. Effect: The Organization did not comply with 2 CFR § 200.512(a)(1). Per 2 CFR § 200.516(a)(2), this results in material noncompliance with the provisions of Federal statues, regulations, and terms and conditions of Federal awards related to major programs. Questioned Costs: No questioned costs were identified as a result of our procedures. Cause: The Organization failed to submit their 2022 Single Audit Data Collection form before the end of September 2023 – the 9 month post-audit period ending deadline. Recommendations: We recommend management finalize and submit their single audit data collection forms within the 9 month window moving forward. Views of Responsible Officials: The Organization agrees with the finding and will work to implement the recommendations.
FINDING 2023-008 MDHHS, PACAP - Inappropriate PACAP Allocation See Schedule of Findings and Questioned Costs for chart/table. Condition MDHHS did not ensure it used the appropriate Public Assistance Cost Allocation Plan (PACAP) data to allocate expenditures to its federal programs. We noted: a. 2 (1%) of 203 statistic groups for which MDHHS used incorrect data to calculate the PACAP percentages, which affected 6 (40%) of 15 sampled cost pools. b. 2 (13%) of 16 Random Moment Time Studies, which MDHHS used to calculate PACAP percentages, did not have a complete population of participants, which affected 6 (40%) of 15 sampled cost pools. Criteria Federal regulation 45 CFR 95.507 and Appendix VI of federal regulation 2 CFR 200 state costs are allocable to a particular cost objective if the services involved are chargeable or assignable to such cost objective in accordance with relative benefits received. Federal regulation 45 CFR 95.517 requires MDHHS to claim federal financial participation for costs associated with a program only in accordance with its approved or amended (at its discretion) PACAP. Federal regulation 2 CFR 200.306 requires that costs used for matching be allowable costs to the federal award. Cause MDHHS informed us its current quality control processes did not detect the errors. Effect MDHHS incorrectly allocated expenditures to various federal programs. The federal grantor agency could issue sanctions or disallowances related to noncompliance. Known Questioned Costs Undeterminable. Recommendation We recommend MDHHS ensure it uses the appropriate PACAP data to allocate expenditures to its federal programs. Management Views MDHHS disagrees the exceptions identified should rise to the level of a significant deficiency and noncompliance. The comprehensive set of quality control processes continue to operate as designed to identify any errors greater than 5.0% of the total difference of the given statistical group from the previous quarter and none of the errors identified in the finding fell outside of this range. For part a., the auditor's review included all related statistical records within each statistical group for the 15 sampled cost pools. This includes all statistics used in the cost allocation process for the entire fiscal year because the costs that originate in these cost pools are referenced in all other cost pools. After review of all fiscal year 2023 statistical data, 6 individual statistical records out of 6,548 were found to be in error. After recalculating the cost allocated amounts related to this error, we identified that approximately $15,346 was overclaimed to LIHEAP out of $1,732,426,561 (0.0009%) of costs allocated in fiscal year 2023 by MDHHS. The other program areas identified were underclaimed. For part b., MDHHS acknowledges the exclusion of a participant from two quarters (quarter three and quarter four) of the Family Independence Specialists/Eligibility Specialists (FIS/ES) Random Moment Time Study (RMTS) in the sample. Although the actual dollar value impact of excluding a participant is indeterminable, MDHHS concluded the impact would be immaterial because there are over 6,000 RMTS participants each quarter and RMTS results vary little from quarter to quarter from non-programmatic changes. Auditor's Comments to Management Views For part a., we calculated the cost allocated amounts related to the error and identified that approximately $17,317 was overclaimed to LIHEAP out of $141.0 million of second quarter expenditures. However, in combination with part b., we could not conclude overclaims for other federal programs were less than $25,000. For part b., MDHHS used incomplete data to allocate approximately $143.5 million of third quarter expenditures and $171.2 million of fourth quarter expenditures for a total of $314.6 million to various federal and State programs, which may have affected the percentages used to allocate these expenditures. MDHHS did not assess the impact of these incomplete records. Consequently, it has no basis for its "immaterial" statement. Given the errors noted in parts a. and b., we could not determine the combined known questioned costs; however, it is likely that the improper allocation related to the $455.7 million exceeds $25,000 for the federal programs identified. Federal regulation 2 CFR 200.516(a)(3) states that in evaluating the effect of questioned costs on the opinion on noncompliance, the auditor considers the best estimate of total questioned costs (likely questioned costs), not just the questioned costs specifically identified (known questioned costs). The auditor must also report audit findings for known questioned costs when likely questioned costs are greater than $25,000 for a type of compliance requirement for a major program. Therefore, the finding stands as written.
FINDING 2023-021 SNAP Cluster, ALN 10.551 and 10.561, Special Tests and Provisions - EBT Reconciliations See Schedule of Findings and Questioned Costs for chart/table. Background MDHHS is responsible for determining eligibility for SNAP benefits. The State's EBT provider then provides the SNAP recipient with a debit card which can be used for food purchases at authorized retailer stores. The State's EBT contractor is responsible for paying retailers that have accepted EBT cards for qualified purchases. The EBT contractor then receives funds from the State, via wire transfer, as reimbursement for the retail purchases. MDHHS is responsible for reconciling the payments made to retailers by its EBT contractor with the amounts drawn from its EBT account with the U.S. Department of the Treasury. Condition MDHHS did not complete daily reconciliations of payments made to retailers by its EBT contractor with the client information recorded in its system and the reports used to make the federal draw. MDHHS developed the Benefit Issuer Food Stamp Report to summarize the total detailed daily client SNAP activity reported by its EBT contractor; however, because of inaccuracies, MDHHS did not use the report in its reconciliation process. Criteria Federal regulation 7 CFR 274.1(i)(1) requires state agencies to establish procedures to monitor SNAP benefit issuers to ensure their operations comply with SNAP requirements, including the identification and correction of deficiencies and to report any violations to the federal government. Also, federal regulation 7 CFR 274.4(a) requires state agencies to reconcile total EBT funds entering into, exiting from, and remaining in the EBT contractor's system each day and to verify retailer credit against the deposit information entered in the Automated Clearing House. Cause MDHHS informed us that EBT reconciliations between Bridges, Bridges data warehouse, and the vendor are conducted on a monthly basis using daily data because of the timing of benefit authorization, availability of vendor data, and usage of benefits. Effect Without proper reconciliation procedures in place, MDHHS could not ensure daily SNAP payment amounts recorded in its system were accurate. We consider this to be a material weakness and material noncompliance because of the amount of SNAP benefits issued through the EBT process and because this required daily reconciliation was not in place in fiscal year 2023. The federal grantor agency could issue sanctions or disallowances related to noncompliance. Known Questioned Costs None. Recommendation We recommend MDHHS complete daily reconciliations of payments made to retailers by its EBT contractor with client information recorded in its system and the reports used to make the federal draw. Management Views MDHHS disagrees that a material weakness and material noncompliance exist. MDHHS federal reporting conducts a daily reconciliation of federal draws and authorizations to retailers based on vendor EBT reports. In addition, MDHHS conducts a monthly reconciliation between Bridges, Bridges data warehouse, and vendor EBT reports using daily data to ensure the client information in Bridges and Bridges data warehouse is accurate. The monthly reconciliation process does not impact the federal draw because the daily reconciliation of the vendor EBT report is used for this purpose. MDHHS provided detailed and accurate descriptions of MDHHS daily and monthly EBT reconciliations to the designated federal awarding agency contacts at the United States Department of Agriculture Food and Nutrition Service Agency that are familiar with MDHHS processes and received confirmation that the current reconciliation processes in place are sufficient to comply with federal regulations. Auditor's Comments to Management Views MDHHS acknowledges it does not perform daily reconciliations of payments made to retailers by its EBT contractor to Bridges data although federal regulation 7 CFR 274.4(a) requires state agencies to reconcile total EBT funds entering into, exiting from, and remaining in the EBT contractor's system each day. Also, MDHHS did not sufficiently communicate its EBT process to its regional federal contact person. The daily EBT "reconciliation" noted above does not include Bridges data, but instead uses the EBT contractor report to confirm the accuracy of the federal account balance. Therefore, the regional federal contact person did not have all necessary information to assess if MDHHS's process complied with the federal regulation. In addition, MDHHS did not obtain an opinion from a federal person with the authority to issue an opinion on behalf of the United States Department of Agriculture ensuring consistent interpretation of federal regulations. Federal regulations 2 CFR 200.516(a)(1) and 2 CFR 200.516(a)(2) state it is the auditor's determination of whether a deficiency in internal control is a significant deficiency or a material weakness and whether a noncompliance with federal statutes, regulations, or the terms and conditions of a federal award is material for the purpose of reporting an audit finding. MDHHS incurred SNAP (ALN 10.551) expenditures of $3.7 billion during fiscal year 2023, with daily draws averaging over $20 million; therefore, the lack of a daily reconciliation increases the risk MDHHS may not detect differences between the State records and the EBT contractor's reports prior to drawing down federal funds. The finding stands as written.
FINDING 2023-008 MDHHS, PACAP - Inappropriate PACAP Allocation See Schedule of Findings and Questioned Costs for chart/table. Condition MDHHS did not ensure it used the appropriate Public Assistance Cost Allocation Plan (PACAP) data to allocate expenditures to its federal programs. We noted: a. 2 (1%) of 203 statistic groups for which MDHHS used incorrect data to calculate the PACAP percentages, which affected 6 (40%) of 15 sampled cost pools. b. 2 (13%) of 16 Random Moment Time Studies, which MDHHS used to calculate PACAP percentages, did not have a complete population of participants, which affected 6 (40%) of 15 sampled cost pools. Criteria Federal regulation 45 CFR 95.507 and Appendix VI of federal regulation 2 CFR 200 state costs are allocable to a particular cost objective if the services involved are chargeable or assignable to such cost objective in accordance with relative benefits received. Federal regulation 45 CFR 95.517 requires MDHHS to claim federal financial participation for costs associated with a program only in accordance with its approved or amended (at its discretion) PACAP. Federal regulation 2 CFR 200.306 requires that costs used for matching be allowable costs to the federal award. Cause MDHHS informed us its current quality control processes did not detect the errors. Effect MDHHS incorrectly allocated expenditures to various federal programs. The federal grantor agency could issue sanctions or disallowances related to noncompliance. Known Questioned Costs Undeterminable. Recommendation We recommend MDHHS ensure it uses the appropriate PACAP data to allocate expenditures to its federal programs. Management Views MDHHS disagrees the exceptions identified should rise to the level of a significant deficiency and noncompliance. The comprehensive set of quality control processes continue to operate as designed to identify any errors greater than 5.0% of the total difference of the given statistical group from the previous quarter and none of the errors identified in the finding fell outside of this range. For part a., the auditor's review included all related statistical records within each statistical group for the 15 sampled cost pools. This includes all statistics used in the cost allocation process for the entire fiscal year because the costs that originate in these cost pools are referenced in all other cost pools. After review of all fiscal year 2023 statistical data, 6 individual statistical records out of 6,548 were found to be in error. After recalculating the cost allocated amounts related to this error, we identified that approximately $15,346 was overclaimed to LIHEAP out of $1,732,426,561 (0.0009%) of costs allocated in fiscal year 2023 by MDHHS. The other program areas identified were underclaimed. For part b., MDHHS acknowledges the exclusion of a participant from two quarters (quarter three and quarter four) of the Family Independence Specialists/Eligibility Specialists (FIS/ES) Random Moment Time Study (RMTS) in the sample. Although the actual dollar value impact of excluding a participant is indeterminable, MDHHS concluded the impact would be immaterial because there are over 6,000 RMTS participants each quarter and RMTS results vary little from quarter to quarter from non-programmatic changes. Auditor's Comments to Management Views For part a., we calculated the cost allocated amounts related to the error and identified that approximately $17,317 was overclaimed to LIHEAP out of $141.0 million of second quarter expenditures. However, in combination with part b., we could not conclude overclaims for other federal programs were less than $25,000. For part b., MDHHS used incomplete data to allocate approximately $143.5 million of third quarter expenditures and $171.2 million of fourth quarter expenditures for a total of $314.6 million to various federal and State programs, which may have affected the percentages used to allocate these expenditures. MDHHS did not assess the impact of these incomplete records. Consequently, it has no basis for its "immaterial" statement. Given the errors noted in parts a. and b., we could not determine the combined known questioned costs; however, it is likely that the improper allocation related to the $455.7 million exceeds $25,000 for the federal programs identified. Federal regulation 2 CFR 200.516(a)(3) states that in evaluating the effect of questioned costs on the opinion on noncompliance, the auditor considers the best estimate of total questioned costs (likely questioned costs), not just the questioned costs specifically identified (known questioned costs). The auditor must also report audit findings for known questioned costs when likely questioned costs are greater than $25,000 for a type of compliance requirement for a major program. Therefore, the finding stands as written.
FINDING 2023-021 SNAP Cluster, ALN 10.551 and 10.561, Special Tests and Provisions - EBT Reconciliations See Schedule of Findings and Questioned Costs for chart/table. Background MDHHS is responsible for determining eligibility for SNAP benefits. The State's EBT provider then provides the SNAP recipient with a debit card which can be used for food purchases at authorized retailer stores. The State's EBT contractor is responsible for paying retailers that have accepted EBT cards for qualified purchases. The EBT contractor then receives funds from the State, via wire transfer, as reimbursement for the retail purchases. MDHHS is responsible for reconciling the payments made to retailers by its EBT contractor with the amounts drawn from its EBT account with the U.S. Department of the Treasury. Condition MDHHS did not complete daily reconciliations of payments made to retailers by its EBT contractor with the client information recorded in its system and the reports used to make the federal draw. MDHHS developed the Benefit Issuer Food Stamp Report to summarize the total detailed daily client SNAP activity reported by its EBT contractor; however, because of inaccuracies, MDHHS did not use the report in its reconciliation process. Criteria Federal regulation 7 CFR 274.1(i)(1) requires state agencies to establish procedures to monitor SNAP benefit issuers to ensure their operations comply with SNAP requirements, including the identification and correction of deficiencies and to report any violations to the federal government. Also, federal regulation 7 CFR 274.4(a) requires state agencies to reconcile total EBT funds entering into, exiting from, and remaining in the EBT contractor's system each day and to verify retailer credit against the deposit information entered in the Automated Clearing House. Cause MDHHS informed us that EBT reconciliations between Bridges, Bridges data warehouse, and the vendor are conducted on a monthly basis using daily data because of the timing of benefit authorization, availability of vendor data, and usage of benefits. Effect Without proper reconciliation procedures in place, MDHHS could not ensure daily SNAP payment amounts recorded in its system were accurate. We consider this to be a material weakness and material noncompliance because of the amount of SNAP benefits issued through the EBT process and because this required daily reconciliation was not in place in fiscal year 2023. The federal grantor agency could issue sanctions or disallowances related to noncompliance. Known Questioned Costs None. Recommendation We recommend MDHHS complete daily reconciliations of payments made to retailers by its EBT contractor with client information recorded in its system and the reports used to make the federal draw. Management Views MDHHS disagrees that a material weakness and material noncompliance exist. MDHHS federal reporting conducts a daily reconciliation of federal draws and authorizations to retailers based on vendor EBT reports. In addition, MDHHS conducts a monthly reconciliation between Bridges, Bridges data warehouse, and vendor EBT reports using daily data to ensure the client information in Bridges and Bridges data warehouse is accurate. The monthly reconciliation process does not impact the federal draw because the daily reconciliation of the vendor EBT report is used for this purpose. MDHHS provided detailed and accurate descriptions of MDHHS daily and monthly EBT reconciliations to the designated federal awarding agency contacts at the United States Department of Agriculture Food and Nutrition Service Agency that are familiar with MDHHS processes and received confirmation that the current reconciliation processes in place are sufficient to comply with federal regulations. Auditor's Comments to Management Views MDHHS acknowledges it does not perform daily reconciliations of payments made to retailers by its EBT contractor to Bridges data although federal regulation 7 CFR 274.4(a) requires state agencies to reconcile total EBT funds entering into, exiting from, and remaining in the EBT contractor's system each day. Also, MDHHS did not sufficiently communicate its EBT process to its regional federal contact person. The daily EBT "reconciliation" noted above does not include Bridges data, but instead uses the EBT contractor report to confirm the accuracy of the federal account balance. Therefore, the regional federal contact person did not have all necessary information to assess if MDHHS's process complied with the federal regulation. In addition, MDHHS did not obtain an opinion from a federal person with the authority to issue an opinion on behalf of the United States Department of Agriculture ensuring consistent interpretation of federal regulations. Federal regulations 2 CFR 200.516(a)(1) and 2 CFR 200.516(a)(2) state it is the auditor's determination of whether a deficiency in internal control is a significant deficiency or a material weakness and whether a noncompliance with federal statutes, regulations, or the terms and conditions of a federal award is material for the purpose of reporting an audit finding. MDHHS incurred SNAP (ALN 10.551) expenditures of $3.7 billion during fiscal year 2023, with daily draws averaging over $20 million; therefore, the lack of a daily reconciliation increases the risk MDHHS may not detect differences between the State records and the EBT contractor's reports prior to drawing down federal funds. The finding stands as written.