The following findings and recommendations relating to internal control deficiencies classified as Material Weaknesses and a Significant Deficiency were communicated to the Department of Health Care Policy and Financing (Department) in previous years and have not been remediated as of June 30, 2022 because the original implementation dates provided by the Department were in a subsequent fiscal year. These complete findings and recommendations can be found within the original report and the complete recommendations can be found within Section IV: Prior Audit Recommendations of this report. See Schedule of Findings and Questioned Costs for chart/table See Schedule of Findings and Questioned Costs for footnote Finding 2021-045 Payments for Non-Emergent Medical Transportation ClaimsPrior to July 2020, in 55 counties, the Department worked with various county offices to have them broker Non-Emergent Medical Transportation (NEMT) services for Medicaid recipients, including rides to and from Medicaid medical appointments, personal mileage reimbursement, and trip-related meals and lodging. For example, these counties arranged the rides with transportation providers, submitted the claims or had providers submit claims for reimbursement to the Department, and passed on reimbursements to providers as needed. For the remaining nine counties, the Department contracted with IntelliRide to serve as the NEMT broker for services in those areas. From July 1, 2020, to August 31, 2021, when the Department contracted with IntelliRide to be the statewide broker, most recipients throughout the state scheduled NEMT rides by contacting IntelliRide through its call center, website chat function, or smartphone applications. IntelliRide scheduled rides and assigned transportation providers to them, and had providers upload trip information into IntelliRide?s EcoLane transportation scheduling system. EcoLane maintains information related to recipients? requests for rides and provider trip information, such as the trip date and time, names of the recipient and driver, and scheduled pick-up and destination addresses. IntelliRide submitted claims through the Department?s interChange system (interChange) requesting payments for providers? NEMT services, paid providers for their services, and received reimbursement from the Department. In addition, the Department paid NEMT claims submitted directly by NEMT providers. In Fiscal Year 2021, from July 1, 2020, through February 28, 2021 (the audit period), the Department paid 362,110 claims for NEMT services totaling about $33.2 million, as shown in the following table. In September 2021, the Department plans to transition back to IntelliRide brokering services in nine counties, while the NEMT providers in the remaining counties will broker their own services. See Schedule of Findings and Questioned Costs for chart/table See Schedule of Findings and Questioned Costs for footnote What audit work was performed and how were the results measured? The purpose of the audit work was to determine whether the Department has ensured that NEMT claims adhere to the following federal and state requirements. ? NEMT trips were to be brokered through, and all claims submitted by, the statewide broker, Intelliride. According to state regulations and the Department?s NEMT Billing Manual, all NEMT trips during Fiscal Year 2021 had to be authorized by the statewide broker, IntelliRide [10 CCR 2505-10 8.014.7.A]. This means that each recipient?s NEMT ride request should have been sent to IntelliRide for approval or authorization before the trip, and any unauthorized trips should ?not be reimbursed or paid? [Billing Manual]. According to the Department, it allowed NEMT providers time to transition to working with IntelliRide because some providers were reluctant to join the statewide brokerage and the Department needed time to onboard providers. By Fall 2020, most providers should have been working with IntelliRide to schedule NEMT rides. The Department told us that six NEMT providers received its express permission to bypass IntelliRide to schedule rides and submit claims directly to the Department because the providers are unique, such as only serving recipients with disabilities or receiving federal grant funding to provide NEMT. To assess whether IntelliRide brokered most NEMT services in the State and submitted the related claims in line with regulations and its contract, we reviewed the Department?s aggregate data for the 128,998 NEMT claims paid from December 2020 through February 2021. ? The Department must pay claims based on accurate service rates and trip mileage. Non-taxi NEMT services, such as wheelchair and mobility vehicle services, have base rates and mileage rates set by the Department. IntelliRide tracks the mileage of each NEMT trip in EcoLane and submits mileage claims to the Department?s interChange system. The Public Utilities Commission (PUC) sets the rate for each permitted taxi provider, which generally includes a rate for the first trip mile and a different rate for each additional mile. According to the Department?s NEMT Billing Manual and NEMT Rate Schedule for Fiscal Year 2021, taxi claims should have been paid at the rate set by the PUC. For example, if a taxi company?s PUC rate was $4 for the first mile and $2 for each additional mile, the Department should have paid $6 for a two-mile NEMT trip claim. To verify that the Department paid NEMT claims based on the correct trip mileage and rates, we reviewed the trip mileage and rates for 362,110 NEMT claims paid from July 2020 through February 2021, and PUC documentation on the taxi rates for permitted taxi companies. ? Claims must be supported with accurate and complete documentation confirming the service provided. Both IntelliRide and providers that submit claims for NEMT services must keep and be able to furnish accurate, complete supporting documentation for all claims [42 USC 1396a(27), 42 CFR ?? 431.17 and 433.32, and 10 CCR 2505-10 8.014.3.C and 8.014.6.B]. For example, a claim must be supported by medical documentation showing that the type of vehicle was needed to transport the recipient, and documentation from the transportation provider showing the trip occurred and when the recipient was picked-up and dropped-off. IntelliRide should only submit a claim to the Department after IntelliRide confirms the trip has been completed and marks the status complete in EcoLane [IntelliRide Policies and Procedures]. If an NEMT provider does not show up for a trip, IntelliRide should mark the trip as ?cancelled? in EcoLane. Payments for Medicaid claims that lack supporting documentation for the services provided are unallowable, meaning they should not be paid. IntelliRide or the Department must maintain documentation from recipients? medical providers showing why certain NEMT services, like transportation in a wheelchair van or with an escort, are medically necessary [10 CCR 2505-10 8.014.7.B and 8.014.5.D.1; Billing Manual]. To verify that there was support for NEMT claims, we reviewed IntelliRide data in EcoLane for all 362,110 NEMT claims paid from July 2020 through February 2021, and Department documentation for a sample of 85 NEMT paid claims?75 selected randomly from the four NEMT service areas of the state, and 10 that were the highest paid NEMT claims. ? NEMT services must be medically necessary. NEMT services shall only be provided to recipients with no other means to attend medically necessary, non-emergency treatment covered by Medicaid [42 USC 1396a(70); 42 CFR 431.53; 10 CCR 2505-10 8.014.5.B]. To verify that NEMT claims were only paid for recipients to access medical care, we reviewed the Department?s data on paid medical claims to determine if the recipients related to 22 sampled NEMT claims paid in December 2020 had a corresponding medical appointment. For another 61 paid NEMT claims that involved IntelliRide scheduling and submitting claims for trips every day in December for two recipients, we reviewed whether the recipients had paid medical claims corresponding with the trips. ? Prior authorization is required for air ambulance. The Department must grant prior authorization for the use of an NEMT air ambulance before the trip occurs in order for the claim to be paid [10 CCR 2505-10 8.014.7.D.1.b]. To verify that the Department granted prior authorization for air ambulance trips, we reviewed the use of air ambulances in 11 paid claims from July 2020 to February 2021. ? Recipients are to receive the least-costly NEMT transportation option appropriate for their medical condition. For example, recipients should only ride in a vehicle for recipients with mobility needs when they have a mobility issue or if there is a lack of access to public transportation [10 CCR 2505-10 8.014.6.B, 42 USC 1396(a(70), and 42 CFR 440.170(a)(4)]. Higher-cost NEMT services, such as ambulance and wheelchair van services, must be supported with documentation of the recipient?s need for the specific higher-cost services [10 CCR 2505-10 8.014.5.B.1.b]. To determine whether recipients received the least costly NEMT services to meet their needs, we reviewed documentation submitted by medical or transportation providers to IntelliRide or the Department for the 85 sampled NEMT claims. ? Taxi providers must be permitted by the PUC to provide NEMT taxi rides. To provide NEMT rides by taxi and receive payment for them, the provider must maintain a common carrier permit issued by the PUC [10 CCR 2505-10 8.014.3.B.4.a]. To verify that the providers that were paid for taxi claims had been permitted to provide taxi services, we reviewed the 33,791 NEMT claims for taxi services from July 2020 to February 2021. What problems were identified? The Department paid $3.5 million directly to 66 NEMT providers for claims that were not brokered by Intelliride. From December 2020 through February 2021, 26,890 of the approximately 129,000 NEMT claims paid by the Department (21 percent), totaling about $3.5 million, were not brokered through IntelliRide, which violated state regulations requiring all NEMT services to be brokered through the statewide brokerage in effect at the time. The following chart shows the amounts the Department paid for claims submitted directly by NEMT providers compared to its payments for claims submitted by IntelliRide from July 2020 through February 2021. During these months, the number of claims that providers submitted directly to the Department decreased as providers transitioned to working with IntelliRide to broker NEMT rides; however, as of February 2021, the Department was still paying about $1 million in monthly claims that were submitted directly by providers. See Schedule of Findings and Questioned Costs for chart/table See Schedule of Findings and Questioned Costs for footnote The Department paid 36,910 NEMT claims totaling $5.5 million, which either violated or may have violated federal and/or state regulations. The claims were for unallowable services or were overpaid, and resulted in $291,597 in known questioned costs and $5,180,962 in likely questioned costs for Medicaid. A questioned cost is a payment that ?resulted from a violation or possible violation of a statute, regulation, or the terms and conditions of a Federal award, including for funds used to match Federal funds? or ?the costs, at the time of the audit, [that] are not supported by adequate documentation?? [2 CFR 200.84]. A known questioned cost reflects a violation that the auditor confirmed; a likely questioned cost is the auditor?s best estimate of a potential violation [2 CFR 200.516(a)(3)]. Known and likely questioned costs should be investigated by the Department and recovered, as appropriate, because Medicaid overpayments are recoverable regardless of whether they occurred due to an error by the Department, entity acting on behalf of the Department, or a provider [Section 25.5-4-301(2), C.R.S.]. We found the following problems resulting in $291,597 in known questioned costs: ? Claims paid with no support that services were provided. For 3,958 of the 362,110 NEMT claims (1 percent), which totaled $258,115 paid from July 2020 to February 2021, IntelliRide or providers submitted the claims without any documentation showing that recipients received the NEMT services from the providers listed in the claim. The $258,115 is known questioned costs and includes: o 3,323 claims totaling $163,985 submitted by IntelliRide with no documentation in EcoLane of a ride being scheduled or provided. o 619 claims totaling $61,431 submitted by IntelliRide for which EcoLane showed the scheduled ride was cancelled. o 16 sampled claims totaling $32,699 submitted by providers directly to the Department had no documentation that an NEMT service occurred because the providers did not send the Department documentation for their claims. Upon our request, the Department attempted to obtain supporting documentation from providers for these claims but was unable to obtain any. ? Overpayments due to incorrect mileage and taxi rates. For 466 of the 321,099 mileage and taxi claims (less than 1 percent), the Department overpaid IntelliRide. Specifically, for 50 of the 287,308 mileage claims (less than 1 percent), the mileage submitted by IntelliRide that the Department paid was more than the ride mileage that IntelliRide documented in EcoLane. For 416 of the 33,791 (1 percent) claims submitted by IntelliRide on behalf of providers that were permitted to operate as taxis, the Department paid a higher rate than the providers? set PUC rate. The following table breaks out the overpayments that we identified, which totaled $6,759 in known questioned costs. We did not find issues with the rate amounts that the Department paid for non-mileage and non-taxi services. See Schedule of Findings and Questioned Costs for chart/table See Schedule of Findings and Questioned Costs for footnote Examples of these overpayments include: o An overpayment of $48 for a claim submitted by IntelliRide for a taxi provider that billed the wrong taxi rate. The Department paid $60 for a 4-mile trip, when it should have paid $12 based on the PUC rate of $3 per mile. o An overpayment of $79 for a claim submitted by IntelliRide on behalf of a provider because the claim showed the trip was 76 miles, but the EcoLane data showed the trip was 38 miles. The Department paid $157, when it should have paid $78. ? Unallowable rides, not for medical appointments. For 61 claims showing NEMT trips every day in December 2020 for two recipients, there were no medical claims corresponding to their trips, so it appears that either NEMT was used repeatedly to transport these recipients to unallowable destinations or the provider did not provide the trips claimed. The NEMT provider reported to IntelliRide that these trips were completed even though the recipients did not attend any medical appointments that month. IntelliRide submitted the 61 NEMT claims and its EcoLane data showed that the NEMT providers self-reported that the trips were completed. However, IntelliRide confirmed that these trips were not used to access medical care. The issues we identified resulted in $2,674 of known questioned costs. ? Air ambulance claims paid without prior authorization. None of the 11 air ambulance NEMT claims had supporting documentation that the provider requested or received prior authorization from the Department before the trip occurred. These 11 claims to three providers resulted in $23,122 in known questioned costs. ? Claims paid for trips that were not the least costly, medically necessary, and/or for approved escorts. For seven of the 85 sampled claims (8 percent), IntelliRide submitted the claims without having required documentation from medical providers. Specifically, four claims lacked documentation to support the medical necessity for the type of vehicle used (either mobility vehicle, taxi, or wheelchair van); the other three claims lacked documentation of the recipient?s need for an escort to support the associated cost, which indicates that the three sampled NEMT trips were provided to an escort ineligible to ride with the recipient. The issues we identified for the seven claims resulted in $927 of known questioned costs. In addition, we found the following problems resulting in $5,180,962 in likely questioned costs, which are estimated potential violations of federal requirements that we could not confirm due to a lack of documentation: ? $4.8 million paid for taxi claims without mileage. For 29,049 taxi claims totaling $4,763,071, the Department paid the claims without ensuring taxi providers were paid at their PUC per-mile rate. These claims were submitted directly to the Department by 10 permitted taxi providers. The Department required providers to submit claims showing only the number of one-way trips driven, not the number of miles driven. As a result, the Department could not ensure that these taxi claims were paid at the correct PUC rates, as required in its Billing Manual and Rate Schedule. The Department paid the full amount that each taxi provider requested, as long as the claim was not more than $1,000 per one-way trip. For example, the Department paid $4,000 to one taxi provider for a claim showing four one-way trips for a recipient on a single day. Based on the claim amount, the taxi provider would have had to have driven the recipient on four 400-mile, one-way trips that day to justify this amount, because the taxi provider?s PUC rate is $4 for the first mile and $2.50 for each additional mile. Since the Department did not obtain the miles driven for each one-way trip from taxi providers for these 29,049 claims, we could not determine whether the payments were accurate based on each provider?s PUC rate, as required. ? $409,575 paid for taxi claims for providers not permitted as taxis. For 3,284 NEMT claims for taxi services from eight providers, the providers were not permitted by the PUC to operate as taxis. For example, one provider was paid for an NEMT taxi claim for $5,875 for 12 trips, or $490 per trip. Since these providers were not permitted as taxis, they did not have PUC-set taxi rates, so we could not determine how much these providers should have been paid. ? $4,718 paid for trips that may not have been to attend medical services. As of April 2021, 13 of the 22 sampled NEMT claims (59 percent) for trips in December 2020 had no medical claims for dates corresponding to the NEMT trips. Department staff told us that Medicaid medical claims are typically submitted and paid within 3 months of the date of service, but that there is a possibility that medical providers had not yet submitted medical claims for the recipients since federal regulations technically allow providers up to 12 months to submit claims [42 CFR 447.45(d)(1)]. In addition, six of these 13 recipients had both Medicaid and other types of medical insurance, such as Medicare. According to the Department, it is possible that the six recipients used NEMT trips to access medical services but the Department did not have a Medicaid claim for the services because they were paid by the other types of insurance, which is allowed by state regulations [10 CCR 2505-10 8.014.5.B.2]. Therefore, we could not determine whether the NEMT trips associated with the 13 claims had been for recipients to attend medical services. ? $3,598 paid for trips that may not have been completed. For 61 of the 362,110 paid claims (less than 1 percent), the scheduled trips were not marked as complete in EcoLane, so we could not determine whether they had been completed. Why did these problems occur? The Department lacks effective internal controls over NEMT claims to ensure they are appropriate and consistently comply with federal and state requirements. According to federal regulations [2 CFR 200.303(a)], the Department, as a recipient of federal funds, must establish and maintain effective internal controls to provide reasonable assurance that federal funds are spent in compliance with federal requirements. We identified the following areas where Department controls are lacking for NEMT claims: Lack of Department information technology (IT) Controls in interChange ? No IT controls to prevent providers from bypassing broker. From December 2020 through February 2021, the Department paid NEMT providers directly for unsupported NEMT trips because the Department did not have IT controls in interChange to deny claims for trips that were not brokered through IntelliRide, as required at the time. As of September 1, 2021, the Department plans to require only the NEMT providers operating in nine metro-Denver counties to broker trips through IntelliRide, so the Department needs IT controls to ensure providers in these counties work with IntelliRide to schedule all trips and submit related claims. ? Lack of IT and other controls to ensure proper payments for NEMT taxi services. InterChange is programmed to pay each NEMT taxi claim based on one-way trips, but the Department has not implemented an IT or other control to ensure that NEMT taxi claims are paid at the providers? current PUC-approved per-mile rates, and that the Department only pays taxi rates when the provider is permitted by the PUC to operate as a taxi. Department staff stated that the only IT control the Department has built into interChange to help ensure proper payment of taxi claims is limiting payments for taxi claims to no more than $1,000 per one-way trip, and that this control is in accordance with the NEMT Billing Manual and Rate Schedule. However, Department staff also acknowledged that there is a conflict within the Billing Manual that requires taxi claims to be based on the number of one-way trips, but also paid based on per-mile PUC rates. By setting the limit based only on the number of one-way trips instead of providers? PUC per-mile rate, this Department IT control is not effective at ensuring taxi claims are paid properly. To ensure accurate payments for NEMT taxi claims, the Department will need methods, such as IT controls in interChange, and clarification in the Billing Manual and Rate Schedule, to ensure taxi providers are paid based on set rates, and ensure each taxi provider is permitted. ? No IT controls to ensure required prior authorizations. Air ambulance services were paid without the Department?s prior authorization for the services because the Department does not have IT controls to ensure prior authorization before payment. If the Department does not implement IT controls to ensure appropriate prior authorizations of NEMT services, the Department will need to develop manual processes to ensure that NEMT services receive required authorization prior to paying the related claims. Lack of Department Monitoring of NEMT Services and Claims ? Insufficient methods to ensure appropriate payment and collect necessary documentation from providers that bypass the statewide brokerage. Although the Department reviewed NEMT provider supporting documentation for NEMT services in 2019, the Department did not do so in 2020 or 2021, and had no process to require the providers that bypassed the statewide brokerage to submit documentation to support their NEMT claims before they were paid. According to the Department, in September 2021, it plans to require providers in nine counties covered by the IntelliRide brokerage contract to provide and submit claims through IntelliRide; however, NEMT providers in the remaining 55 counties will be submitting NEMT claims directly to the Department. Therefore, it is important that the Department develop a process to ensure that providers in these 55 counties maintain required documentation for each claim. ? Lack of monitoring to ensure Intelliride submits accurate mileage claims and collects necessary documentation. The Department does not conduct reviews of IntelliRide?s documentation in EcoLane to ensure it submits claims for accurate mileage and maintains support for claims submitted to or paid by the Department. For example, the Department does not reconcile its NEMT claims data from interChange and IntelliRide?s EcoLane system data to ensure each claim is supported. Furthermore, the Department has never completed a file review of IntelliRide?s supporting documentation for NEMT claims, such as when the Department contracted with IntelliRide to be a regional broker prior to becoming the statewide broker. ? No method to ensure NEMT service claims are for rides for medical treatment and the least costly. The Department does not conduct any reconciliation of its interChange data on NEMT trip claims to its interChange data on Medicaid medical claims to ensure NEMT claims are only paid for recipients to access medical care. The Department also does not require confirmation from medical providers that recipients used NEMT to access necessary medical care. For example, NEMT providers told us that before the start of the IntelliRide statewide brokerage contract, they either called medical providers to confirm that the recipients? NEMT trips were to access medical appointments or collected medical providers? signatures for each NEMT trip. In addition, the Department has no controls to ensure providers that submit claims directly to the Department are providing the least costly NEMT service appropriate to each recipient, such as public transportation when it is accessible and appropriate. For example, IntelliRide instructs its staff to attempt to schedule the lowest-cost NEMT service based on recipients? mobility needs and access to public transportation; however, the Department has no such method to ensure services are the least costly when NEMT providers schedule services for recipients. As of September 2021, the Department plans to have the recipients who live in the 55 counties not served by IntelliRide begin scheduling their rides directly with the NEMT providers of their choosing, yet the Department has not developed a method to ensure recipients in these areas receive the lowest-cost services appropriate for their needs. ? Potentially insufficient Department staffing to monitor NEMT claims effectively. For Fiscal Year 2021, the Department was appropriated three full-time equivalent (FTE) staff to oversee NEMT claims; however, the Department had two vacancies in these positions from July 2020 through May 2021 that it did not fill, so there was only one Department staff overseeing NEMT and the IntelliRide statewide contract during the audit time period. In June 2021, the Department added an additional FTE staff member to assist in administering the NEMT benefit. Why do these problems matter? Likely federal recovery of funds used for improper payments. Section 25.5-4-301(2), C.R.S., states that any overpayments of claims to providers are recoverable and ?are recoverable regardless of whether the overpayment is the result of an error by the state department? an entity acting on behalf of [the department], or the provider or any agent of the provider.? Our audit identified $291,597 in known questioned costs, of which about $145,797 is the federal portion of funds that the federal government may recover. We also identified $5,180,962 in likely questioned costs, of which $2,590,480 is the federal portion of funds that could be recovered if the payments are determined to have not been appropriate. The following table shows the questioned costs and federal portions for each problem we identified. See Schedule of Findings and Questioned Costs for chart/table See Schedule of Findings and Questioned Costs for footnote When providers bypass broker controls, service quality is not monitored. When the Department allows some NEMT providers to bypass the IntelliRide broker, and does not obtain documentation to support their claims, the Department is unable to monitor the services of these providers. Additionally, when the Department does not monitor providers that bypass the statewide broker, the Department is applying different and possibly inadequate standards for the providers that bypass compared to the providers that work with IntelliRide. Although the Department plans for IntelliRide to no longer be the statewide NEMT broker for all 64 counties beginning September 2021, IntelliRide will continue to administer NEMT trips for nine Front Range counties that account for the majority of NEMT trips. It is important that all NEMT trips in these counties be brokered through IntelliRide so that the Department can monitor the quality of the trips and IntelliRide?s oversight of them. Risk of fraud, waste, and abuse. When the Department pays NEMT claims that are not supported by documentation of the service, medical documentation showing NEMT was for medical treatment, or the required prior authorizations, there is a significant risk of misappropriation of federal and state funds by providers and/or recipients. In addition, the eight providers not permitted as taxis that submitted taxi claims appear to have set their own rates of payment at a significantly higher rate, since the PUC did not permit or set rates for these providers. While we did not identify confirmed fraud by recipients or providers due to a lack of supporting documentation for claims, the problems identified demonstrate waste of public funds and potential abuse of the Medicaid program. When the Department overpays Medicaid funds and pays for unallowable services, there are fewer funds available to service the recipients who need them. In addition, there is no federal or state limit on payments for NEMT services, so it is important that the Department ensure Medicaid recipients receive appropriate transportation to medical treatment, while also ensuring the Department is acting as a good steward of federal and state funds. See Schedule of Findings and Questioned Costs for chart/table Character Limit Exceeded See Statewide Single Audit Report
The following findings and recommendations relating to internal control deficiencies classified as Material Weaknesses and a Significant Deficiency were communicated to the Department of Health Care Policy and Financing (Department) in previous years and have not been remediated as of June 30, 2022 because the original implementation dates provided by the Department were in a subsequent fiscal year. These complete findings and recommendations can be found within the original report and the complete recommendations can be found within Section IV: Prior Audit Recommendations of this report. See Schedule of Findings and Questioned Costs for chart/table See Schedule of Findings and Questioned Costs for footnote Finding 2021-045 Payments for Non-Emergent Medical Transportation ClaimsPrior to July 2020, in 55 counties, the Department worked with various county offices to have them broker Non-Emergent Medical Transportation (NEMT) services for Medicaid recipients, including rides to and from Medicaid medical appointments, personal mileage reimbursement, and trip-related meals and lodging. For example, these counties arranged the rides with transportation providers, submitted the claims or had providers submit claims for reimbursement to the Department, and passed on reimbursements to providers as needed. For the remaining nine counties, the Department contracted with IntelliRide to serve as the NEMT broker for services in those areas. From July 1, 2020, to August 31, 2021, when the Department contracted with IntelliRide to be the statewide broker, most recipients throughout the state scheduled NEMT rides by contacting IntelliRide through its call center, website chat function, or smartphone applications. IntelliRide scheduled rides and assigned transportation providers to them, and had providers upload trip information into IntelliRide?s EcoLane transportation scheduling system. EcoLane maintains information related to recipients? requests for rides and provider trip information, such as the trip date and time, names of the recipient and driver, and scheduled pick-up and destination addresses. IntelliRide submitted claims through the Department?s interChange system (interChange) requesting payments for providers? NEMT services, paid providers for their services, and received reimbursement from the Department. In addition, the Department paid NEMT claims submitted directly by NEMT providers. In Fiscal Year 2021, from July 1, 2020, through February 28, 2021 (the audit period), the Department paid 362,110 claims for NEMT services totaling about $33.2 million, as shown in the following table. In September 2021, the Department plans to transition back to IntelliRide brokering services in nine counties, while the NEMT providers in the remaining counties will broker their own services. See Schedule of Findings and Questioned Costs for chart/table See Schedule of Findings and Questioned Costs for footnote What audit work was performed and how were the results measured? The purpose of the audit work was to determine whether the Department has ensured that NEMT claims adhere to the following federal and state requirements. ? NEMT trips were to be brokered through, and all claims submitted by, the statewide broker, Intelliride. According to state regulations and the Department?s NEMT Billing Manual, all NEMT trips during Fiscal Year 2021 had to be authorized by the statewide broker, IntelliRide [10 CCR 2505-10 8.014.7.A]. This means that each recipient?s NEMT ride request should have been sent to IntelliRide for approval or authorization before the trip, and any unauthorized trips should ?not be reimbursed or paid? [Billing Manual]. According to the Department, it allowed NEMT providers time to transition to working with IntelliRide because some providers were reluctant to join the statewide brokerage and the Department needed time to onboard providers. By Fall 2020, most providers should have been working with IntelliRide to schedule NEMT rides. The Department told us that six NEMT providers received its express permission to bypass IntelliRide to schedule rides and submit claims directly to the Department because the providers are unique, such as only serving recipients with disabilities or receiving federal grant funding to provide NEMT. To assess whether IntelliRide brokered most NEMT services in the State and submitted the related claims in line with regulations and its contract, we reviewed the Department?s aggregate data for the 128,998 NEMT claims paid from December 2020 through February 2021. ? The Department must pay claims based on accurate service rates and trip mileage. Non-taxi NEMT services, such as wheelchair and mobility vehicle services, have base rates and mileage rates set by the Department. IntelliRide tracks the mileage of each NEMT trip in EcoLane and submits mileage claims to the Department?s interChange system. The Public Utilities Commission (PUC) sets the rate for each permitted taxi provider, which generally includes a rate for the first trip mile and a different rate for each additional mile. According to the Department?s NEMT Billing Manual and NEMT Rate Schedule for Fiscal Year 2021, taxi claims should have been paid at the rate set by the PUC. For example, if a taxi company?s PUC rate was $4 for the first mile and $2 for each additional mile, the Department should have paid $6 for a two-mile NEMT trip claim. To verify that the Department paid NEMT claims based on the correct trip mileage and rates, we reviewed the trip mileage and rates for 362,110 NEMT claims paid from July 2020 through February 2021, and PUC documentation on the taxi rates for permitted taxi companies. ? Claims must be supported with accurate and complete documentation confirming the service provided. Both IntelliRide and providers that submit claims for NEMT services must keep and be able to furnish accurate, complete supporting documentation for all claims [42 USC 1396a(27), 42 CFR ?? 431.17 and 433.32, and 10 CCR 2505-10 8.014.3.C and 8.014.6.B]. For example, a claim must be supported by medical documentation showing that the type of vehicle was needed to transport the recipient, and documentation from the transportation provider showing the trip occurred and when the recipient was picked-up and dropped-off. IntelliRide should only submit a claim to the Department after IntelliRide confirms the trip has been completed and marks the status complete in EcoLane [IntelliRide Policies and Procedures]. If an NEMT provider does not show up for a trip, IntelliRide should mark the trip as ?cancelled? in EcoLane. Payments for Medicaid claims that lack supporting documentation for the services provided are unallowable, meaning they should not be paid. IntelliRide or the Department must maintain documentation from recipients? medical providers showing why certain NEMT services, like transportation in a wheelchair van or with an escort, are medically necessary [10 CCR 2505-10 8.014.7.B and 8.014.5.D.1; Billing Manual]. To verify that there was support for NEMT claims, we reviewed IntelliRide data in EcoLane for all 362,110 NEMT claims paid from July 2020 through February 2021, and Department documentation for a sample of 85 NEMT paid claims?75 selected randomly from the four NEMT service areas of the state, and 10 that were the highest paid NEMT claims. ? NEMT services must be medically necessary. NEMT services shall only be provided to recipients with no other means to attend medically necessary, non-emergency treatment covered by Medicaid [42 USC 1396a(70); 42 CFR 431.53; 10 CCR 2505-10 8.014.5.B]. To verify that NEMT claims were only paid for recipients to access medical care, we reviewed the Department?s data on paid medical claims to determine if the recipients related to 22 sampled NEMT claims paid in December 2020 had a corresponding medical appointment. For another 61 paid NEMT claims that involved IntelliRide scheduling and submitting claims for trips every day in December for two recipients, we reviewed whether the recipients had paid medical claims corresponding with the trips. ? Prior authorization is required for air ambulance. The Department must grant prior authorization for the use of an NEMT air ambulance before the trip occurs in order for the claim to be paid [10 CCR 2505-10 8.014.7.D.1.b]. To verify that the Department granted prior authorization for air ambulance trips, we reviewed the use of air ambulances in 11 paid claims from July 2020 to February 2021. ? Recipients are to receive the least-costly NEMT transportation option appropriate for their medical condition. For example, recipients should only ride in a vehicle for recipients with mobility needs when they have a mobility issue or if there is a lack of access to public transportation [10 CCR 2505-10 8.014.6.B, 42 USC 1396(a(70), and 42 CFR 440.170(a)(4)]. Higher-cost NEMT services, such as ambulance and wheelchair van services, must be supported with documentation of the recipient?s need for the specific higher-cost services [10 CCR 2505-10 8.014.5.B.1.b]. To determine whether recipients received the least costly NEMT services to meet their needs, we reviewed documentation submitted by medical or transportation providers to IntelliRide or the Department for the 85 sampled NEMT claims. ? Taxi providers must be permitted by the PUC to provide NEMT taxi rides. To provide NEMT rides by taxi and receive payment for them, the provider must maintain a common carrier permit issued by the PUC [10 CCR 2505-10 8.014.3.B.4.a]. To verify that the providers that were paid for taxi claims had been permitted to provide taxi services, we reviewed the 33,791 NEMT claims for taxi services from July 2020 to February 2021. What problems were identified? The Department paid $3.5 million directly to 66 NEMT providers for claims that were not brokered by Intelliride. From December 2020 through February 2021, 26,890 of the approximately 129,000 NEMT claims paid by the Department (21 percent), totaling about $3.5 million, were not brokered through IntelliRide, which violated state regulations requiring all NEMT services to be brokered through the statewide brokerage in effect at the time. The following chart shows the amounts the Department paid for claims submitted directly by NEMT providers compared to its payments for claims submitted by IntelliRide from July 2020 through February 2021. During these months, the number of claims that providers submitted directly to the Department decreased as providers transitioned to working with IntelliRide to broker NEMT rides; however, as of February 2021, the Department was still paying about $1 million in monthly claims that were submitted directly by providers. See Schedule of Findings and Questioned Costs for chart/table See Schedule of Findings and Questioned Costs for footnote The Department paid 36,910 NEMT claims totaling $5.5 million, which either violated or may have violated federal and/or state regulations. The claims were for unallowable services or were overpaid, and resulted in $291,597 in known questioned costs and $5,180,962 in likely questioned costs for Medicaid. A questioned cost is a payment that ?resulted from a violation or possible violation of a statute, regulation, or the terms and conditions of a Federal award, including for funds used to match Federal funds? or ?the costs, at the time of the audit, [that] are not supported by adequate documentation?? [2 CFR 200.84]. A known questioned cost reflects a violation that the auditor confirmed; a likely questioned cost is the auditor?s best estimate of a potential violation [2 CFR 200.516(a)(3)]. Known and likely questioned costs should be investigated by the Department and recovered, as appropriate, because Medicaid overpayments are recoverable regardless of whether they occurred due to an error by the Department, entity acting on behalf of the Department, or a provider [Section 25.5-4-301(2), C.R.S.]. We found the following problems resulting in $291,597 in known questioned costs: ? Claims paid with no support that services were provided. For 3,958 of the 362,110 NEMT claims (1 percent), which totaled $258,115 paid from July 2020 to February 2021, IntelliRide or providers submitted the claims without any documentation showing that recipients received the NEMT services from the providers listed in the claim. The $258,115 is known questioned costs and includes: o 3,323 claims totaling $163,985 submitted by IntelliRide with no documentation in EcoLane of a ride being scheduled or provided. o 619 claims totaling $61,431 submitted by IntelliRide for which EcoLane showed the scheduled ride was cancelled. o 16 sampled claims totaling $32,699 submitted by providers directly to the Department had no documentation that an NEMT service occurred because the providers did not send the Department documentation for their claims. Upon our request, the Department attempted to obtain supporting documentation from providers for these claims but was unable to obtain any. ? Overpayments due to incorrect mileage and taxi rates. For 466 of the 321,099 mileage and taxi claims (less than 1 percent), the Department overpaid IntelliRide. Specifically, for 50 of the 287,308 mileage claims (less than 1 percent), the mileage submitted by IntelliRide that the Department paid was more than the ride mileage that IntelliRide documented in EcoLane. For 416 of the 33,791 (1 percent) claims submitted by IntelliRide on behalf of providers that were permitted to operate as taxis, the Department paid a higher rate than the providers? set PUC rate. The following table breaks out the overpayments that we identified, which totaled $6,759 in known questioned costs. We did not find issues with the rate amounts that the Department paid for non-mileage and non-taxi services. See Schedule of Findings and Questioned Costs for chart/table See Schedule of Findings and Questioned Costs for footnote Examples of these overpayments include: o An overpayment of $48 for a claim submitted by IntelliRide for a taxi provider that billed the wrong taxi rate. The Department paid $60 for a 4-mile trip, when it should have paid $12 based on the PUC rate of $3 per mile. o An overpayment of $79 for a claim submitted by IntelliRide on behalf of a provider because the claim showed the trip was 76 miles, but the EcoLane data showed the trip was 38 miles. The Department paid $157, when it should have paid $78. ? Unallowable rides, not for medical appointments. For 61 claims showing NEMT trips every day in December 2020 for two recipients, there were no medical claims corresponding to their trips, so it appears that either NEMT was used repeatedly to transport these recipients to unallowable destinations or the provider did not provide the trips claimed. The NEMT provider reported to IntelliRide that these trips were completed even though the recipients did not attend any medical appointments that month. IntelliRide submitted the 61 NEMT claims and its EcoLane data showed that the NEMT providers self-reported that the trips were completed. However, IntelliRide confirmed that these trips were not used to access medical care. The issues we identified resulted in $2,674 of known questioned costs. ? Air ambulance claims paid without prior authorization. None of the 11 air ambulance NEMT claims had supporting documentation that the provider requested or received prior authorization from the Department before the trip occurred. These 11 claims to three providers resulted in $23,122 in known questioned costs. ? Claims paid for trips that were not the least costly, medically necessary, and/or for approved escorts. For seven of the 85 sampled claims (8 percent), IntelliRide submitted the claims without having required documentation from medical providers. Specifically, four claims lacked documentation to support the medical necessity for the type of vehicle used (either mobility vehicle, taxi, or wheelchair van); the other three claims lacked documentation of the recipient?s need for an escort to support the associated cost, which indicates that the three sampled NEMT trips were provided to an escort ineligible to ride with the recipient. The issues we identified for the seven claims resulted in $927 of known questioned costs. In addition, we found the following problems resulting in $5,180,962 in likely questioned costs, which are estimated potential violations of federal requirements that we could not confirm due to a lack of documentation: ? $4.8 million paid for taxi claims without mileage. For 29,049 taxi claims totaling $4,763,071, the Department paid the claims without ensuring taxi providers were paid at their PUC per-mile rate. These claims were submitted directly to the Department by 10 permitted taxi providers. The Department required providers to submit claims showing only the number of one-way trips driven, not the number of miles driven. As a result, the Department could not ensure that these taxi claims were paid at the correct PUC rates, as required in its Billing Manual and Rate Schedule. The Department paid the full amount that each taxi provider requested, as long as the claim was not more than $1,000 per one-way trip. For example, the Department paid $4,000 to one taxi provider for a claim showing four one-way trips for a recipient on a single day. Based on the claim amount, the taxi provider would have had to have driven the recipient on four 400-mile, one-way trips that day to justify this amount, because the taxi provider?s PUC rate is $4 for the first mile and $2.50 for each additional mile. Since the Department did not obtain the miles driven for each one-way trip from taxi providers for these 29,049 claims, we could not determine whether the payments were accurate based on each provider?s PUC rate, as required. ? $409,575 paid for taxi claims for providers not permitted as taxis. For 3,284 NEMT claims for taxi services from eight providers, the providers were not permitted by the PUC to operate as taxis. For example, one provider was paid for an NEMT taxi claim for $5,875 for 12 trips, or $490 per trip. Since these providers were not permitted as taxis, they did not have PUC-set taxi rates, so we could not determine how much these providers should have been paid. ? $4,718 paid for trips that may not have been to attend medical services. As of April 2021, 13 of the 22 sampled NEMT claims (59 percent) for trips in December 2020 had no medical claims for dates corresponding to the NEMT trips. Department staff told us that Medicaid medical claims are typically submitted and paid within 3 months of the date of service, but that there is a possibility that medical providers had not yet submitted medical claims for the recipients since federal regulations technically allow providers up to 12 months to submit claims [42 CFR 447.45(d)(1)]. In addition, six of these 13 recipients had both Medicaid and other types of medical insurance, such as Medicare. According to the Department, it is possible that the six recipients used NEMT trips to access medical services but the Department did not have a Medicaid claim for the services because they were paid by the other types of insurance, which is allowed by state regulations [10 CCR 2505-10 8.014.5.B.2]. Therefore, we could not determine whether the NEMT trips associated with the 13 claims had been for recipients to attend medical services. ? $3,598 paid for trips that may not have been completed. For 61 of the 362,110 paid claims (less than 1 percent), the scheduled trips were not marked as complete in EcoLane, so we could not determine whether they had been completed. Why did these problems occur? The Department lacks effective internal controls over NEMT claims to ensure they are appropriate and consistently comply with federal and state requirements. According to federal regulations [2 CFR 200.303(a)], the Department, as a recipient of federal funds, must establish and maintain effective internal controls to provide reasonable assurance that federal funds are spent in compliance with federal requirements. We identified the following areas where Department controls are lacking for NEMT claims: Lack of Department information technology (IT) Controls in interChange ? No IT controls to prevent providers from bypassing broker. From December 2020 through February 2021, the Department paid NEMT providers directly for unsupported NEMT trips because the Department did not have IT controls in interChange to deny claims for trips that were not brokered through IntelliRide, as required at the time. As of September 1, 2021, the Department plans to require only the NEMT providers operating in nine metro-Denver counties to broker trips through IntelliRide, so the Department needs IT controls to ensure providers in these counties work with IntelliRide to schedule all trips and submit related claims. ? Lack of IT and other controls to ensure proper payments for NEMT taxi services. InterChange is programmed to pay each NEMT taxi claim based on one-way trips, but the Department has not implemented an IT or other control to ensure that NEMT taxi claims are paid at the providers? current PUC-approved per-mile rates, and that the Department only pays taxi rates when the provider is permitted by the PUC to operate as a taxi. Department staff stated that the only IT control the Department has built into interChange to help ensure proper payment of taxi claims is limiting payments for taxi claims to no more than $1,000 per one-way trip, and that this control is in accordance with the NEMT Billing Manual and Rate Schedule. However, Department staff also acknowledged that there is a conflict within the Billing Manual that requires taxi claims to be based on the number of one-way trips, but also paid based on per-mile PUC rates. By setting the limit based only on the number of one-way trips instead of providers? PUC per-mile rate, this Department IT control is not effective at ensuring taxi claims are paid properly. To ensure accurate payments for NEMT taxi claims, the Department will need methods, such as IT controls in interChange, and clarification in the Billing Manual and Rate Schedule, to ensure taxi providers are paid based on set rates, and ensure each taxi provider is permitted. ? No IT controls to ensure required prior authorizations. Air ambulance services were paid without the Department?s prior authorization for the services because the Department does not have IT controls to ensure prior authorization before payment. If the Department does not implement IT controls to ensure appropriate prior authorizations of NEMT services, the Department will need to develop manual processes to ensure that NEMT services receive required authorization prior to paying the related claims. Lack of Department Monitoring of NEMT Services and Claims ? Insufficient methods to ensure appropriate payment and collect necessary documentation from providers that bypass the statewide brokerage. Although the Department reviewed NEMT provider supporting documentation for NEMT services in 2019, the Department did not do so in 2020 or 2021, and had no process to require the providers that bypassed the statewide brokerage to submit documentation to support their NEMT claims before they were paid. According to the Department, in September 2021, it plans to require providers in nine counties covered by the IntelliRide brokerage contract to provide and submit claims through IntelliRide; however, NEMT providers in the remaining 55 counties will be submitting NEMT claims directly to the Department. Therefore, it is important that the Department develop a process to ensure that providers in these 55 counties maintain required documentation for each claim. ? Lack of monitoring to ensure Intelliride submits accurate mileage claims and collects necessary documentation. The Department does not conduct reviews of IntelliRide?s documentation in EcoLane to ensure it submits claims for accurate mileage and maintains support for claims submitted to or paid by the Department. For example, the Department does not reconcile its NEMT claims data from interChange and IntelliRide?s EcoLane system data to ensure each claim is supported. Furthermore, the Department has never completed a file review of IntelliRide?s supporting documentation for NEMT claims, such as when the Department contracted with IntelliRide to be a regional broker prior to becoming the statewide broker. ? No method to ensure NEMT service claims are for rides for medical treatment and the least costly. The Department does not conduct any reconciliation of its interChange data on NEMT trip claims to its interChange data on Medicaid medical claims to ensure NEMT claims are only paid for recipients to access medical care. The Department also does not require confirmation from medical providers that recipients used NEMT to access necessary medical care. For example, NEMT providers told us that before the start of the IntelliRide statewide brokerage contract, they either called medical providers to confirm that the recipients? NEMT trips were to access medical appointments or collected medical providers? signatures for each NEMT trip. In addition, the Department has no controls to ensure providers that submit claims directly to the Department are providing the least costly NEMT service appropriate to each recipient, such as public transportation when it is accessible and appropriate. For example, IntelliRide instructs its staff to attempt to schedule the lowest-cost NEMT service based on recipients? mobility needs and access to public transportation; however, the Department has no such method to ensure services are the least costly when NEMT providers schedule services for recipients. As of September 2021, the Department plans to have the recipients who live in the 55 counties not served by IntelliRide begin scheduling their rides directly with the NEMT providers of their choosing, yet the Department has not developed a method to ensure recipients in these areas receive the lowest-cost services appropriate for their needs. ? Potentially insufficient Department staffing to monitor NEMT claims effectively. For Fiscal Year 2021, the Department was appropriated three full-time equivalent (FTE) staff to oversee NEMT claims; however, the Department had two vacancies in these positions from July 2020 through May 2021 that it did not fill, so there was only one Department staff overseeing NEMT and the IntelliRide statewide contract during the audit time period. In June 2021, the Department added an additional FTE staff member to assist in administering the NEMT benefit. Why do these problems matter? Likely federal recovery of funds used for improper payments. Section 25.5-4-301(2), C.R.S., states that any overpayments of claims to providers are recoverable and ?are recoverable regardless of whether the overpayment is the result of an error by the state department? an entity acting on behalf of [the department], or the provider or any agent of the provider.? Our audit identified $291,597 in known questioned costs, of which about $145,797 is the federal portion of funds that the federal government may recover. We also identified $5,180,962 in likely questioned costs, of which $2,590,480 is the federal portion of funds that could be recovered if the payments are determined to have not been appropriate. The following table shows the questioned costs and federal portions for each problem we identified. See Schedule of Findings and Questioned Costs for chart/table See Schedule of Findings and Questioned Costs for footnote When providers bypass broker controls, service quality is not monitored. When the Department allows some NEMT providers to bypass the IntelliRide broker, and does not obtain documentation to support their claims, the Department is unable to monitor the services of these providers. Additionally, when the Department does not monitor providers that bypass the statewide broker, the Department is applying different and possibly inadequate standards for the providers that bypass compared to the providers that work with IntelliRide. Although the Department plans for IntelliRide to no longer be the statewide NEMT broker for all 64 counties beginning September 2021, IntelliRide will continue to administer NEMT trips for nine Front Range counties that account for the majority of NEMT trips. It is important that all NEMT trips in these counties be brokered through IntelliRide so that the Department can monitor the quality of the trips and IntelliRide?s oversight of them. Risk of fraud, waste, and abuse. When the Department pays NEMT claims that are not supported by documentation of the service, medical documentation showing NEMT was for medical treatment, or the required prior authorizations, there is a significant risk of misappropriation of federal and state funds by providers and/or recipients. In addition, the eight providers not permitted as taxis that submitted taxi claims appear to have set their own rates of payment at a significantly higher rate, since the PUC did not permit or set rates for these providers. While we did not identify confirmed fraud by recipients or providers due to a lack of supporting documentation for claims, the problems identified demonstrate waste of public funds and potential abuse of the Medicaid program. When the Department overpays Medicaid funds and pays for unallowable services, there are fewer funds available to service the recipients who need them. In addition, there is no federal or state limit on payments for NEMT services, so it is important that the Department ensure Medicaid recipients receive appropriate transportation to medical treatment, while also ensuring the Department is acting as a good steward of federal and state funds. See Schedule of Findings and Questioned Costs for chart/table Character Limit Exceeded See Statewide Single Audit Report
2 CFR § 2900.4 gives regulatory effect to the Department of Labor for 2 CFR § 200 Subpart E which outlines allowable cost principles. 2 CFR § 200.403 provides, in part, that except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards: Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles and be adequately documented. Due to a lack of internal control over expenditures and documentation, testing of expenditures identified a payment charged twice to the WIOA Cluster accounting system. As such, the second entry for the payment had no invoice support and was not valid. The total amount tested that had no invoice support was $369,757 and was determined to be unallowable. Failure to maintain adequate support documentation for federal expenditures could result in costs being disallowed by the grantor. Policies and procedures over documentation of expenditures should be developed and implemented. Support should be maintained for all expenditures to ensure that each expenditure charged to the program is for an allowable activity/cost. The expenditure amount is in excess of $25,000 and therefore is considered questioned costs under 2 CFR § 200.516. In addition to this issue, we could not determine if the expenditures in total for this program were supported by the accounting system records since we could not reconcile between the accounting system and the federal schedule. See Finding 2022-004 above for this issue in detail.
2 CFR § 2900.4 gives regulatory effect to the Department of Labor for 2 CFR § 200 Subpart E which outlines allowable cost principles. 2 CFR § 200.403 provides, in part, that except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards: Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles and be adequately documented. Due to a lack of internal control over expenditures and documentation, testing of expenditures identified a payment charged twice to the WIOA Cluster accounting system. As such, the second entry for the payment had no invoice support and was not valid. The total amount tested that had no invoice support was $369,757 and was determined to be unallowable. Failure to maintain adequate support documentation for federal expenditures could result in costs being disallowed by the grantor. Policies and procedures over documentation of expenditures should be developed and implemented. Support should be maintained for all expenditures to ensure that each expenditure charged to the program is for an allowable activity/cost. The expenditure amount is in excess of $25,000 and therefore is considered questioned costs under 2 CFR § 200.516. In addition to this issue, we could not determine if the expenditures in total for this program were supported by the accounting system records since we could not reconcile between the accounting system and the federal schedule. See Finding 2022-004 above for this issue in detail.
2 CFR § 2900.4 gives regulatory effect to the Department of Labor for 2 CFR § 200 Subpart E which outlines allowable cost principles. 2 CFR § 200.403 provides, in part, that except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards: Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles and be adequately documented. Due to a lack of internal control over expenditures and documentation, testing of expenditures identified a payment charged twice to the WIOA Cluster accounting system. As such, the second entry for the payment had no invoice support and was not valid. The total amount tested that had no invoice support was $369,757 and was determined to be unallowable. Failure to maintain adequate support documentation for federal expenditures could result in costs being disallowed by the grantor. Policies and procedures over documentation of expenditures should be developed and implemented. Support should be maintained for all expenditures to ensure that each expenditure charged to the program is for an allowable activity/cost. The expenditure amount is in excess of $25,000 and therefore is considered questioned costs under 2 CFR § 200.516. In addition to this issue, we could not determine if the expenditures in total for this program were supported by the accounting system records since we could not reconcile between the accounting system and the federal schedule. See Finding 2022-004 above for this issue in detail.
2 CFR § 2900.4 gives regulatory effect to the Department of Labor for 2 CFR § 200 Subpart E which outlines allowable cost principles. 2 CFR § 200.403 provides, in part, that except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards: Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles and be adequately documented. Due to a lack of internal control over expenditures and documentation, testing of expenditures identified a payment charged twice to the WIOA Cluster accounting system. As such, the second entry for the payment had no invoice support and was not valid. The total amount tested that had no invoice support was $369,757 and was determined to be unallowable. Failure to maintain adequate support documentation for federal expenditures could result in costs being disallowed by the grantor. Policies and procedures over documentation of expenditures should be developed and implemented. Support should be maintained for all expenditures to ensure that each expenditure charged to the program is for an allowable activity/cost. The expenditure amount is in excess of $25,000 and therefore is considered questioned costs under 2 CFR § 200.516. In addition to this issue, we could not determine if the expenditures in total for this program were supported by the accounting system records since we could not reconcile between the accounting system and the federal schedule. See Finding 2022-004 above for this issue in detail.
2 CFR § 2900.4 gives regulatory effect to the Department of Labor for 2 CFR § 200 Subpart E which outlines allowable cost principles. 2 CFR § 200.403 provides, in part, that except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards: Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles and be adequately documented. Due to a lack of internal control over expenditures and documentation, testing of expenditures identified a payment charged twice to the WIOA Cluster accounting system. As such, the second entry for the payment had no invoice support and was not valid. The total amount tested that had no invoice support was $369,757 and was determined to be unallowable. Failure to maintain adequate support documentation for federal expenditures could result in costs being disallowed by the grantor. Policies and procedures over documentation of expenditures should be developed and implemented. Support should be maintained for all expenditures to ensure that each expenditure charged to the program is for an allowable activity/cost. The expenditure amount is in excess of $25,000 and therefore is considered questioned costs under 2 CFR § 200.516. In addition to this issue, we could not determine if the expenditures in total for this program were supported by the accounting system records since we could not reconcile between the accounting system and the federal schedule. See Finding 2022-004 above for this issue in detail.
2 CFR § 2900.4 gives regulatory effect to the Department of Labor for 2 CFR § 200 Subpart E which outlines allowable cost principles. 2 CFR § 200.403 provides, in part, that except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards: Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles and be adequately documented. We further noted that 20 CFR § 671.140 states the following as allowable activities: (a) National emergency grants may provide adjustment assistance for eligible dislocated workers, described at WIA section 173(c)(2) or (d)(2). (b) Adjustment assistance includes the core, intensive, and training services authorized at WIA sections 134(d) and 173. The scope of services to be provided in a particular project are negotiated between the Department and the grantee, taking into account the needs of the target population covered by the grant. The scope of services may be changed through grant modifications, if necessary. (c) National emergency grants may provide for supportive services to help workers who require such assistance to participate in activities provided for in the grant. Needs-related payments, in support of other employment and training assistance, may be available for the purpose of enabling dislocated workers who are eligible for such payments to participate in programs of training services. Generally, the terms of a grant must be consistent with Local Board policies governing such financial assistance with formula funds (including the payment levels and duration of payments). However, the terms of the grant agreement may diverge from established Local Board policies, in the following instances: (1) If unemployed dislocated workers served by the project are not able to meet the 13 or 8 weeks enrollment in training requirement at WIA section 134(e)(3)(B) because of the lack of formula or emergency grant funds in the State or local area at the time of dislocation, such individuals may be eligible for needs-related payments if they are enrolled in training by the end of the 6th week following the date of the emergency grant award; (2) Trade-impacted workers who are not eligible for trade readjustment assistance under NAFTA-TAA may be eligible for needs-related payments under a national emergency grant if the worker is enrolled in training by the end of the 16th week following layoff; and (3) Under other circumstances as specified in the national emergency grant application guidelines. (d) A national emergency grant to respond to a declared emergency or natural disaster, as defined at § 671.110(e), may provide short-term disaster relief employment for: Individuals who are temporarily or permanently laid off as a consequence of the disaster; Dislocated workers; and Long-term unemployed individuals. (e) Temporary employment assistance is authorized on disaster projects that provide food, clothing, shelter and other humanitarian assistance for disaster victims; and on projects that perform demolition, cleaning, repair, renovation and reconstruction of damaged and destroyed structures, facilities and lands located within the disaster area. For such temporary jobs, each eligible worker is limited to no more than six months of employment for each single disaster. The amounts, duration and other limitations on wages will be negotiated for each grant. (f) Additional requirements that apply to national emergency grants, including natural disaster grants, are contained in the application instructions. Due to a lack of internal control over expenditures and documentation, testing of expenditures identified a payment charged to the NEG Federal Program twice in the accounting system. As such, the second entry for the payment had no invoice support and was not valid. The total amount tested that had no invoice support was $191,416 and was determined to be unallowable. Failure to maintain adequate support documentation for federal expenditures could result in costs being disallowed by the grantor. Policies and procedures over documentation of expenditures should be developed and implemented. Support should be maintained for all expenditures to ensure that each expenditure charged to the program is for an allowable activity/cost. The expenditure amount is in excess of $25,000 and therefore is considered questioned costs under 2 CFR § 200.516. In addition to this issue, we could not determine if the expenditures in total for this program were supported by the accounting system records since we could not reconcile between the accounting system and the federal schedule. See Finding 2022-004 above for this issue in detail.
COVID-19 Coronavirus Relief Fund (21.019) Agency: Department of Treasury Federal Award Number/Year: 2020 Program & ALN: COVID-19 Coronavirus Relief Fund - 21.019 Pass-through Entities: Virginia Department of Accounts Compliance Requirement: Reporting Finding Type: Finding reported in accordance with 2 CFR section 200.516(a) and material weakness of internal controls surrounding reporting requirements. Criteria: Per single audit requirements, prime recipients (i.e. the Commonwealth of Virginia) are required to submit quarterly Financial Progress reports. To assist with the reporting requirement, the Commonwealth required quarterly reports from its subrecipients (the County). Condition: The County did not file a required quarterly report for the quarter ended September 30, 2021. Cause: The County did not have a proper reporting and review process of federal grants and failed to submit the required report. Effect: The amounts reported by the County to the Commonwealth are understated resulting in an error in reporting by the Commonwealth to the federal government. Recommendation: Management should establish a reconciliation process and reports should be reviewed by someone other than the preparer prior to submission to ensure accuracy of reporting. Views of Responsible Officials and Planned Corrective Action: The County concurs with the finding. The County corrected activity with the final reporting filed for the period ended December 31, 2021.
A. Summary of Auditor's Results 1. The auditor's report expresses a unmodified opinion on whether the financial statements of Geneva Avenue Elderly Housing, Inc. were prepared in accordance with generally accepted accounting principles. 2. No significant deficiencies related to the audit of the financial statements were reported in the Independent Auditor's Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards. No material weaknesses were reported. 3. One instance of noncompliance material to the financial statements of Geneva Avenue Elderly Housing, Inc., which would be required to be reported in accordance with Government Auditing Standards, was disclosed during the audit. 4. One significant deficiency in internal control over major federal award programs was disclosed during the audit and reported in the Independent Auditor's Report on Compliance for the Major Federal Program and on Internal Control over Compliance Required by the Uniform Guidance. No material weaknesses were reported. 5. The auditor's report on compliance for the major federal award programs for Geneva Avenue Elderly Housing, Inc. expresses a qualified opinion on all major federal programs. 6. There is one audit finding required to be reported in accordance with 2 CFR Section 200.516(a) in this Schedule. 7. The programs tested as major programs included: CFDA Number Name of Federal Program 14.157 HUD Section 202 (Capital Advance) 8. The threshold for distinguishing between Type A and B programs was $750,000. 9. Geneva Avenue Elderly Housing, Inc. was determined to be a low risk auditee. B. Financial Statement Findings None reported C. Federal Award Findings and Questioned Costs Department of Housing and Urban Development Finding No. 2022-001; Assistance Listing No. 14.157 Support Housing for the Elderly (Section 202) Criteria Tenant lease files are required to be maintained and tenant eligibility determined in accordance with HUD Handbook 4571.3, Section 202 Supportive Housing for the Elderly. Condition In connection with our lease file testing, we noted that six tenant files out of the six tenant files tested did not have the EIV completed timely for the most recent annual recertification. Cause There was an administrative error involving personnel involved in the annual recertification process resulting in the EIV reports not being run in accordance with the HUD program guidelines. Effect or Potential Effect The Corporation is not in compliance with HUD Program guidelines. Recommendation The Corporation should ensure that EIV reports are run timely in connection with the annual recertification in accordance with the HUD Program guidelines, and it should monitor its compliance with those policies and procedures. Auditor Noncompliance Code: R - Section 8 program administration Reporting Views of Responsible Officials: Management concurs with the finding. Management has communicated with the staff the importance of completing EIV reports in accordance with HUD Program guidelines, and on a go forward basis will enhance its monitoring of compliance with this requirement to ensure that EIV's are run within an appropriate time frame.
THIS FINDING IS: New FINDING TYPE: Internal Control DEFICIENCY TYPE: Significant Deficiency Federal Program Name and Year: Education Stabilization Fund - 2022 Project No.: 20-4998-ER AL No.: 84.425D Passed Through: Illinois State Board of Education Federal Agency: U.S. Department of Education Criteria or specific requirement (including statutory, regulatory, or other citation): The District is required to report grant expenditures in accordance with the Illinois State Board of Education State and Federal Grant Administration Policy and Fiscal Requirements and Procedures and the ISBE Illinois Program Account Manual, which is consistent with the provisions of the Uniform Guidance. According to Uniform Guidance, Title 2 CFR 200.516, the District is required to maintain internal control over Federal programs that provide reasonable assurance that the Auditee is managing Federal awards in compliance with laws, regulations, and provisions of contracts or grant agreements that could have a material effect on each of its Federal programs. Under Uniform Guidance, Title 2 CFR 200.501, a non-Federal entity that expends $750,000 or more during the entity's fiscal year in Federal awards must have a single audit conducted for that year. Condition: The District overstated expenditures on the ESSER I June 30, 2021 expenditure report. Questioned Costs: The ESSER I 2020 project year's June 30, 2021 expenditure report included $10,678 of questioned costs. Purchased Services were overstated by $2,300, Supplies and Materials were overstated by $6,035, and Capital Outlay was overstated by $2,343 when compared to the accounting records. Context: The ESSER I 2020 project year's June 30, 2021 expenditure report included $10,678 of questioned costs. Purchased Services were overstated by $2,300, Supplies and Materials were overstated by $6,035, and Capital Outlay was overstated by $2,343 when compared to the accounting records. Effect: Expenditures reported on the final project expenditure report were overstated by $10,678. Excluding the $10,678 of overstated expenditures from the calculation of over all expenditures of federal awards resulted in the district expending less than $750,000 of federal awards during the year ended June 30, 2021 and thereby not being subject to the Uniform Guidance/Single Audit provisions. Cause: ESSER I 2020 project year's final expenditures were reported in error. Recommendation: Grant expenditures should be reviewed and reconciled back to the accounting records prior to submitting final reports; ISBE grants division should be contacted regarding this discrepancy. Management's response: The District agrees that the expenditures claimed on the June 30, 2021 expenditure report was overstated by $10,678 and in the future will review and reconcile the expenditure reports to the accounting records before submitting to ISBE.
2022-028 The University of Washington did not establish adequate internal controls to ensure payments to contractors and subrecipients for the Global AIDS program were allowable, properly supported and within the period of performance. Assistance Listing Number and Title: 93.067 Global AIDS 93.067 COVID-19 Global AIDS Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: NU2GGH001430; NU2GGH001968; NU2GGH002038; NU2GGH002116; NU2GGH002242; NUGGH002360; NU2GGH002157; NU2GGH002298; NU2GGH002374 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs / Cost Principles Period of Performance Known Questioned Cost Amount: None Background The Global AIDS program is a federal initiative focused on treating and preventing the transmission of HIV/AIDS around the world. The program is authorized by Sections 307 and 317(k)(2) of the Public Health Service Act, the U.S. Leadership Against HIV/AIDS, Tuberculosis, and Malaria Acts of 2003 and 2008, and the U.S. President?s Emergency Plan for AIDS Relief. Since it was established in 2003, the federal government has invested more than $100 billion in the global HIV/AIDS response, providing testing and treatment for millions of people, preventing transmission among affected communities, and supporting numerous countries to achieve HIV epidemic control. The program distributes funding through public and private sector partnerships to reach the populations most vulnerable to HIV/AIDS epidemics. The University of Washington administers this grant for the state through its International Training and Education Center for Health (I-TECH). I-TECH is a center in the University?s Department of Global Health operated by more than 2,000 staff in offices located in Africa, Asia, the Caribbean, Eastern Europe and the United States. In fiscal year 2022, the University spent more than $66 million in federal program funds, about $44 million of which it passed through to subrecipients. To achieve the performance goals of the program, the Seattle headquarters of I-TECH (Seattle HQ) provides funding to subrecipients and contractors. Invoices submitted by contractors directly to Seattle HQ are reviewed and approved for payment by budget managers who have delegated authority from the Principal Investigator. Invoices submitted by subrecipients are reviewed and approved for payment by a Principal Investigator. Principal Investigators are also responsible for monitoring the subrecipient?s technical progress and performance. Seattle HQ also provides funding to country offices operating within the University?s global network. The country offices incur costs associated with furnishing supplies and equipment to address the HIV/AIDS epidemic, as well as staffing resources and acquiring goods and services from contractors to carry out the objectives of the program. Payments made by country offices are approved by Country Directors and Country Representatives as delegated by the University. Under the University?s policies, country offices are reimbursed for locally incurred expenses at least monthly. An invoice, accompanied by a schedule of expenses incurred, is submitted and approved by the Country Director and then by the Director of Finance at Seattle HQ, prior to payment. Country offices also responsible for obtaining and retaining supporting documentation for costs incurred and paid on each project. Monthly, Budget Managers review and approve a Budget Activity Report (BAR) that details the expenses charged to the project for the previous month to ensure accurate posting of already approved expenses. This review is also to determine whether the work performed during the billing period reconciles to costs claimed within the contractor?s invoice so that payment may be authorized. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The University did not have adequate internal controls to ensure payments to contractors and subrecipients of the Global AIDS program were allowable properly supported and within the period of performance. Payments to country offices We used a statistical sampling method to randomly select and examine 58 out of 1,644 transactions for country offices. Of the 58 payments examined, we identified one payment (1.7 percent) that was not approved by the Country Director and the corresponding Budget Activity Report was not approved by the Director of Finance. Payments to contractors We used a statistical sampling method to randomly select and review 58 out of 3,040 payments to contractors. We found: ? Invoices for three payments (5 percent) were not approved by a Budget Manager ? Monthly Budget Activity Reports were not approved for 12 payments (20 percent) Subrecipient reimbursements We used a statistical sampling method to randomly select and review 55 out of 438 payments to subrecipients. We found the assigned Budget Manager did not review and approve the monthly Budget Activity Reports for 52 payments (94 percent). We consider these internal control deficiencies to be a material weakness. This issue was not reported as a finding in the prior audit. Cause of Condition Program management did not require supporting documentation for each payment to be forwarded to and reviewed by headquarters personnel prior to payment authorization. Management also did not monitor the submission of invoices and Budget Activity Reports to ensure they were approved by the responsible Budget Manager, as required. Effect of Condition Without establishing adequate internal controls, the University cannot reasonably ensure it is using federal funds for allowable purposes and that expenditures of federal funds are supported by adequate documentation. Recommendations We recommend the University: ? Improve its internal controls to ensure invoices are properly approved by Principal Investigators, as required ? Improve its internal controls to ensure Budget Mangers review and approve monthly Budget Activity Reports before authorizing payments for projects incurring reimbursement requests ? Ensure it retains supporting documentation sufficient to show costs incurred and paid by the program are allowable, and to demonstrate the required managerial reviews have occurred prior to issuing payment University?s Response In response to the findings for the Global Aids Program, we would like to clarify the following: General Clarification: The draft finding inaccurately represents the role of BARS approvals as part of the internal controls to ensure payments to country offices, contractors and subrecipients are allowable, properly supported and within the period of performance. This is not the role of the BARS review process. Compliance, Budget Manager and PI reviews are the controls that ensure allowability of payments and BARS approvals are after-the-fact validations of accurate posting of already approved expenditures. We provided edits to the Background section to reflect our process. We request in light of this that the description of condition, cause of condition and recommendation sections of this finding be updated accordingly. Payments to country offices I-TECH country offices are not contractors; the offices are an extension of the University of Washington. Your review identified one of fifty-eight samples (1.7%) did not meet the approval requirements set forth in I-TECH?s standard operating procedure. Based on the error percentage, we disagree with this finding. Payments to contractors Payments to contractors have multiple approvals. Upon receipt, individual invoices are approved by the program/budget manager either by signature or email. Invoices are then sent to the I-TECH Accounts Payable Administrator for input to the University?s procurement system, ARIBA, which requires compliance approval from the Accounts Payable Supervisor or other manager, as well as funding approval from the budget manager prior to payment. Approvals of Budget Activity Reports (BARS) are not approval of individual payments to contractors, they are reviews of the monthly expenses posted to the budget and the program manager?s concurrence that the expenses are as expected. The exceptions noted were payments made to country offices instead of contractors. The support for approvals were provided to the State Auditors on April 26, 2023, prior to the completion of fieldwork. We therefore disagree with this finding. We also request that the finding be adjusted to omit the 20% of missing BARS approvals as this is not related to the contractor payments. Subrecipient reimbursements Each subrecipient invoice is reviewed for reasonableness, allowability and allocability by the contracts manager and approved by both budget managers and principal investigators prior to being processed for payment in ARIBA. PI approvals were provided and verified for each subrecipient selection with no omissions noted by the auditors. Approvals of Budget Activity Reports (BARS) are not approval of individual payments to subrecipients, they are after-the-fact reviews of the monthly expenses posted to the budget, intended as documentation of the program manager?s concurrence that the expenses are posted as expected. We acknowledge the instances detailed in the finding where we were unable to produce related BARS approvals for 52 of the transactions; however, we request that the finding be adjusted as these BARS approvals are not related to subrecipient invoice review and approvals. Our record keeping process for BARS approvals was to save the emails in a folder within our Finance Team mailbox. We learned during this review that emails beyond a certain date are deleted but maintained in the MS360 file. We?ve searched for the missing BARS approvals but have not yet been able to locate them. We have since begun saving the approvals to our server to ensure we have access to the data going forward. Auditor?s Remarks The University?s I-TECH Global Operations Manual stipulates that BARs will be generated, reviewed and approved monthly by the Budget Manager and management team. This information was provided to our Office as part of the University?s overall design of internal controls over payments to contractors, subrecipients and country offices. The University responded to our Office on April 20, 2023 adding that ?BAR review is the University?s key post payment control designed to ensure charges are accurately processed, coded and allowable on the budget charged.? We interpret this response to indicate the BAR review process is a monitoring control, and the University asserted on multiple occasions this is a key internal control, which is why we tested it. On January 5, our Office notified University management in writing that the BAR review process would be tested as a key control over the cost principles and period of performance requirements for Global AIDS expenditures. We received no additional inquiry or concerns from University management regarding this internal control until the draft finding was issued on April 14. We provided the University with a final written summary of our fieldwork in this area on April 6, 2023, after fieldwork had concluded. On April 7, the Finance Director responded to our Office in writing confirming they had no further questions or concerns regarding our testing results. It was not until after the University received this finding that additional documentation supporting expenditures tested during the audit were ultimately given to our Office. The basis for this audit finding is the key internal control failure rate of BAR approvals that exceeds our established materiality threshold of five percent, and constitutes a material weakness in internal control, which under the Uniform Guidance is required to be reported as an audit finding in accordance with 2 CFR 200.516 ? Audit findings. We reaffirm our finding and will follow up on the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. The University of Washington?s Policies, Procedures and Guidance (UW Research), GIM 02 ? Acceptance of Sponsored Program Awards and Fiscal Compliance on Sponsored Program Accounts (Budget Numbers), states in part: Responsibilities Principal Investigator ? Supervises expenditure of sponsored program funds and approves sub-recipient invoices (see GIM 8) to assure: o That funds are used only for purposes that directly relate to and benefit the activity supported in the award. o That expenditures are consistent with all special terms, conditions, or limitations that apply to expenditures under the particular grant or contract. o That expenditures do not exceed the total funds authorized for a given period under the grant or contract. GIM 07 ? Sponsored Program Subaward Administration, states in part: Principal Investigator ? Review and approve subaward invoices. GIM 08 ? Subrecipient Monitoring, states in part: Roles & Responsibilities PI / Department Responsibilities Project level monitoring of subrecipient including: o Reviews that expenses are necessary, reasonable, and allocable to the work completed and are aligned with technical progress. o Approve invoices for payment. Subrecipient Monitoring ? Project Level Subrecipient invoices are reviewed and approved in accordance with the requirements of GIM 2 in the manner and frequency stated in the subaward. The University of Washington I-TECH Global Operations Manual (GRef 2.3), Section 2, Finance, Accounting Policy and Procedure Requirements, states in part: In addition to the Fiscal Guidelines set forth in the I-TECH Field Operations Manual, these country specific policies are implemented at I-TECH. 10. Budget Management and Reporting f. Reports that show the variance between the budget plan and the activity for each region and activity code will be generated, reviewed and approved by the budget managers and the Management Team each month.
2022-030 The University of Washington did not have adequate internal controls over and did not comply with federal requirements to ensure subrecipients of the Global AIDS program received required single or program-specific audits, and that it followed up on findings and issued management decisions. Assistance Listing Number and Title: 93.067 Global AIDS 93.067 COVID-19 Global AIDS Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: NU2GGH001430; NU2GGH001968; NU2GGH002038; NU2GGH002116; NU2GGH002242; NUGGH002360; NU2GGH002157; NU2GGH002298; NU2GGH002374 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Subrecipient Monitoring Known Questioned Cost Amount: None Background The Global AIDS program is a federal initiative focused on treating and preventing the transmission of HIV/AIDS around the world. The program is authorized by Sections 307 and 317(k)(2) of the Public Health Service Act, the U.S. Leadership Against HIV/AIDS, Tuberculosis, and Malaria Acts of 2003 and 2008, and the U.S. President?s Emergency Plan for AIDS Relief. Since it was established in 2003, the federal government has invested more than $100 billion in the global HIV/AIDS response, providing testing and treatment for millions of people, preventing transmission among affected communities, and supporting numerous countries to achieve HIV epidemic control. The program distributes funding through public and private sector partnerships to reach the populations most vulnerable to HIV/AIDS epidemics. The University of Washington administers this grant for the state through its International Training and Education Center for Health (I-TECH). I-TECH is a center in the University?s Department of Global Health operated by more than 2,000 staff in offices located in Africa, Asia, the Caribbean, Eastern Europe and the United States. In fiscal year 2022, the University spent more than $66 million in federal program funds, about $44 million of which it passed through to subrecipients. Federal regulations require the University to monitor its subrecipients? activities. This includes verifying that its subrecipients that spend $750,000 or more in federal awards during a fiscal year obtain a single or program-specific audit. For the Global AIDS program, the Centers for Disease Control and Prevention requires foreign subrecipients to submit their audits directly to the federal government and pass-through entity within 30 days after receiving the auditor?s report or nine months after the end of the subrecipient?s audit period, whichever is earlier. Additionally, for the awards it passes onto its subrecipients, the University must follow up and ensure the subrecipients take timely and appropriate corrective action on all deficiencies identified through audits. When a subrecipient receives an audit finding for a University-funded program, federal law requires the University to issue a management decision to the subrecipient within six months of the audit report?s acceptance by the federal government. The management decision must clearly state whether the audit finding is sustained, the reason for the decision, and the actions the subrecipient is expected to take, such as repaying unallowable costs or making financial adjustments. These requirements help ensure subrecipients use federal program funds for authorized purposes and within the provisions of contracts or grant agreements. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The University did not have adequate internal controls over and did not comply with federal requirements to ensure subrecipients of the Global AIDS program received required single or program-specific audits, and that it appropriately followed up on findings and issued management decisions. We found the University did not have adequate internal controls in place to verify whether: ? Subrecipients received required audits, if necessary, and appropriate remedies were taken if audits were not filed ? Management decisions were required to be issued for subrecipients who required a single or program-specific audit We used a nonstatistical sampling method to randomly select and examine seven out of a total population of 21 subrecipients. We found the University did not adequately monitor one subrecipient (14 percent) to ensure it received a required single or program-specific audit. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition Staff in the University?s Office of Sponsored Programs (OSP) used a spreadsheet to track subrecipient certifications and responses, and reviewed annual certifications from the subrecipient to monitor its audit status. However, OSP did not correctly interpret the subrecipient?s response and, therefore, did not require it to provide documentation of a single or program-specific audit. Additionally, management did not review the subrecipient?s federal assistance expenditures to detect that it required an audit and, therefore, also failed to adequately follow up to ensure any reported findings were resolved with appropriate corrective action, if required. Effect of Condition Without establishing adequate internal controls, the University cannot ensure all subrecipients that required a single or program-specific audit received one. Furthermore, the University cannot ensure it is following up on subrecipient audit findings and communicating required management decisions to subrecipients. By failing to ensure subrecipients establish corrective actions and management monitors them for effectiveness where required, the University cannot determine whether subrecipients have sufficiently corrected issues identified in audit findings. Recommendations We recommend the University: ? Follow policies and procedures to ensure subrecipients receive required single or program-specific audits ? Establish and follow effective internal controls to ensure it reviews audit reports for its subrecipients and issues written management decisions, as required ? Ensure subrecipients develop and perform acceptable corrective actions to adequately address all audit recommendations ? Follow up with the subrecipient to ensure the required audit reports are received and reviewed to determine if the subrecipient is required to take corrective action to address audit recommendations ? Issue a written management decision for all applicable audit findings, if necessary University?s Response The University of Washington has established internal controls to carry out a risk assessment per Uniform Guidance, 2 CFR ? 200.332, Requirements for pass-through entities, and our UW Grants Information Memorandum (GIM) 8. This involves using various factors to assess risk. Part of our process to obtain the information needed from each subrecipient is through a certification process. The certification was obtained from the subrecipient, along with additional documentation from the subrecipient, such as an audited financial statement. We made a risk assessment using our standard risk criteria. We did misinterpret the response provided from the subrecipient regarding whether it expended $750,000 or more in federal awards during a fiscal year in order to obtain a single or program-specific audit from this subrecipient. While this was not obtained and reviewed, a risk assessment using our standard criteria was performed with the subrecipient rated as a medium risk, and subject to monitoring throughout the project, per GIM 8. The monitoring at the program level occurred during the period in question. We will be improving our required communications with subrecipients to have clear questions and responses regarding whether the subrecipient expended $750,000 or more in federal awards during the fiscal year in order to obtain a single or program-specific audit, follow up with the subrecipient to ensure the required audit reports are received and reviewed to determine if the subrecipient is required to take corrective action to address audit recommendations, and issue a written management decision for all applicable audit findings, if necessary. Auditor?s Remarks We thank the University for its cooperation and assistance during the audit. Whether the University performed a risk assessment for the subrecipient is not being questioned. The University did not adequately monitor the subrecipient to ensure it detected whether the subrecipient was required to receive a single audit, or program-specific audit in accordance with 2 CFR ?200.332(f). There is no other mechanism for the Federal government to monitor subrecipients of the University and, because a single audit of the subrecipient was not performed, neither the federal grantor nor the University had reasonable assurance of the subrecipient?s compliance with federal award requirements. We reaffirm our finding and will follow up on the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200, Uniform Guidance, establishes the following applicable requirements: Section 200.332 Requirements for pass-through entities, states in part: All pass-through entities must: (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. (3) Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by ? 200.521. (4) The pass-through entity is responsible for resolving audit findings specifically related to the subaward and not responsible for resolving crosscutting findings. If a subrecipient has a current Single Audit report posted in the Federal Audit Clearinghouse and has not otherwise been excluded from receipt of Federal funding (e.g., has been debarred or suspended), the pass-through entity may rely on the subrecipient?s cognizant audit agency or cognizant oversight agency to perform audit follow-up and make management decisions related to cross-cutting findings in accordance with section ? 200.513(a)(3)(vii). Such reliance does not eliminate the responsibility of the pass-through entity to issue subawards that conform to agency and award-specific requirements, to manage risk through ongoing subaward monitoring, and to monitor the status of the findings that are specifically related to the subaward. (f) Verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the subrecipient?s Federal awards expended during the respective fiscal year equaled or exceeded the threshold set for the in ?200.501 Audit requirements. Section 200.339 Remedies for noncompliance, states: If a non-Federal entity fails to comply with the U.S. Constitution, Federal statutes, regulations or the terms and conditions of a Federal award, the Federal awarding agency or pass-through entity may impose additional conditions, as described in ? 200.208. If the Federal awarding agency or pass-through entity determines that noncompliance cannot be remedied by imposing additional conditions, the Federal awarding agency or pass-through entity may take one or more of the following actions, as appropriate in the circumstances: (a) Temporarily withhold cash payments pending correction of the deficiency by the non-Federal entity or more severe enforcement action by the Federal awarding agency or pass-through entity. (b) Disallow (that is, deny both use of funds and any applicable matching credit for) all or part of the cost of the activity or action not in compliance. (c) Wholly or partly suspend or terminate the Federal award. (d) Initiate suspension or debarment proceedings as authorized under 2 CFR part 180 and Federal awarding agency regulations (or in the case of a pass-through entity, recommend such a proceeding be initiated by a Federal awarding agency). (e) Withhold further Federal awards for the project or program. (f) Take other remedies that may be legally available. Section 200.501 Audit requirements, states in part: (a) Audit required. A non-Federal entity that expends $750,000 or more during the non-Federal entity?s fiscal year in Federal awards must have a single or program-specific audit conducted for that year in accordance with the provisions of this part. (b) Single audit. A non-Federal entity that expends $750,000 or more during the non-Federal entity?s fiscal year in Federal awards must have a single audit conducted in accordance with ? 200.514 except when it elects to have a program-specific audit conducted in accordance with paragraph (c) of this section. Section 200.521 Management decision, states in part: (a) General. The management decision must clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action. If the auditee has not completed corrective action, a timetable for follow-up should be given. Prior to issuing the management decision, the Federal agency or pass-through entity may request additional information or documentation from the auditee, including a request for auditor assurance related to the documentation, as a way of mitigating disallowed costs. The management decision should describe any appeal process available to the auditee. While not required, the Federal agency or pass-through entity may also issue a management decision on findings relating to the financial statements which are required to be reported in accordance with GAGAS. (c) Pass-through entity. As provided in ? 200.332(d), the pass-through entity must be responsible for issuing a management decision for audit findings that relate to Federal awards it makes to subrecipients. (d) Time requirements. The Federal awarding agency or pass-through entity responsible for issuing a management decision must do so within six months of acceptance of the audit report by the FAC. The auditee must initiate and proceed with corrective action as rapidly as possible and corrective action should begin no later than upon receipt of the audit report. (e) Reference numbers. Management decisions must include the reference numbers the auditor assigned to each audit finding in accordance with ? 200.516(c). The University of Washington?s Policies, Procedures and Guidance (UW Research), GIM 8 ? Subrecipient Monitoring, states in part: Background Additionally, per the Federal Uniform Guidance, UW must evaluate each subrecipients? risk of noncompliance with federal regulations, include specific terms and conditions in the subaward as necessary, and monitor the activities of the subrecipient through various mechanisms. These mechanisms include: Training and technical assistance to subrecipients, on-site reviews, review of audit results, increased reporting requirements and enforcement action, if necessary. University Policy UW reviews each subrecipient entity according to an entity level comprehensive risk assessment prior to the issuance of a subaward. This risk assessment includes an entity level review of their fiscal systems, past audit activity, and if required, financial statements of the entity as well as the project specific activity proposed and that the required compliance approvals are obtained. When necessary, UW imposes limitations and requirements on the subrecipient through subaward terms and conditions per Federal Uniform Guidance, Section 200.521, prior to the issuance or renewal of a subaward. UW?s subrecipient monitoring requirements are comprised, at a minimum, of the following: ? Completion of the UW?s entity level comprehensive risk assessment (Certs & Reps, Annual Audit Certification) Subrecipient Monitoring ? Entity Level Entity level monitoring consists of a combination of the following: ? Initial Subrecipient Certification Form completion and assurance by subrecipient?s authorized official ? Annual audit assurance through an annual audit certification form ? Maintenance of a subrecipient profile list, which includes information on the entity?s past audit information and certifications ? Risk assessment carried out at each annual renewal of a subaward
2022-028 The University of Washington did not establish adequate internal controls to ensure payments to contractors and subrecipients for the Global AIDS program were allowable, properly supported and within the period of performance. Assistance Listing Number and Title: 93.067 Global AIDS 93.067 COVID-19 Global AIDS Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: NU2GGH001430; NU2GGH001968; NU2GGH002038; NU2GGH002116; NU2GGH002242; NUGGH002360; NU2GGH002157; NU2GGH002298; NU2GGH002374 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs / Cost Principles Period of Performance Known Questioned Cost Amount: None Background The Global AIDS program is a federal initiative focused on treating and preventing the transmission of HIV/AIDS around the world. The program is authorized by Sections 307 and 317(k)(2) of the Public Health Service Act, the U.S. Leadership Against HIV/AIDS, Tuberculosis, and Malaria Acts of 2003 and 2008, and the U.S. President?s Emergency Plan for AIDS Relief. Since it was established in 2003, the federal government has invested more than $100 billion in the global HIV/AIDS response, providing testing and treatment for millions of people, preventing transmission among affected communities, and supporting numerous countries to achieve HIV epidemic control. The program distributes funding through public and private sector partnerships to reach the populations most vulnerable to HIV/AIDS epidemics. The University of Washington administers this grant for the state through its International Training and Education Center for Health (I-TECH). I-TECH is a center in the University?s Department of Global Health operated by more than 2,000 staff in offices located in Africa, Asia, the Caribbean, Eastern Europe and the United States. In fiscal year 2022, the University spent more than $66 million in federal program funds, about $44 million of which it passed through to subrecipients. To achieve the performance goals of the program, the Seattle headquarters of I-TECH (Seattle HQ) provides funding to subrecipients and contractors. Invoices submitted by contractors directly to Seattle HQ are reviewed and approved for payment by budget managers who have delegated authority from the Principal Investigator. Invoices submitted by subrecipients are reviewed and approved for payment by a Principal Investigator. Principal Investigators are also responsible for monitoring the subrecipient?s technical progress and performance. Seattle HQ also provides funding to country offices operating within the University?s global network. The country offices incur costs associated with furnishing supplies and equipment to address the HIV/AIDS epidemic, as well as staffing resources and acquiring goods and services from contractors to carry out the objectives of the program. Payments made by country offices are approved by Country Directors and Country Representatives as delegated by the University. Under the University?s policies, country offices are reimbursed for locally incurred expenses at least monthly. An invoice, accompanied by a schedule of expenses incurred, is submitted and approved by the Country Director and then by the Director of Finance at Seattle HQ, prior to payment. Country offices also responsible for obtaining and retaining supporting documentation for costs incurred and paid on each project. Monthly, Budget Managers review and approve a Budget Activity Report (BAR) that details the expenses charged to the project for the previous month to ensure accurate posting of already approved expenses. This review is also to determine whether the work performed during the billing period reconciles to costs claimed within the contractor?s invoice so that payment may be authorized. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The University did not have adequate internal controls to ensure payments to contractors and subrecipients of the Global AIDS program were allowable properly supported and within the period of performance. Payments to country offices We used a statistical sampling method to randomly select and examine 58 out of 1,644 transactions for country offices. Of the 58 payments examined, we identified one payment (1.7 percent) that was not approved by the Country Director and the corresponding Budget Activity Report was not approved by the Director of Finance. Payments to contractors We used a statistical sampling method to randomly select and review 58 out of 3,040 payments to contractors. We found: ? Invoices for three payments (5 percent) were not approved by a Budget Manager ? Monthly Budget Activity Reports were not approved for 12 payments (20 percent) Subrecipient reimbursements We used a statistical sampling method to randomly select and review 55 out of 438 payments to subrecipients. We found the assigned Budget Manager did not review and approve the monthly Budget Activity Reports for 52 payments (94 percent). We consider these internal control deficiencies to be a material weakness. This issue was not reported as a finding in the prior audit. Cause of Condition Program management did not require supporting documentation for each payment to be forwarded to and reviewed by headquarters personnel prior to payment authorization. Management also did not monitor the submission of invoices and Budget Activity Reports to ensure they were approved by the responsible Budget Manager, as required. Effect of Condition Without establishing adequate internal controls, the University cannot reasonably ensure it is using federal funds for allowable purposes and that expenditures of federal funds are supported by adequate documentation. Recommendations We recommend the University: ? Improve its internal controls to ensure invoices are properly approved by Principal Investigators, as required ? Improve its internal controls to ensure Budget Mangers review and approve monthly Budget Activity Reports before authorizing payments for projects incurring reimbursement requests ? Ensure it retains supporting documentation sufficient to show costs incurred and paid by the program are allowable, and to demonstrate the required managerial reviews have occurred prior to issuing payment University?s Response In response to the findings for the Global Aids Program, we would like to clarify the following: General Clarification: The draft finding inaccurately represents the role of BARS approvals as part of the internal controls to ensure payments to country offices, contractors and subrecipients are allowable, properly supported and within the period of performance. This is not the role of the BARS review process. Compliance, Budget Manager and PI reviews are the controls that ensure allowability of payments and BARS approvals are after-the-fact validations of accurate posting of already approved expenditures. We provided edits to the Background section to reflect our process. We request in light of this that the description of condition, cause of condition and recommendation sections of this finding be updated accordingly. Payments to country offices I-TECH country offices are not contractors; the offices are an extension of the University of Washington. Your review identified one of fifty-eight samples (1.7%) did not meet the approval requirements set forth in I-TECH?s standard operating procedure. Based on the error percentage, we disagree with this finding. Payments to contractors Payments to contractors have multiple approvals. Upon receipt, individual invoices are approved by the program/budget manager either by signature or email. Invoices are then sent to the I-TECH Accounts Payable Administrator for input to the University?s procurement system, ARIBA, which requires compliance approval from the Accounts Payable Supervisor or other manager, as well as funding approval from the budget manager prior to payment. Approvals of Budget Activity Reports (BARS) are not approval of individual payments to contractors, they are reviews of the monthly expenses posted to the budget and the program manager?s concurrence that the expenses are as expected. The exceptions noted were payments made to country offices instead of contractors. The support for approvals were provided to the State Auditors on April 26, 2023, prior to the completion of fieldwork. We therefore disagree with this finding. We also request that the finding be adjusted to omit the 20% of missing BARS approvals as this is not related to the contractor payments. Subrecipient reimbursements Each subrecipient invoice is reviewed for reasonableness, allowability and allocability by the contracts manager and approved by both budget managers and principal investigators prior to being processed for payment in ARIBA. PI approvals were provided and verified for each subrecipient selection with no omissions noted by the auditors. Approvals of Budget Activity Reports (BARS) are not approval of individual payments to subrecipients, they are after-the-fact reviews of the monthly expenses posted to the budget, intended as documentation of the program manager?s concurrence that the expenses are posted as expected. We acknowledge the instances detailed in the finding where we were unable to produce related BARS approvals for 52 of the transactions; however, we request that the finding be adjusted as these BARS approvals are not related to subrecipient invoice review and approvals. Our record keeping process for BARS approvals was to save the emails in a folder within our Finance Team mailbox. We learned during this review that emails beyond a certain date are deleted but maintained in the MS360 file. We?ve searched for the missing BARS approvals but have not yet been able to locate them. We have since begun saving the approvals to our server to ensure we have access to the data going forward. Auditor?s Remarks The University?s I-TECH Global Operations Manual stipulates that BARs will be generated, reviewed and approved monthly by the Budget Manager and management team. This information was provided to our Office as part of the University?s overall design of internal controls over payments to contractors, subrecipients and country offices. The University responded to our Office on April 20, 2023 adding that ?BAR review is the University?s key post payment control designed to ensure charges are accurately processed, coded and allowable on the budget charged.? We interpret this response to indicate the BAR review process is a monitoring control, and the University asserted on multiple occasions this is a key internal control, which is why we tested it. On January 5, our Office notified University management in writing that the BAR review process would be tested as a key control over the cost principles and period of performance requirements for Global AIDS expenditures. We received no additional inquiry or concerns from University management regarding this internal control until the draft finding was issued on April 14. We provided the University with a final written summary of our fieldwork in this area on April 6, 2023, after fieldwork had concluded. On April 7, the Finance Director responded to our Office in writing confirming they had no further questions or concerns regarding our testing results. It was not until after the University received this finding that additional documentation supporting expenditures tested during the audit were ultimately given to our Office. The basis for this audit finding is the key internal control failure rate of BAR approvals that exceeds our established materiality threshold of five percent, and constitutes a material weakness in internal control, which under the Uniform Guidance is required to be reported as an audit finding in accordance with 2 CFR 200.516 ? Audit findings. We reaffirm our finding and will follow up on the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. The University of Washington?s Policies, Procedures and Guidance (UW Research), GIM 02 ? Acceptance of Sponsored Program Awards and Fiscal Compliance on Sponsored Program Accounts (Budget Numbers), states in part: Responsibilities Principal Investigator ? Supervises expenditure of sponsored program funds and approves sub-recipient invoices (see GIM 8) to assure: o That funds are used only for purposes that directly relate to and benefit the activity supported in the award. o That expenditures are consistent with all special terms, conditions, or limitations that apply to expenditures under the particular grant or contract. o That expenditures do not exceed the total funds authorized for a given period under the grant or contract. GIM 07 ? Sponsored Program Subaward Administration, states in part: Principal Investigator ? Review and approve subaward invoices. GIM 08 ? Subrecipient Monitoring, states in part: Roles & Responsibilities PI / Department Responsibilities Project level monitoring of subrecipient including: o Reviews that expenses are necessary, reasonable, and allocable to the work completed and are aligned with technical progress. o Approve invoices for payment. Subrecipient Monitoring ? Project Level Subrecipient invoices are reviewed and approved in accordance with the requirements of GIM 2 in the manner and frequency stated in the subaward. The University of Washington I-TECH Global Operations Manual (GRef 2.3), Section 2, Finance, Accounting Policy and Procedure Requirements, states in part: In addition to the Fiscal Guidelines set forth in the I-TECH Field Operations Manual, these country specific policies are implemented at I-TECH. 10. Budget Management and Reporting f. Reports that show the variance between the budget plan and the activity for each region and activity code will be generated, reviewed and approved by the budget managers and the Management Team each month.
2022-030 The University of Washington did not have adequate internal controls over and did not comply with federal requirements to ensure subrecipients of the Global AIDS program received required single or program-specific audits, and that it followed up on findings and issued management decisions. Assistance Listing Number and Title: 93.067 Global AIDS 93.067 COVID-19 Global AIDS Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: NU2GGH001430; NU2GGH001968; NU2GGH002038; NU2GGH002116; NU2GGH002242; NUGGH002360; NU2GGH002157; NU2GGH002298; NU2GGH002374 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Subrecipient Monitoring Known Questioned Cost Amount: None Background The Global AIDS program is a federal initiative focused on treating and preventing the transmission of HIV/AIDS around the world. The program is authorized by Sections 307 and 317(k)(2) of the Public Health Service Act, the U.S. Leadership Against HIV/AIDS, Tuberculosis, and Malaria Acts of 2003 and 2008, and the U.S. President?s Emergency Plan for AIDS Relief. Since it was established in 2003, the federal government has invested more than $100 billion in the global HIV/AIDS response, providing testing and treatment for millions of people, preventing transmission among affected communities, and supporting numerous countries to achieve HIV epidemic control. The program distributes funding through public and private sector partnerships to reach the populations most vulnerable to HIV/AIDS epidemics. The University of Washington administers this grant for the state through its International Training and Education Center for Health (I-TECH). I-TECH is a center in the University?s Department of Global Health operated by more than 2,000 staff in offices located in Africa, Asia, the Caribbean, Eastern Europe and the United States. In fiscal year 2022, the University spent more than $66 million in federal program funds, about $44 million of which it passed through to subrecipients. Federal regulations require the University to monitor its subrecipients? activities. This includes verifying that its subrecipients that spend $750,000 or more in federal awards during a fiscal year obtain a single or program-specific audit. For the Global AIDS program, the Centers for Disease Control and Prevention requires foreign subrecipients to submit their audits directly to the federal government and pass-through entity within 30 days after receiving the auditor?s report or nine months after the end of the subrecipient?s audit period, whichever is earlier. Additionally, for the awards it passes onto its subrecipients, the University must follow up and ensure the subrecipients take timely and appropriate corrective action on all deficiencies identified through audits. When a subrecipient receives an audit finding for a University-funded program, federal law requires the University to issue a management decision to the subrecipient within six months of the audit report?s acceptance by the federal government. The management decision must clearly state whether the audit finding is sustained, the reason for the decision, and the actions the subrecipient is expected to take, such as repaying unallowable costs or making financial adjustments. These requirements help ensure subrecipients use federal program funds for authorized purposes and within the provisions of contracts or grant agreements. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The University did not have adequate internal controls over and did not comply with federal requirements to ensure subrecipients of the Global AIDS program received required single or program-specific audits, and that it appropriately followed up on findings and issued management decisions. We found the University did not have adequate internal controls in place to verify whether: ? Subrecipients received required audits, if necessary, and appropriate remedies were taken if audits were not filed ? Management decisions were required to be issued for subrecipients who required a single or program-specific audit We used a nonstatistical sampling method to randomly select and examine seven out of a total population of 21 subrecipients. We found the University did not adequately monitor one subrecipient (14 percent) to ensure it received a required single or program-specific audit. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition Staff in the University?s Office of Sponsored Programs (OSP) used a spreadsheet to track subrecipient certifications and responses, and reviewed annual certifications from the subrecipient to monitor its audit status. However, OSP did not correctly interpret the subrecipient?s response and, therefore, did not require it to provide documentation of a single or program-specific audit. Additionally, management did not review the subrecipient?s federal assistance expenditures to detect that it required an audit and, therefore, also failed to adequately follow up to ensure any reported findings were resolved with appropriate corrective action, if required. Effect of Condition Without establishing adequate internal controls, the University cannot ensure all subrecipients that required a single or program-specific audit received one. Furthermore, the University cannot ensure it is following up on subrecipient audit findings and communicating required management decisions to subrecipients. By failing to ensure subrecipients establish corrective actions and management monitors them for effectiveness where required, the University cannot determine whether subrecipients have sufficiently corrected issues identified in audit findings. Recommendations We recommend the University: ? Follow policies and procedures to ensure subrecipients receive required single or program-specific audits ? Establish and follow effective internal controls to ensure it reviews audit reports for its subrecipients and issues written management decisions, as required ? Ensure subrecipients develop and perform acceptable corrective actions to adequately address all audit recommendations ? Follow up with the subrecipient to ensure the required audit reports are received and reviewed to determine if the subrecipient is required to take corrective action to address audit recommendations ? Issue a written management decision for all applicable audit findings, if necessary University?s Response The University of Washington has established internal controls to carry out a risk assessment per Uniform Guidance, 2 CFR ? 200.332, Requirements for pass-through entities, and our UW Grants Information Memorandum (GIM) 8. This involves using various factors to assess risk. Part of our process to obtain the information needed from each subrecipient is through a certification process. The certification was obtained from the subrecipient, along with additional documentation from the subrecipient, such as an audited financial statement. We made a risk assessment using our standard risk criteria. We did misinterpret the response provided from the subrecipient regarding whether it expended $750,000 or more in federal awards during a fiscal year in order to obtain a single or program-specific audit from this subrecipient. While this was not obtained and reviewed, a risk assessment using our standard criteria was performed with the subrecipient rated as a medium risk, and subject to monitoring throughout the project, per GIM 8. The monitoring at the program level occurred during the period in question. We will be improving our required communications with subrecipients to have clear questions and responses regarding whether the subrecipient expended $750,000 or more in federal awards during the fiscal year in order to obtain a single or program-specific audit, follow up with the subrecipient to ensure the required audit reports are received and reviewed to determine if the subrecipient is required to take corrective action to address audit recommendations, and issue a written management decision for all applicable audit findings, if necessary. Auditor?s Remarks We thank the University for its cooperation and assistance during the audit. Whether the University performed a risk assessment for the subrecipient is not being questioned. The University did not adequately monitor the subrecipient to ensure it detected whether the subrecipient was required to receive a single audit, or program-specific audit in accordance with 2 CFR ?200.332(f). There is no other mechanism for the Federal government to monitor subrecipients of the University and, because a single audit of the subrecipient was not performed, neither the federal grantor nor the University had reasonable assurance of the subrecipient?s compliance with federal award requirements. We reaffirm our finding and will follow up on the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200, Uniform Guidance, establishes the following applicable requirements: Section 200.332 Requirements for pass-through entities, states in part: All pass-through entities must: (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. (3) Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by ? 200.521. (4) The pass-through entity is responsible for resolving audit findings specifically related to the subaward and not responsible for resolving crosscutting findings. If a subrecipient has a current Single Audit report posted in the Federal Audit Clearinghouse and has not otherwise been excluded from receipt of Federal funding (e.g., has been debarred or suspended), the pass-through entity may rely on the subrecipient?s cognizant audit agency or cognizant oversight agency to perform audit follow-up and make management decisions related to cross-cutting findings in accordance with section ? 200.513(a)(3)(vii). Such reliance does not eliminate the responsibility of the pass-through entity to issue subawards that conform to agency and award-specific requirements, to manage risk through ongoing subaward monitoring, and to monitor the status of the findings that are specifically related to the subaward. (f) Verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the subrecipient?s Federal awards expended during the respective fiscal year equaled or exceeded the threshold set for the in ?200.501 Audit requirements. Section 200.339 Remedies for noncompliance, states: If a non-Federal entity fails to comply with the U.S. Constitution, Federal statutes, regulations or the terms and conditions of a Federal award, the Federal awarding agency or pass-through entity may impose additional conditions, as described in ? 200.208. If the Federal awarding agency or pass-through entity determines that noncompliance cannot be remedied by imposing additional conditions, the Federal awarding agency or pass-through entity may take one or more of the following actions, as appropriate in the circumstances: (a) Temporarily withhold cash payments pending correction of the deficiency by the non-Federal entity or more severe enforcement action by the Federal awarding agency or pass-through entity. (b) Disallow (that is, deny both use of funds and any applicable matching credit for) all or part of the cost of the activity or action not in compliance. (c) Wholly or partly suspend or terminate the Federal award. (d) Initiate suspension or debarment proceedings as authorized under 2 CFR part 180 and Federal awarding agency regulations (or in the case of a pass-through entity, recommend such a proceeding be initiated by a Federal awarding agency). (e) Withhold further Federal awards for the project or program. (f) Take other remedies that may be legally available. Section 200.501 Audit requirements, states in part: (a) Audit required. A non-Federal entity that expends $750,000 or more during the non-Federal entity?s fiscal year in Federal awards must have a single or program-specific audit conducted for that year in accordance with the provisions of this part. (b) Single audit. A non-Federal entity that expends $750,000 or more during the non-Federal entity?s fiscal year in Federal awards must have a single audit conducted in accordance with ? 200.514 except when it elects to have a program-specific audit conducted in accordance with paragraph (c) of this section. Section 200.521 Management decision, states in part: (a) General. The management decision must clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action. If the auditee has not completed corrective action, a timetable for follow-up should be given. Prior to issuing the management decision, the Federal agency or pass-through entity may request additional information or documentation from the auditee, including a request for auditor assurance related to the documentation, as a way of mitigating disallowed costs. The management decision should describe any appeal process available to the auditee. While not required, the Federal agency or pass-through entity may also issue a management decision on findings relating to the financial statements which are required to be reported in accordance with GAGAS. (c) Pass-through entity. As provided in ? 200.332(d), the pass-through entity must be responsible for issuing a management decision for audit findings that relate to Federal awards it makes to subrecipients. (d) Time requirements. The Federal awarding agency or pass-through entity responsible for issuing a management decision must do so within six months of acceptance of the audit report by the FAC. The auditee must initiate and proceed with corrective action as rapidly as possible and corrective action should begin no later than upon receipt of the audit report. (e) Reference numbers. Management decisions must include the reference numbers the auditor assigned to each audit finding in accordance with ? 200.516(c). The University of Washington?s Policies, Procedures and Guidance (UW Research), GIM 8 ? Subrecipient Monitoring, states in part: Background Additionally, per the Federal Uniform Guidance, UW must evaluate each subrecipients? risk of noncompliance with federal regulations, include specific terms and conditions in the subaward as necessary, and monitor the activities of the subrecipient through various mechanisms. These mechanisms include: Training and technical assistance to subrecipients, on-site reviews, review of audit results, increased reporting requirements and enforcement action, if necessary. University Policy UW reviews each subrecipient entity according to an entity level comprehensive risk assessment prior to the issuance of a subaward. This risk assessment includes an entity level review of their fiscal systems, past audit activity, and if required, financial statements of the entity as well as the project specific activity proposed and that the required compliance approvals are obtained. When necessary, UW imposes limitations and requirements on the subrecipient through subaward terms and conditions per Federal Uniform Guidance, Section 200.521, prior to the issuance or renewal of a subaward. UW?s subrecipient monitoring requirements are comprised, at a minimum, of the following: ? Completion of the UW?s entity level comprehensive risk assessment (Certs & Reps, Annual Audit Certification) Subrecipient Monitoring ? Entity Level Entity level monitoring consists of a combination of the following: ? Initial Subrecipient Certification Form completion and assurance by subrecipient?s authorized official ? Annual audit assurance through an annual audit certification form ? Maintenance of a subrecipient profile list, which includes information on the entity?s past audit information and certifications ? Risk assessment carried out at each annual renewal of a subaward
2022-028 The University of Washington did not establish adequate internal controls to ensure payments to contractors and subrecipients for the Global AIDS program were allowable, properly supported and within the period of performance. Assistance Listing Number and Title: 93.067 Global AIDS 93.067 COVID-19 Global AIDS Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: NU2GGH001430; NU2GGH001968; NU2GGH002038; NU2GGH002116; NU2GGH002242; NUGGH002360; NU2GGH002157; NU2GGH002298; NU2GGH002374 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs / Cost Principles Period of Performance Known Questioned Cost Amount: None Background The Global AIDS program is a federal initiative focused on treating and preventing the transmission of HIV/AIDS around the world. The program is authorized by Sections 307 and 317(k)(2) of the Public Health Service Act, the U.S. Leadership Against HIV/AIDS, Tuberculosis, and Malaria Acts of 2003 and 2008, and the U.S. President?s Emergency Plan for AIDS Relief. Since it was established in 2003, the federal government has invested more than $100 billion in the global HIV/AIDS response, providing testing and treatment for millions of people, preventing transmission among affected communities, and supporting numerous countries to achieve HIV epidemic control. The program distributes funding through public and private sector partnerships to reach the populations most vulnerable to HIV/AIDS epidemics. The University of Washington administers this grant for the state through its International Training and Education Center for Health (I-TECH). I-TECH is a center in the University?s Department of Global Health operated by more than 2,000 staff in offices located in Africa, Asia, the Caribbean, Eastern Europe and the United States. In fiscal year 2022, the University spent more than $66 million in federal program funds, about $44 million of which it passed through to subrecipients. To achieve the performance goals of the program, the Seattle headquarters of I-TECH (Seattle HQ) provides funding to subrecipients and contractors. Invoices submitted by contractors directly to Seattle HQ are reviewed and approved for payment by budget managers who have delegated authority from the Principal Investigator. Invoices submitted by subrecipients are reviewed and approved for payment by a Principal Investigator. Principal Investigators are also responsible for monitoring the subrecipient?s technical progress and performance. Seattle HQ also provides funding to country offices operating within the University?s global network. The country offices incur costs associated with furnishing supplies and equipment to address the HIV/AIDS epidemic, as well as staffing resources and acquiring goods and services from contractors to carry out the objectives of the program. Payments made by country offices are approved by Country Directors and Country Representatives as delegated by the University. Under the University?s policies, country offices are reimbursed for locally incurred expenses at least monthly. An invoice, accompanied by a schedule of expenses incurred, is submitted and approved by the Country Director and then by the Director of Finance at Seattle HQ, prior to payment. Country offices also responsible for obtaining and retaining supporting documentation for costs incurred and paid on each project. Monthly, Budget Managers review and approve a Budget Activity Report (BAR) that details the expenses charged to the project for the previous month to ensure accurate posting of already approved expenses. This review is also to determine whether the work performed during the billing period reconciles to costs claimed within the contractor?s invoice so that payment may be authorized. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The University did not have adequate internal controls to ensure payments to contractors and subrecipients of the Global AIDS program were allowable properly supported and within the period of performance. Payments to country offices We used a statistical sampling method to randomly select and examine 58 out of 1,644 transactions for country offices. Of the 58 payments examined, we identified one payment (1.7 percent) that was not approved by the Country Director and the corresponding Budget Activity Report was not approved by the Director of Finance. Payments to contractors We used a statistical sampling method to randomly select and review 58 out of 3,040 payments to contractors. We found: ? Invoices for three payments (5 percent) were not approved by a Budget Manager ? Monthly Budget Activity Reports were not approved for 12 payments (20 percent) Subrecipient reimbursements We used a statistical sampling method to randomly select and review 55 out of 438 payments to subrecipients. We found the assigned Budget Manager did not review and approve the monthly Budget Activity Reports for 52 payments (94 percent). We consider these internal control deficiencies to be a material weakness. This issue was not reported as a finding in the prior audit. Cause of Condition Program management did not require supporting documentation for each payment to be forwarded to and reviewed by headquarters personnel prior to payment authorization. Management also did not monitor the submission of invoices and Budget Activity Reports to ensure they were approved by the responsible Budget Manager, as required. Effect of Condition Without establishing adequate internal controls, the University cannot reasonably ensure it is using federal funds for allowable purposes and that expenditures of federal funds are supported by adequate documentation. Recommendations We recommend the University: ? Improve its internal controls to ensure invoices are properly approved by Principal Investigators, as required ? Improve its internal controls to ensure Budget Mangers review and approve monthly Budget Activity Reports before authorizing payments for projects incurring reimbursement requests ? Ensure it retains supporting documentation sufficient to show costs incurred and paid by the program are allowable, and to demonstrate the required managerial reviews have occurred prior to issuing payment University?s Response In response to the findings for the Global Aids Program, we would like to clarify the following: General Clarification: The draft finding inaccurately represents the role of BARS approvals as part of the internal controls to ensure payments to country offices, contractors and subrecipients are allowable, properly supported and within the period of performance. This is not the role of the BARS review process. Compliance, Budget Manager and PI reviews are the controls that ensure allowability of payments and BARS approvals are after-the-fact validations of accurate posting of already approved expenditures. We provided edits to the Background section to reflect our process. We request in light of this that the description of condition, cause of condition and recommendation sections of this finding be updated accordingly. Payments to country offices I-TECH country offices are not contractors; the offices are an extension of the University of Washington. Your review identified one of fifty-eight samples (1.7%) did not meet the approval requirements set forth in I-TECH?s standard operating procedure. Based on the error percentage, we disagree with this finding. Payments to contractors Payments to contractors have multiple approvals. Upon receipt, individual invoices are approved by the program/budget manager either by signature or email. Invoices are then sent to the I-TECH Accounts Payable Administrator for input to the University?s procurement system, ARIBA, which requires compliance approval from the Accounts Payable Supervisor or other manager, as well as funding approval from the budget manager prior to payment. Approvals of Budget Activity Reports (BARS) are not approval of individual payments to contractors, they are reviews of the monthly expenses posted to the budget and the program manager?s concurrence that the expenses are as expected. The exceptions noted were payments made to country offices instead of contractors. The support for approvals were provided to the State Auditors on April 26, 2023, prior to the completion of fieldwork. We therefore disagree with this finding. We also request that the finding be adjusted to omit the 20% of missing BARS approvals as this is not related to the contractor payments. Subrecipient reimbursements Each subrecipient invoice is reviewed for reasonableness, allowability and allocability by the contracts manager and approved by both budget managers and principal investigators prior to being processed for payment in ARIBA. PI approvals were provided and verified for each subrecipient selection with no omissions noted by the auditors. Approvals of Budget Activity Reports (BARS) are not approval of individual payments to subrecipients, they are after-the-fact reviews of the monthly expenses posted to the budget, intended as documentation of the program manager?s concurrence that the expenses are posted as expected. We acknowledge the instances detailed in the finding where we were unable to produce related BARS approvals for 52 of the transactions; however, we request that the finding be adjusted as these BARS approvals are not related to subrecipient invoice review and approvals. Our record keeping process for BARS approvals was to save the emails in a folder within our Finance Team mailbox. We learned during this review that emails beyond a certain date are deleted but maintained in the MS360 file. We?ve searched for the missing BARS approvals but have not yet been able to locate them. We have since begun saving the approvals to our server to ensure we have access to the data going forward. Auditor?s Remarks The University?s I-TECH Global Operations Manual stipulates that BARs will be generated, reviewed and approved monthly by the Budget Manager and management team. This information was provided to our Office as part of the University?s overall design of internal controls over payments to contractors, subrecipients and country offices. The University responded to our Office on April 20, 2023 adding that ?BAR review is the University?s key post payment control designed to ensure charges are accurately processed, coded and allowable on the budget charged.? We interpret this response to indicate the BAR review process is a monitoring control, and the University asserted on multiple occasions this is a key internal control, which is why we tested it. On January 5, our Office notified University management in writing that the BAR review process would be tested as a key control over the cost principles and period of performance requirements for Global AIDS expenditures. We received no additional inquiry or concerns from University management regarding this internal control until the draft finding was issued on April 14. We provided the University with a final written summary of our fieldwork in this area on April 6, 2023, after fieldwork had concluded. On April 7, the Finance Director responded to our Office in writing confirming they had no further questions or concerns regarding our testing results. It was not until after the University received this finding that additional documentation supporting expenditures tested during the audit were ultimately given to our Office. The basis for this audit finding is the key internal control failure rate of BAR approvals that exceeds our established materiality threshold of five percent, and constitutes a material weakness in internal control, which under the Uniform Guidance is required to be reported as an audit finding in accordance with 2 CFR 200.516 ? Audit findings. We reaffirm our finding and will follow up on the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. The University of Washington?s Policies, Procedures and Guidance (UW Research), GIM 02 ? Acceptance of Sponsored Program Awards and Fiscal Compliance on Sponsored Program Accounts (Budget Numbers), states in part: Responsibilities Principal Investigator ? Supervises expenditure of sponsored program funds and approves sub-recipient invoices (see GIM 8) to assure: o That funds are used only for purposes that directly relate to and benefit the activity supported in the award. o That expenditures are consistent with all special terms, conditions, or limitations that apply to expenditures under the particular grant or contract. o That expenditures do not exceed the total funds authorized for a given period under the grant or contract. GIM 07 ? Sponsored Program Subaward Administration, states in part: Principal Investigator ? Review and approve subaward invoices. GIM 08 ? Subrecipient Monitoring, states in part: Roles & Responsibilities PI / Department Responsibilities Project level monitoring of subrecipient including: o Reviews that expenses are necessary, reasonable, and allocable to the work completed and are aligned with technical progress. o Approve invoices for payment. Subrecipient Monitoring ? Project Level Subrecipient invoices are reviewed and approved in accordance with the requirements of GIM 2 in the manner and frequency stated in the subaward. The University of Washington I-TECH Global Operations Manual (GRef 2.3), Section 2, Finance, Accounting Policy and Procedure Requirements, states in part: In addition to the Fiscal Guidelines set forth in the I-TECH Field Operations Manual, these country specific policies are implemented at I-TECH. 10. Budget Management and Reporting f. Reports that show the variance between the budget plan and the activity for each region and activity code will be generated, reviewed and approved by the budget managers and the Management Team each month.
2022-030 The University of Washington did not have adequate internal controls over and did not comply with federal requirements to ensure subrecipients of the Global AIDS program received required single or program-specific audits, and that it followed up on findings and issued management decisions. Assistance Listing Number and Title: 93.067 Global AIDS 93.067 COVID-19 Global AIDS Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: NU2GGH001430; NU2GGH001968; NU2GGH002038; NU2GGH002116; NU2GGH002242; NUGGH002360; NU2GGH002157; NU2GGH002298; NU2GGH002374 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Subrecipient Monitoring Known Questioned Cost Amount: None Background The Global AIDS program is a federal initiative focused on treating and preventing the transmission of HIV/AIDS around the world. The program is authorized by Sections 307 and 317(k)(2) of the Public Health Service Act, the U.S. Leadership Against HIV/AIDS, Tuberculosis, and Malaria Acts of 2003 and 2008, and the U.S. President?s Emergency Plan for AIDS Relief. Since it was established in 2003, the federal government has invested more than $100 billion in the global HIV/AIDS response, providing testing and treatment for millions of people, preventing transmission among affected communities, and supporting numerous countries to achieve HIV epidemic control. The program distributes funding through public and private sector partnerships to reach the populations most vulnerable to HIV/AIDS epidemics. The University of Washington administers this grant for the state through its International Training and Education Center for Health (I-TECH). I-TECH is a center in the University?s Department of Global Health operated by more than 2,000 staff in offices located in Africa, Asia, the Caribbean, Eastern Europe and the United States. In fiscal year 2022, the University spent more than $66 million in federal program funds, about $44 million of which it passed through to subrecipients. Federal regulations require the University to monitor its subrecipients? activities. This includes verifying that its subrecipients that spend $750,000 or more in federal awards during a fiscal year obtain a single or program-specific audit. For the Global AIDS program, the Centers for Disease Control and Prevention requires foreign subrecipients to submit their audits directly to the federal government and pass-through entity within 30 days after receiving the auditor?s report or nine months after the end of the subrecipient?s audit period, whichever is earlier. Additionally, for the awards it passes onto its subrecipients, the University must follow up and ensure the subrecipients take timely and appropriate corrective action on all deficiencies identified through audits. When a subrecipient receives an audit finding for a University-funded program, federal law requires the University to issue a management decision to the subrecipient within six months of the audit report?s acceptance by the federal government. The management decision must clearly state whether the audit finding is sustained, the reason for the decision, and the actions the subrecipient is expected to take, such as repaying unallowable costs or making financial adjustments. These requirements help ensure subrecipients use federal program funds for authorized purposes and within the provisions of contracts or grant agreements. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The University did not have adequate internal controls over and did not comply with federal requirements to ensure subrecipients of the Global AIDS program received required single or program-specific audits, and that it appropriately followed up on findings and issued management decisions. We found the University did not have adequate internal controls in place to verify whether: ? Subrecipients received required audits, if necessary, and appropriate remedies were taken if audits were not filed ? Management decisions were required to be issued for subrecipients who required a single or program-specific audit We used a nonstatistical sampling method to randomly select and examine seven out of a total population of 21 subrecipients. We found the University did not adequately monitor one subrecipient (14 percent) to ensure it received a required single or program-specific audit. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition Staff in the University?s Office of Sponsored Programs (OSP) used a spreadsheet to track subrecipient certifications and responses, and reviewed annual certifications from the subrecipient to monitor its audit status. However, OSP did not correctly interpret the subrecipient?s response and, therefore, did not require it to provide documentation of a single or program-specific audit. Additionally, management did not review the subrecipient?s federal assistance expenditures to detect that it required an audit and, therefore, also failed to adequately follow up to ensure any reported findings were resolved with appropriate corrective action, if required. Effect of Condition Without establishing adequate internal controls, the University cannot ensure all subrecipients that required a single or program-specific audit received one. Furthermore, the University cannot ensure it is following up on subrecipient audit findings and communicating required management decisions to subrecipients. By failing to ensure subrecipients establish corrective actions and management monitors them for effectiveness where required, the University cannot determine whether subrecipients have sufficiently corrected issues identified in audit findings. Recommendations We recommend the University: ? Follow policies and procedures to ensure subrecipients receive required single or program-specific audits ? Establish and follow effective internal controls to ensure it reviews audit reports for its subrecipients and issues written management decisions, as required ? Ensure subrecipients develop and perform acceptable corrective actions to adequately address all audit recommendations ? Follow up with the subrecipient to ensure the required audit reports are received and reviewed to determine if the subrecipient is required to take corrective action to address audit recommendations ? Issue a written management decision for all applicable audit findings, if necessary University?s Response The University of Washington has established internal controls to carry out a risk assessment per Uniform Guidance, 2 CFR ? 200.332, Requirements for pass-through entities, and our UW Grants Information Memorandum (GIM) 8. This involves using various factors to assess risk. Part of our process to obtain the information needed from each subrecipient is through a certification process. The certification was obtained from the subrecipient, along with additional documentation from the subrecipient, such as an audited financial statement. We made a risk assessment using our standard risk criteria. We did misinterpret the response provided from the subrecipient regarding whether it expended $750,000 or more in federal awards during a fiscal year in order to obtain a single or program-specific audit from this subrecipient. While this was not obtained and reviewed, a risk assessment using our standard criteria was performed with the subrecipient rated as a medium risk, and subject to monitoring throughout the project, per GIM 8. The monitoring at the program level occurred during the period in question. We will be improving our required communications with subrecipients to have clear questions and responses regarding whether the subrecipient expended $750,000 or more in federal awards during the fiscal year in order to obtain a single or program-specific audit, follow up with the subrecipient to ensure the required audit reports are received and reviewed to determine if the subrecipient is required to take corrective action to address audit recommendations, and issue a written management decision for all applicable audit findings, if necessary. Auditor?s Remarks We thank the University for its cooperation and assistance during the audit. Whether the University performed a risk assessment for the subrecipient is not being questioned. The University did not adequately monitor the subrecipient to ensure it detected whether the subrecipient was required to receive a single audit, or program-specific audit in accordance with 2 CFR ?200.332(f). There is no other mechanism for the Federal government to monitor subrecipients of the University and, because a single audit of the subrecipient was not performed, neither the federal grantor nor the University had reasonable assurance of the subrecipient?s compliance with federal award requirements. We reaffirm our finding and will follow up on the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200, Uniform Guidance, establishes the following applicable requirements: Section 200.332 Requirements for pass-through entities, states in part: All pass-through entities must: (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. (3) Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by ? 200.521. (4) The pass-through entity is responsible for resolving audit findings specifically related to the subaward and not responsible for resolving crosscutting findings. If a subrecipient has a current Single Audit report posted in the Federal Audit Clearinghouse and has not otherwise been excluded from receipt of Federal funding (e.g., has been debarred or suspended), the pass-through entity may rely on the subrecipient?s cognizant audit agency or cognizant oversight agency to perform audit follow-up and make management decisions related to cross-cutting findings in accordance with section ? 200.513(a)(3)(vii). Such reliance does not eliminate the responsibility of the pass-through entity to issue subawards that conform to agency and award-specific requirements, to manage risk through ongoing subaward monitoring, and to monitor the status of the findings that are specifically related to the subaward. (f) Verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the subrecipient?s Federal awards expended during the respective fiscal year equaled or exceeded the threshold set for the in ?200.501 Audit requirements. Section 200.339 Remedies for noncompliance, states: If a non-Federal entity fails to comply with the U.S. Constitution, Federal statutes, regulations or the terms and conditions of a Federal award, the Federal awarding agency or pass-through entity may impose additional conditions, as described in ? 200.208. If the Federal awarding agency or pass-through entity determines that noncompliance cannot be remedied by imposing additional conditions, the Federal awarding agency or pass-through entity may take one or more of the following actions, as appropriate in the circumstances: (a) Temporarily withhold cash payments pending correction of the deficiency by the non-Federal entity or more severe enforcement action by the Federal awarding agency or pass-through entity. (b) Disallow (that is, deny both use of funds and any applicable matching credit for) all or part of the cost of the activity or action not in compliance. (c) Wholly or partly suspend or terminate the Federal award. (d) Initiate suspension or debarment proceedings as authorized under 2 CFR part 180 and Federal awarding agency regulations (or in the case of a pass-through entity, recommend such a proceeding be initiated by a Federal awarding agency). (e) Withhold further Federal awards for the project or program. (f) Take other remedies that may be legally available. Section 200.501 Audit requirements, states in part: (a) Audit required. A non-Federal entity that expends $750,000 or more during the non-Federal entity?s fiscal year in Federal awards must have a single or program-specific audit conducted for that year in accordance with the provisions of this part. (b) Single audit. A non-Federal entity that expends $750,000 or more during the non-Federal entity?s fiscal year in Federal awards must have a single audit conducted in accordance with ? 200.514 except when it elects to have a program-specific audit conducted in accordance with paragraph (c) of this section. Section 200.521 Management decision, states in part: (a) General. The management decision must clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action. If the auditee has not completed corrective action, a timetable for follow-up should be given. Prior to issuing the management decision, the Federal agency or pass-through entity may request additional information or documentation from the auditee, including a request for auditor assurance related to the documentation, as a way of mitigating disallowed costs. The management decision should describe any appeal process available to the auditee. While not required, the Federal agency or pass-through entity may also issue a management decision on findings relating to the financial statements which are required to be reported in accordance with GAGAS. (c) Pass-through entity. As provided in ? 200.332(d), the pass-through entity must be responsible for issuing a management decision for audit findings that relate to Federal awards it makes to subrecipients. (d) Time requirements. The Federal awarding agency or pass-through entity responsible for issuing a management decision must do so within six months of acceptance of the audit report by the FAC. The auditee must initiate and proceed with corrective action as rapidly as possible and corrective action should begin no later than upon receipt of the audit report. (e) Reference numbers. Management decisions must include the reference numbers the auditor assigned to each audit finding in accordance with ? 200.516(c). The University of Washington?s Policies, Procedures and Guidance (UW Research), GIM 8 ? Subrecipient Monitoring, states in part: Background Additionally, per the Federal Uniform Guidance, UW must evaluate each subrecipients? risk of noncompliance with federal regulations, include specific terms and conditions in the subaward as necessary, and monitor the activities of the subrecipient through various mechanisms. These mechanisms include: Training and technical assistance to subrecipients, on-site reviews, review of audit results, increased reporting requirements and enforcement action, if necessary. University Policy UW reviews each subrecipient entity according to an entity level comprehensive risk assessment prior to the issuance of a subaward. This risk assessment includes an entity level review of their fiscal systems, past audit activity, and if required, financial statements of the entity as well as the project specific activity proposed and that the required compliance approvals are obtained. When necessary, UW imposes limitations and requirements on the subrecipient through subaward terms and conditions per Federal Uniform Guidance, Section 200.521, prior to the issuance or renewal of a subaward. UW?s subrecipient monitoring requirements are comprised, at a minimum, of the following: ? Completion of the UW?s entity level comprehensive risk assessment (Certs & Reps, Annual Audit Certification) Subrecipient Monitoring ? Entity Level Entity level monitoring consists of a combination of the following: ? Initial Subrecipient Certification Form completion and assurance by subrecipient?s authorized official ? Annual audit assurance through an annual audit certification form ? Maintenance of a subrecipient profile list, which includes information on the entity?s past audit information and certifications ? Risk assessment carried out at each annual renewal of a subaward
2022-028 The University of Washington did not establish adequate internal controls to ensure payments to contractors and subrecipients for the Global AIDS program were allowable, properly supported and within the period of performance. Assistance Listing Number and Title: 93.067 Global AIDS 93.067 COVID-19 Global AIDS Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: NU2GGH001430; NU2GGH001968; NU2GGH002038; NU2GGH002116; NU2GGH002242; NUGGH002360; NU2GGH002157; NU2GGH002298; NU2GGH002374 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs / Cost Principles Period of Performance Known Questioned Cost Amount: None Background The Global AIDS program is a federal initiative focused on treating and preventing the transmission of HIV/AIDS around the world. The program is authorized by Sections 307 and 317(k)(2) of the Public Health Service Act, the U.S. Leadership Against HIV/AIDS, Tuberculosis, and Malaria Acts of 2003 and 2008, and the U.S. President?s Emergency Plan for AIDS Relief. Since it was established in 2003, the federal government has invested more than $100 billion in the global HIV/AIDS response, providing testing and treatment for millions of people, preventing transmission among affected communities, and supporting numerous countries to achieve HIV epidemic control. The program distributes funding through public and private sector partnerships to reach the populations most vulnerable to HIV/AIDS epidemics. The University of Washington administers this grant for the state through its International Training and Education Center for Health (I-TECH). I-TECH is a center in the University?s Department of Global Health operated by more than 2,000 staff in offices located in Africa, Asia, the Caribbean, Eastern Europe and the United States. In fiscal year 2022, the University spent more than $66 million in federal program funds, about $44 million of which it passed through to subrecipients. To achieve the performance goals of the program, the Seattle headquarters of I-TECH (Seattle HQ) provides funding to subrecipients and contractors. Invoices submitted by contractors directly to Seattle HQ are reviewed and approved for payment by budget managers who have delegated authority from the Principal Investigator. Invoices submitted by subrecipients are reviewed and approved for payment by a Principal Investigator. Principal Investigators are also responsible for monitoring the subrecipient?s technical progress and performance. Seattle HQ also provides funding to country offices operating within the University?s global network. The country offices incur costs associated with furnishing supplies and equipment to address the HIV/AIDS epidemic, as well as staffing resources and acquiring goods and services from contractors to carry out the objectives of the program. Payments made by country offices are approved by Country Directors and Country Representatives as delegated by the University. Under the University?s policies, country offices are reimbursed for locally incurred expenses at least monthly. An invoice, accompanied by a schedule of expenses incurred, is submitted and approved by the Country Director and then by the Director of Finance at Seattle HQ, prior to payment. Country offices also responsible for obtaining and retaining supporting documentation for costs incurred and paid on each project. Monthly, Budget Managers review and approve a Budget Activity Report (BAR) that details the expenses charged to the project for the previous month to ensure accurate posting of already approved expenses. This review is also to determine whether the work performed during the billing period reconciles to costs claimed within the contractor?s invoice so that payment may be authorized. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The University did not have adequate internal controls to ensure payments to contractors and subrecipients of the Global AIDS program were allowable properly supported and within the period of performance. Payments to country offices We used a statistical sampling method to randomly select and examine 58 out of 1,644 transactions for country offices. Of the 58 payments examined, we identified one payment (1.7 percent) that was not approved by the Country Director and the corresponding Budget Activity Report was not approved by the Director of Finance. Payments to contractors We used a statistical sampling method to randomly select and review 58 out of 3,040 payments to contractors. We found: ? Invoices for three payments (5 percent) were not approved by a Budget Manager ? Monthly Budget Activity Reports were not approved for 12 payments (20 percent) Subrecipient reimbursements We used a statistical sampling method to randomly select and review 55 out of 438 payments to subrecipients. We found the assigned Budget Manager did not review and approve the monthly Budget Activity Reports for 52 payments (94 percent). We consider these internal control deficiencies to be a material weakness. This issue was not reported as a finding in the prior audit. Cause of Condition Program management did not require supporting documentation for each payment to be forwarded to and reviewed by headquarters personnel prior to payment authorization. Management also did not monitor the submission of invoices and Budget Activity Reports to ensure they were approved by the responsible Budget Manager, as required. Effect of Condition Without establishing adequate internal controls, the University cannot reasonably ensure it is using federal funds for allowable purposes and that expenditures of federal funds are supported by adequate documentation. Recommendations We recommend the University: ? Improve its internal controls to ensure invoices are properly approved by Principal Investigators, as required ? Improve its internal controls to ensure Budget Mangers review and approve monthly Budget Activity Reports before authorizing payments for projects incurring reimbursement requests ? Ensure it retains supporting documentation sufficient to show costs incurred and paid by the program are allowable, and to demonstrate the required managerial reviews have occurred prior to issuing payment University?s Response In response to the findings for the Global Aids Program, we would like to clarify the following: General Clarification: The draft finding inaccurately represents the role of BARS approvals as part of the internal controls to ensure payments to country offices, contractors and subrecipients are allowable, properly supported and within the period of performance. This is not the role of the BARS review process. Compliance, Budget Manager and PI reviews are the controls that ensure allowability of payments and BARS approvals are after-the-fact validations of accurate posting of already approved expenditures. We provided edits to the Background section to reflect our process. We request in light of this that the description of condition, cause of condition and recommendation sections of this finding be updated accordingly. Payments to country offices I-TECH country offices are not contractors; the offices are an extension of the University of Washington. Your review identified one of fifty-eight samples (1.7%) did not meet the approval requirements set forth in I-TECH?s standard operating procedure. Based on the error percentage, we disagree with this finding. Payments to contractors Payments to contractors have multiple approvals. Upon receipt, individual invoices are approved by the program/budget manager either by signature or email. Invoices are then sent to the I-TECH Accounts Payable Administrator for input to the University?s procurement system, ARIBA, which requires compliance approval from the Accounts Payable Supervisor or other manager, as well as funding approval from the budget manager prior to payment. Approvals of Budget Activity Reports (BARS) are not approval of individual payments to contractors, they are reviews of the monthly expenses posted to the budget and the program manager?s concurrence that the expenses are as expected. The exceptions noted were payments made to country offices instead of contractors. The support for approvals were provided to the State Auditors on April 26, 2023, prior to the completion of fieldwork. We therefore disagree with this finding. We also request that the finding be adjusted to omit the 20% of missing BARS approvals as this is not related to the contractor payments. Subrecipient reimbursements Each subrecipient invoice is reviewed for reasonableness, allowability and allocability by the contracts manager and approved by both budget managers and principal investigators prior to being processed for payment in ARIBA. PI approvals were provided and verified for each subrecipient selection with no omissions noted by the auditors. Approvals of Budget Activity Reports (BARS) are not approval of individual payments to subrecipients, they are after-the-fact reviews of the monthly expenses posted to the budget, intended as documentation of the program manager?s concurrence that the expenses are posted as expected. We acknowledge the instances detailed in the finding where we were unable to produce related BARS approvals for 52 of the transactions; however, we request that the finding be adjusted as these BARS approvals are not related to subrecipient invoice review and approvals. Our record keeping process for BARS approvals was to save the emails in a folder within our Finance Team mailbox. We learned during this review that emails beyond a certain date are deleted but maintained in the MS360 file. We?ve searched for the missing BARS approvals but have not yet been able to locate them. We have since begun saving the approvals to our server to ensure we have access to the data going forward. Auditor?s Remarks The University?s I-TECH Global Operations Manual stipulates that BARs will be generated, reviewed and approved monthly by the Budget Manager and management team. This information was provided to our Office as part of the University?s overall design of internal controls over payments to contractors, subrecipients and country offices. The University responded to our Office on April 20, 2023 adding that ?BAR review is the University?s key post payment control designed to ensure charges are accurately processed, coded and allowable on the budget charged.? We interpret this response to indicate the BAR review process is a monitoring control, and the University asserted on multiple occasions this is a key internal control, which is why we tested it. On January 5, our Office notified University management in writing that the BAR review process would be tested as a key control over the cost principles and period of performance requirements for Global AIDS expenditures. We received no additional inquiry or concerns from University management regarding this internal control until the draft finding was issued on April 14. We provided the University with a final written summary of our fieldwork in this area on April 6, 2023, after fieldwork had concluded. On April 7, the Finance Director responded to our Office in writing confirming they had no further questions or concerns regarding our testing results. It was not until after the University received this finding that additional documentation supporting expenditures tested during the audit were ultimately given to our Office. The basis for this audit finding is the key internal control failure rate of BAR approvals that exceeds our established materiality threshold of five percent, and constitutes a material weakness in internal control, which under the Uniform Guidance is required to be reported as an audit finding in accordance with 2 CFR 200.516 ? Audit findings. We reaffirm our finding and will follow up on the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. The University of Washington?s Policies, Procedures and Guidance (UW Research), GIM 02 ? Acceptance of Sponsored Program Awards and Fiscal Compliance on Sponsored Program Accounts (Budget Numbers), states in part: Responsibilities Principal Investigator ? Supervises expenditure of sponsored program funds and approves sub-recipient invoices (see GIM 8) to assure: o That funds are used only for purposes that directly relate to and benefit the activity supported in the award. o That expenditures are consistent with all special terms, conditions, or limitations that apply to expenditures under the particular grant or contract. o That expenditures do not exceed the total funds authorized for a given period under the grant or contract. GIM 07 ? Sponsored Program Subaward Administration, states in part: Principal Investigator ? Review and approve subaward invoices. GIM 08 ? Subrecipient Monitoring, states in part: Roles & Responsibilities PI / Department Responsibilities Project level monitoring of subrecipient including: o Reviews that expenses are necessary, reasonable, and allocable to the work completed and are aligned with technical progress. o Approve invoices for payment. Subrecipient Monitoring ? Project Level Subrecipient invoices are reviewed and approved in accordance with the requirements of GIM 2 in the manner and frequency stated in the subaward. The University of Washington I-TECH Global Operations Manual (GRef 2.3), Section 2, Finance, Accounting Policy and Procedure Requirements, states in part: In addition to the Fiscal Guidelines set forth in the I-TECH Field Operations Manual, these country specific policies are implemented at I-TECH. 10. Budget Management and Reporting f. Reports that show the variance between the budget plan and the activity for each region and activity code will be generated, reviewed and approved by the budget managers and the Management Team each month.
2022-030 The University of Washington did not have adequate internal controls over and did not comply with federal requirements to ensure subrecipients of the Global AIDS program received required single or program-specific audits, and that it followed up on findings and issued management decisions. Assistance Listing Number and Title: 93.067 Global AIDS 93.067 COVID-19 Global AIDS Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: NU2GGH001430; NU2GGH001968; NU2GGH002038; NU2GGH002116; NU2GGH002242; NUGGH002360; NU2GGH002157; NU2GGH002298; NU2GGH002374 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Subrecipient Monitoring Known Questioned Cost Amount: None Background The Global AIDS program is a federal initiative focused on treating and preventing the transmission of HIV/AIDS around the world. The program is authorized by Sections 307 and 317(k)(2) of the Public Health Service Act, the U.S. Leadership Against HIV/AIDS, Tuberculosis, and Malaria Acts of 2003 and 2008, and the U.S. President?s Emergency Plan for AIDS Relief. Since it was established in 2003, the federal government has invested more than $100 billion in the global HIV/AIDS response, providing testing and treatment for millions of people, preventing transmission among affected communities, and supporting numerous countries to achieve HIV epidemic control. The program distributes funding through public and private sector partnerships to reach the populations most vulnerable to HIV/AIDS epidemics. The University of Washington administers this grant for the state through its International Training and Education Center for Health (I-TECH). I-TECH is a center in the University?s Department of Global Health operated by more than 2,000 staff in offices located in Africa, Asia, the Caribbean, Eastern Europe and the United States. In fiscal year 2022, the University spent more than $66 million in federal program funds, about $44 million of which it passed through to subrecipients. Federal regulations require the University to monitor its subrecipients? activities. This includes verifying that its subrecipients that spend $750,000 or more in federal awards during a fiscal year obtain a single or program-specific audit. For the Global AIDS program, the Centers for Disease Control and Prevention requires foreign subrecipients to submit their audits directly to the federal government and pass-through entity within 30 days after receiving the auditor?s report or nine months after the end of the subrecipient?s audit period, whichever is earlier. Additionally, for the awards it passes onto its subrecipients, the University must follow up and ensure the subrecipients take timely and appropriate corrective action on all deficiencies identified through audits. When a subrecipient receives an audit finding for a University-funded program, federal law requires the University to issue a management decision to the subrecipient within six months of the audit report?s acceptance by the federal government. The management decision must clearly state whether the audit finding is sustained, the reason for the decision, and the actions the subrecipient is expected to take, such as repaying unallowable costs or making financial adjustments. These requirements help ensure subrecipients use federal program funds for authorized purposes and within the provisions of contracts or grant agreements. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The University did not have adequate internal controls over and did not comply with federal requirements to ensure subrecipients of the Global AIDS program received required single or program-specific audits, and that it appropriately followed up on findings and issued management decisions. We found the University did not have adequate internal controls in place to verify whether: ? Subrecipients received required audits, if necessary, and appropriate remedies were taken if audits were not filed ? Management decisions were required to be issued for subrecipients who required a single or program-specific audit We used a nonstatistical sampling method to randomly select and examine seven out of a total population of 21 subrecipients. We found the University did not adequately monitor one subrecipient (14 percent) to ensure it received a required single or program-specific audit. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition Staff in the University?s Office of Sponsored Programs (OSP) used a spreadsheet to track subrecipient certifications and responses, and reviewed annual certifications from the subrecipient to monitor its audit status. However, OSP did not correctly interpret the subrecipient?s response and, therefore, did not require it to provide documentation of a single or program-specific audit. Additionally, management did not review the subrecipient?s federal assistance expenditures to detect that it required an audit and, therefore, also failed to adequately follow up to ensure any reported findings were resolved with appropriate corrective action, if required. Effect of Condition Without establishing adequate internal controls, the University cannot ensure all subrecipients that required a single or program-specific audit received one. Furthermore, the University cannot ensure it is following up on subrecipient audit findings and communicating required management decisions to subrecipients. By failing to ensure subrecipients establish corrective actions and management monitors them for effectiveness where required, the University cannot determine whether subrecipients have sufficiently corrected issues identified in audit findings. Recommendations We recommend the University: ? Follow policies and procedures to ensure subrecipients receive required single or program-specific audits ? Establish and follow effective internal controls to ensure it reviews audit reports for its subrecipients and issues written management decisions, as required ? Ensure subrecipients develop and perform acceptable corrective actions to adequately address all audit recommendations ? Follow up with the subrecipient to ensure the required audit reports are received and reviewed to determine if the subrecipient is required to take corrective action to address audit recommendations ? Issue a written management decision for all applicable audit findings, if necessary University?s Response The University of Washington has established internal controls to carry out a risk assessment per Uniform Guidance, 2 CFR ? 200.332, Requirements for pass-through entities, and our UW Grants Information Memorandum (GIM) 8. This involves using various factors to assess risk. Part of our process to obtain the information needed from each subrecipient is through a certification process. The certification was obtained from the subrecipient, along with additional documentation from the subrecipient, such as an audited financial statement. We made a risk assessment using our standard risk criteria. We did misinterpret the response provided from the subrecipient regarding whether it expended $750,000 or more in federal awards during a fiscal year in order to obtain a single or program-specific audit from this subrecipient. While this was not obtained and reviewed, a risk assessment using our standard criteria was performed with the subrecipient rated as a medium risk, and subject to monitoring throughout the project, per GIM 8. The monitoring at the program level occurred during the period in question. We will be improving our required communications with subrecipients to have clear questions and responses regarding whether the subrecipient expended $750,000 or more in federal awards during the fiscal year in order to obtain a single or program-specific audit, follow up with the subrecipient to ensure the required audit reports are received and reviewed to determine if the subrecipient is required to take corrective action to address audit recommendations, and issue a written management decision for all applicable audit findings, if necessary. Auditor?s Remarks We thank the University for its cooperation and assistance during the audit. Whether the University performed a risk assessment for the subrecipient is not being questioned. The University did not adequately monitor the subrecipient to ensure it detected whether the subrecipient was required to receive a single audit, or program-specific audit in accordance with 2 CFR ?200.332(f). There is no other mechanism for the Federal government to monitor subrecipients of the University and, because a single audit of the subrecipient was not performed, neither the federal grantor nor the University had reasonable assurance of the subrecipient?s compliance with federal award requirements. We reaffirm our finding and will follow up on the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200, Uniform Guidance, establishes the following applicable requirements: Section 200.332 Requirements for pass-through entities, states in part: All pass-through entities must: (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. (3) Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by ? 200.521. (4) The pass-through entity is responsible for resolving audit findings specifically related to the subaward and not responsible for resolving crosscutting findings. If a subrecipient has a current Single Audit report posted in the Federal Audit Clearinghouse and has not otherwise been excluded from receipt of Federal funding (e.g., has been debarred or suspended), the pass-through entity may rely on the subrecipient?s cognizant audit agency or cognizant oversight agency to perform audit follow-up and make management decisions related to cross-cutting findings in accordance with section ? 200.513(a)(3)(vii). Such reliance does not eliminate the responsibility of the pass-through entity to issue subawards that conform to agency and award-specific requirements, to manage risk through ongoing subaward monitoring, and to monitor the status of the findings that are specifically related to the subaward. (f) Verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the subrecipient?s Federal awards expended during the respective fiscal year equaled or exceeded the threshold set for the in ?200.501 Audit requirements. Section 200.339 Remedies for noncompliance, states: If a non-Federal entity fails to comply with the U.S. Constitution, Federal statutes, regulations or the terms and conditions of a Federal award, the Federal awarding agency or pass-through entity may impose additional conditions, as described in ? 200.208. If the Federal awarding agency or pass-through entity determines that noncompliance cannot be remedied by imposing additional conditions, the Federal awarding agency or pass-through entity may take one or more of the following actions, as appropriate in the circumstances: (a) Temporarily withhold cash payments pending correction of the deficiency by the non-Federal entity or more severe enforcement action by the Federal awarding agency or pass-through entity. (b) Disallow (that is, deny both use of funds and any applicable matching credit for) all or part of the cost of the activity or action not in compliance. (c) Wholly or partly suspend or terminate the Federal award. (d) Initiate suspension or debarment proceedings as authorized under 2 CFR part 180 and Federal awarding agency regulations (or in the case of a pass-through entity, recommend such a proceeding be initiated by a Federal awarding agency). (e) Withhold further Federal awards for the project or program. (f) Take other remedies that may be legally available. Section 200.501 Audit requirements, states in part: (a) Audit required. A non-Federal entity that expends $750,000 or more during the non-Federal entity?s fiscal year in Federal awards must have a single or program-specific audit conducted for that year in accordance with the provisions of this part. (b) Single audit. A non-Federal entity that expends $750,000 or more during the non-Federal entity?s fiscal year in Federal awards must have a single audit conducted in accordance with ? 200.514 except when it elects to have a program-specific audit conducted in accordance with paragraph (c) of this section. Section 200.521 Management decision, states in part: (a) General. The management decision must clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action. If the auditee has not completed corrective action, a timetable for follow-up should be given. Prior to issuing the management decision, the Federal agency or pass-through entity may request additional information or documentation from the auditee, including a request for auditor assurance related to the documentation, as a way of mitigating disallowed costs. The management decision should describe any appeal process available to the auditee. While not required, the Federal agency or pass-through entity may also issue a management decision on findings relating to the financial statements which are required to be reported in accordance with GAGAS. (c) Pass-through entity. As provided in ? 200.332(d), the pass-through entity must be responsible for issuing a management decision for audit findings that relate to Federal awards it makes to subrecipients. (d) Time requirements. The Federal awarding agency or pass-through entity responsible for issuing a management decision must do so within six months of acceptance of the audit report by the FAC. The auditee must initiate and proceed with corrective action as rapidly as possible and corrective action should begin no later than upon receipt of the audit report. (e) Reference numbers. Management decisions must include the reference numbers the auditor assigned to each audit finding in accordance with ? 200.516(c). The University of Washington?s Policies, Procedures and Guidance (UW Research), GIM 8 ? Subrecipient Monitoring, states in part: Background Additionally, per the Federal Uniform Guidance, UW must evaluate each subrecipients? risk of noncompliance with federal regulations, include specific terms and conditions in the subaward as necessary, and monitor the activities of the subrecipient through various mechanisms. These mechanisms include: Training and technical assistance to subrecipients, on-site reviews, review of audit results, increased reporting requirements and enforcement action, if necessary. University Policy UW reviews each subrecipient entity according to an entity level comprehensive risk assessment prior to the issuance of a subaward. This risk assessment includes an entity level review of their fiscal systems, past audit activity, and if required, financial statements of the entity as well as the project specific activity proposed and that the required compliance approvals are obtained. When necessary, UW imposes limitations and requirements on the subrecipient through subaward terms and conditions per Federal Uniform Guidance, Section 200.521, prior to the issuance or renewal of a subaward. UW?s subrecipient monitoring requirements are comprised, at a minimum, of the following: ? Completion of the UW?s entity level comprehensive risk assessment (Certs & Reps, Annual Audit Certification) Subrecipient Monitoring ? Entity Level Entity level monitoring consists of a combination of the following: ? Initial Subrecipient Certification Form completion and assurance by subrecipient?s authorized official ? Annual audit assurance through an annual audit certification form ? Maintenance of a subrecipient profile list, which includes information on the entity?s past audit information and certifications ? Risk assessment carried out at each annual renewal of a subaward
2022-028 The University of Washington did not establish adequate internal controls to ensure payments to contractors and subrecipients for the Global AIDS program were allowable, properly supported and within the period of performance. Assistance Listing Number and Title: 93.067 Global AIDS 93.067 COVID-19 Global AIDS Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: NU2GGH001430; NU2GGH001968; NU2GGH002038; NU2GGH002116; NU2GGH002242; NUGGH002360; NU2GGH002157; NU2GGH002298; NU2GGH002374 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs / Cost Principles Period of Performance Known Questioned Cost Amount: None Background The Global AIDS program is a federal initiative focused on treating and preventing the transmission of HIV/AIDS around the world. The program is authorized by Sections 307 and 317(k)(2) of the Public Health Service Act, the U.S. Leadership Against HIV/AIDS, Tuberculosis, and Malaria Acts of 2003 and 2008, and the U.S. President?s Emergency Plan for AIDS Relief. Since it was established in 2003, the federal government has invested more than $100 billion in the global HIV/AIDS response, providing testing and treatment for millions of people, preventing transmission among affected communities, and supporting numerous countries to achieve HIV epidemic control. The program distributes funding through public and private sector partnerships to reach the populations most vulnerable to HIV/AIDS epidemics. The University of Washington administers this grant for the state through its International Training and Education Center for Health (I-TECH). I-TECH is a center in the University?s Department of Global Health operated by more than 2,000 staff in offices located in Africa, Asia, the Caribbean, Eastern Europe and the United States. In fiscal year 2022, the University spent more than $66 million in federal program funds, about $44 million of which it passed through to subrecipients. To achieve the performance goals of the program, the Seattle headquarters of I-TECH (Seattle HQ) provides funding to subrecipients and contractors. Invoices submitted by contractors directly to Seattle HQ are reviewed and approved for payment by budget managers who have delegated authority from the Principal Investigator. Invoices submitted by subrecipients are reviewed and approved for payment by a Principal Investigator. Principal Investigators are also responsible for monitoring the subrecipient?s technical progress and performance. Seattle HQ also provides funding to country offices operating within the University?s global network. The country offices incur costs associated with furnishing supplies and equipment to address the HIV/AIDS epidemic, as well as staffing resources and acquiring goods and services from contractors to carry out the objectives of the program. Payments made by country offices are approved by Country Directors and Country Representatives as delegated by the University. Under the University?s policies, country offices are reimbursed for locally incurred expenses at least monthly. An invoice, accompanied by a schedule of expenses incurred, is submitted and approved by the Country Director and then by the Director of Finance at Seattle HQ, prior to payment. Country offices also responsible for obtaining and retaining supporting documentation for costs incurred and paid on each project. Monthly, Budget Managers review and approve a Budget Activity Report (BAR) that details the expenses charged to the project for the previous month to ensure accurate posting of already approved expenses. This review is also to determine whether the work performed during the billing period reconciles to costs claimed within the contractor?s invoice so that payment may be authorized. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The University did not have adequate internal controls to ensure payments to contractors and subrecipients of the Global AIDS program were allowable properly supported and within the period of performance. Payments to country offices We used a statistical sampling method to randomly select and examine 58 out of 1,644 transactions for country offices. Of the 58 payments examined, we identified one payment (1.7 percent) that was not approved by the Country Director and the corresponding Budget Activity Report was not approved by the Director of Finance. Payments to contractors We used a statistical sampling method to randomly select and review 58 out of 3,040 payments to contractors. We found: ? Invoices for three payments (5 percent) were not approved by a Budget Manager ? Monthly Budget Activity Reports were not approved for 12 payments (20 percent) Subrecipient reimbursements We used a statistical sampling method to randomly select and review 55 out of 438 payments to subrecipients. We found the assigned Budget Manager did not review and approve the monthly Budget Activity Reports for 52 payments (94 percent). We consider these internal control deficiencies to be a material weakness. This issue was not reported as a finding in the prior audit. Cause of Condition Program management did not require supporting documentation for each payment to be forwarded to and reviewed by headquarters personnel prior to payment authorization. Management also did not monitor the submission of invoices and Budget Activity Reports to ensure they were approved by the responsible Budget Manager, as required. Effect of Condition Without establishing adequate internal controls, the University cannot reasonably ensure it is using federal funds for allowable purposes and that expenditures of federal funds are supported by adequate documentation. Recommendations We recommend the University: ? Improve its internal controls to ensure invoices are properly approved by Principal Investigators, as required ? Improve its internal controls to ensure Budget Mangers review and approve monthly Budget Activity Reports before authorizing payments for projects incurring reimbursement requests ? Ensure it retains supporting documentation sufficient to show costs incurred and paid by the program are allowable, and to demonstrate the required managerial reviews have occurred prior to issuing payment University?s Response In response to the findings for the Global Aids Program, we would like to clarify the following: General Clarification: The draft finding inaccurately represents the role of BARS approvals as part of the internal controls to ensure payments to country offices, contractors and subrecipients are allowable, properly supported and within the period of performance. This is not the role of the BARS review process. Compliance, Budget Manager and PI reviews are the controls that ensure allowability of payments and BARS approvals are after-the-fact validations of accurate posting of already approved expenditures. We provided edits to the Background section to reflect our process. We request in light of this that the description of condition, cause of condition and recommendation sections of this finding be updated accordingly. Payments to country offices I-TECH country offices are not contractors; the offices are an extension of the University of Washington. Your review identified one of fifty-eight samples (1.7%) did not meet the approval requirements set forth in I-TECH?s standard operating procedure. Based on the error percentage, we disagree with this finding. Payments to contractors Payments to contractors have multiple approvals. Upon receipt, individual invoices are approved by the program/budget manager either by signature or email. Invoices are then sent to the I-TECH Accounts Payable Administrator for input to the University?s procurement system, ARIBA, which requires compliance approval from the Accounts Payable Supervisor or other manager, as well as funding approval from the budget manager prior to payment. Approvals of Budget Activity Reports (BARS) are not approval of individual payments to contractors, they are reviews of the monthly expenses posted to the budget and the program manager?s concurrence that the expenses are as expected. The exceptions noted were payments made to country offices instead of contractors. The support for approvals were provided to the State Auditors on April 26, 2023, prior to the completion of fieldwork. We therefore disagree with this finding. We also request that the finding be adjusted to omit the 20% of missing BARS approvals as this is not related to the contractor payments. Subrecipient reimbursements Each subrecipient invoice is reviewed for reasonableness, allowability and allocability by the contracts manager and approved by both budget managers and principal investigators prior to being processed for payment in ARIBA. PI approvals were provided and verified for each subrecipient selection with no omissions noted by the auditors. Approvals of Budget Activity Reports (BARS) are not approval of individual payments to subrecipients, they are after-the-fact reviews of the monthly expenses posted to the budget, intended as documentation of the program manager?s concurrence that the expenses are posted as expected. We acknowledge the instances detailed in the finding where we were unable to produce related BARS approvals for 52 of the transactions; however, we request that the finding be adjusted as these BARS approvals are not related to subrecipient invoice review and approvals. Our record keeping process for BARS approvals was to save the emails in a folder within our Finance Team mailbox. We learned during this review that emails beyond a certain date are deleted but maintained in the MS360 file. We?ve searched for the missing BARS approvals but have not yet been able to locate them. We have since begun saving the approvals to our server to ensure we have access to the data going forward. Auditor?s Remarks The University?s I-TECH Global Operations Manual stipulates that BARs will be generated, reviewed and approved monthly by the Budget Manager and management team. This information was provided to our Office as part of the University?s overall design of internal controls over payments to contractors, subrecipients and country offices. The University responded to our Office on April 20, 2023 adding that ?BAR review is the University?s key post payment control designed to ensure charges are accurately processed, coded and allowable on the budget charged.? We interpret this response to indicate the BAR review process is a monitoring control, and the University asserted on multiple occasions this is a key internal control, which is why we tested it. On January 5, our Office notified University management in writing that the BAR review process would be tested as a key control over the cost principles and period of performance requirements for Global AIDS expenditures. We received no additional inquiry or concerns from University management regarding this internal control until the draft finding was issued on April 14. We provided the University with a final written summary of our fieldwork in this area on April 6, 2023, after fieldwork had concluded. On April 7, the Finance Director responded to our Office in writing confirming they had no further questions or concerns regarding our testing results. It was not until after the University received this finding that additional documentation supporting expenditures tested during the audit were ultimately given to our Office. The basis for this audit finding is the key internal control failure rate of BAR approvals that exceeds our established materiality threshold of five percent, and constitutes a material weakness in internal control, which under the Uniform Guidance is required to be reported as an audit finding in accordance with 2 CFR 200.516 ? Audit findings. We reaffirm our finding and will follow up on the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. The University of Washington?s Policies, Procedures and Guidance (UW Research), GIM 02 ? Acceptance of Sponsored Program Awards and Fiscal Compliance on Sponsored Program Accounts (Budget Numbers), states in part: Responsibilities Principal Investigator ? Supervises expenditure of sponsored program funds and approves sub-recipient invoices (see GIM 8) to assure: o That funds are used only for purposes that directly relate to and benefit the activity supported in the award. o That expenditures are consistent with all special terms, conditions, or limitations that apply to expenditures under the particular grant or contract. o That expenditures do not exceed the total funds authorized for a given period under the grant or contract. GIM 07 ? Sponsored Program Subaward Administration, states in part: Principal Investigator ? Review and approve subaward invoices. GIM 08 ? Subrecipient Monitoring, states in part: Roles & Responsibilities PI / Department Responsibilities Project level monitoring of subrecipient including: o Reviews that expenses are necessary, reasonable, and allocable to the work completed and are aligned with technical progress. o Approve invoices for payment. Subrecipient Monitoring ? Project Level Subrecipient invoices are reviewed and approved in accordance with the requirements of GIM 2 in the manner and frequency stated in the subaward. The University of Washington I-TECH Global Operations Manual (GRef 2.3), Section 2, Finance, Accounting Policy and Procedure Requirements, states in part: In addition to the Fiscal Guidelines set forth in the I-TECH Field Operations Manual, these country specific policies are implemented at I-TECH. 10. Budget Management and Reporting f. Reports that show the variance between the budget plan and the activity for each region and activity code will be generated, reviewed and approved by the budget managers and the Management Team each month.
2022-030 The University of Washington did not have adequate internal controls over and did not comply with federal requirements to ensure subrecipients of the Global AIDS program received required single or program-specific audits, and that it followed up on findings and issued management decisions. Assistance Listing Number and Title: 93.067 Global AIDS 93.067 COVID-19 Global AIDS Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: NU2GGH001430; NU2GGH001968; NU2GGH002038; NU2GGH002116; NU2GGH002242; NUGGH002360; NU2GGH002157; NU2GGH002298; NU2GGH002374 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Subrecipient Monitoring Known Questioned Cost Amount: None Background The Global AIDS program is a federal initiative focused on treating and preventing the transmission of HIV/AIDS around the world. The program is authorized by Sections 307 and 317(k)(2) of the Public Health Service Act, the U.S. Leadership Against HIV/AIDS, Tuberculosis, and Malaria Acts of 2003 and 2008, and the U.S. President?s Emergency Plan for AIDS Relief. Since it was established in 2003, the federal government has invested more than $100 billion in the global HIV/AIDS response, providing testing and treatment for millions of people, preventing transmission among affected communities, and supporting numerous countries to achieve HIV epidemic control. The program distributes funding through public and private sector partnerships to reach the populations most vulnerable to HIV/AIDS epidemics. The University of Washington administers this grant for the state through its International Training and Education Center for Health (I-TECH). I-TECH is a center in the University?s Department of Global Health operated by more than 2,000 staff in offices located in Africa, Asia, the Caribbean, Eastern Europe and the United States. In fiscal year 2022, the University spent more than $66 million in federal program funds, about $44 million of which it passed through to subrecipients. Federal regulations require the University to monitor its subrecipients? activities. This includes verifying that its subrecipients that spend $750,000 or more in federal awards during a fiscal year obtain a single or program-specific audit. For the Global AIDS program, the Centers for Disease Control and Prevention requires foreign subrecipients to submit their audits directly to the federal government and pass-through entity within 30 days after receiving the auditor?s report or nine months after the end of the subrecipient?s audit period, whichever is earlier. Additionally, for the awards it passes onto its subrecipients, the University must follow up and ensure the subrecipients take timely and appropriate corrective action on all deficiencies identified through audits. When a subrecipient receives an audit finding for a University-funded program, federal law requires the University to issue a management decision to the subrecipient within six months of the audit report?s acceptance by the federal government. The management decision must clearly state whether the audit finding is sustained, the reason for the decision, and the actions the subrecipient is expected to take, such as repaying unallowable costs or making financial adjustments. These requirements help ensure subrecipients use federal program funds for authorized purposes and within the provisions of contracts or grant agreements. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The University did not have adequate internal controls over and did not comply with federal requirements to ensure subrecipients of the Global AIDS program received required single or program-specific audits, and that it appropriately followed up on findings and issued management decisions. We found the University did not have adequate internal controls in place to verify whether: ? Subrecipients received required audits, if necessary, and appropriate remedies were taken if audits were not filed ? Management decisions were required to be issued for subrecipients who required a single or program-specific audit We used a nonstatistical sampling method to randomly select and examine seven out of a total population of 21 subrecipients. We found the University did not adequately monitor one subrecipient (14 percent) to ensure it received a required single or program-specific audit. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition Staff in the University?s Office of Sponsored Programs (OSP) used a spreadsheet to track subrecipient certifications and responses, and reviewed annual certifications from the subrecipient to monitor its audit status. However, OSP did not correctly interpret the subrecipient?s response and, therefore, did not require it to provide documentation of a single or program-specific audit. Additionally, management did not review the subrecipient?s federal assistance expenditures to detect that it required an audit and, therefore, also failed to adequately follow up to ensure any reported findings were resolved with appropriate corrective action, if required. Effect of Condition Without establishing adequate internal controls, the University cannot ensure all subrecipients that required a single or program-specific audit received one. Furthermore, the University cannot ensure it is following up on subrecipient audit findings and communicating required management decisions to subrecipients. By failing to ensure subrecipients establish corrective actions and management monitors them for effectiveness where required, the University cannot determine whether subrecipients have sufficiently corrected issues identified in audit findings. Recommendations We recommend the University: ? Follow policies and procedures to ensure subrecipients receive required single or program-specific audits ? Establish and follow effective internal controls to ensure it reviews audit reports for its subrecipients and issues written management decisions, as required ? Ensure subrecipients develop and perform acceptable corrective actions to adequately address all audit recommendations ? Follow up with the subrecipient to ensure the required audit reports are received and reviewed to determine if the subrecipient is required to take corrective action to address audit recommendations ? Issue a written management decision for all applicable audit findings, if necessary University?s Response The University of Washington has established internal controls to carry out a risk assessment per Uniform Guidance, 2 CFR ? 200.332, Requirements for pass-through entities, and our UW Grants Information Memorandum (GIM) 8. This involves using various factors to assess risk. Part of our process to obtain the information needed from each subrecipient is through a certification process. The certification was obtained from the subrecipient, along with additional documentation from the subrecipient, such as an audited financial statement. We made a risk assessment using our standard risk criteria. We did misinterpret the response provided from the subrecipient regarding whether it expended $750,000 or more in federal awards during a fiscal year in order to obtain a single or program-specific audit from this subrecipient. While this was not obtained and reviewed, a risk assessment using our standard criteria was performed with the subrecipient rated as a medium risk, and subject to monitoring throughout the project, per GIM 8. The monitoring at the program level occurred during the period in question. We will be improving our required communications with subrecipients to have clear questions and responses regarding whether the subrecipient expended $750,000 or more in federal awards during the fiscal year in order to obtain a single or program-specific audit, follow up with the subrecipient to ensure the required audit reports are received and reviewed to determine if the subrecipient is required to take corrective action to address audit recommendations, and issue a written management decision for all applicable audit findings, if necessary. Auditor?s Remarks We thank the University for its cooperation and assistance during the audit. Whether the University performed a risk assessment for the subrecipient is not being questioned. The University did not adequately monitor the subrecipient to ensure it detected whether the subrecipient was required to receive a single audit, or program-specific audit in accordance with 2 CFR ?200.332(f). There is no other mechanism for the Federal government to monitor subrecipients of the University and, because a single audit of the subrecipient was not performed, neither the federal grantor nor the University had reasonable assurance of the subrecipient?s compliance with federal award requirements. We reaffirm our finding and will follow up on the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200, Uniform Guidance, establishes the following applicable requirements: Section 200.332 Requirements for pass-through entities, states in part: All pass-through entities must: (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. (3) Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by ? 200.521. (4) The pass-through entity is responsible for resolving audit findings specifically related to the subaward and not responsible for resolving crosscutting findings. If a subrecipient has a current Single Audit report posted in the Federal Audit Clearinghouse and has not otherwise been excluded from receipt of Federal funding (e.g., has been debarred or suspended), the pass-through entity may rely on the subrecipient?s cognizant audit agency or cognizant oversight agency to perform audit follow-up and make management decisions related to cross-cutting findings in accordance with section ? 200.513(a)(3)(vii). Such reliance does not eliminate the responsibility of the pass-through entity to issue subawards that conform to agency and award-specific requirements, to manage risk through ongoing subaward monitoring, and to monitor the status of the findings that are specifically related to the subaward. (f) Verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the subrecipient?s Federal awards expended during the respective fiscal year equaled or exceeded the threshold set for the in ?200.501 Audit requirements. Section 200.339 Remedies for noncompliance, states: If a non-Federal entity fails to comply with the U.S. Constitution, Federal statutes, regulations or the terms and conditions of a Federal award, the Federal awarding agency or pass-through entity may impose additional conditions, as described in ? 200.208. If the Federal awarding agency or pass-through entity determines that noncompliance cannot be remedied by imposing additional conditions, the Federal awarding agency or pass-through entity may take one or more of the following actions, as appropriate in the circumstances: (a) Temporarily withhold cash payments pending correction of the deficiency by the non-Federal entity or more severe enforcement action by the Federal awarding agency or pass-through entity. (b) Disallow (that is, deny both use of funds and any applicable matching credit for) all or part of the cost of the activity or action not in compliance. (c) Wholly or partly suspend or terminate the Federal award. (d) Initiate suspension or debarment proceedings as authorized under 2 CFR part 180 and Federal awarding agency regulations (or in the case of a pass-through entity, recommend such a proceeding be initiated by a Federal awarding agency). (e) Withhold further Federal awards for the project or program. (f) Take other remedies that may be legally available. Section 200.501 Audit requirements, states in part: (a) Audit required. A non-Federal entity that expends $750,000 or more during the non-Federal entity?s fiscal year in Federal awards must have a single or program-specific audit conducted for that year in accordance with the provisions of this part. (b) Single audit. A non-Federal entity that expends $750,000 or more during the non-Federal entity?s fiscal year in Federal awards must have a single audit conducted in accordance with ? 200.514 except when it elects to have a program-specific audit conducted in accordance with paragraph (c) of this section. Section 200.521 Management decision, states in part: (a) General. The management decision must clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action. If the auditee has not completed corrective action, a timetable for follow-up should be given. Prior to issuing the management decision, the Federal agency or pass-through entity may request additional information or documentation from the auditee, including a request for auditor assurance related to the documentation, as a way of mitigating disallowed costs. The management decision should describe any appeal process available to the auditee. While not required, the Federal agency or pass-through entity may also issue a management decision on findings relating to the financial statements which are required to be reported in accordance with GAGAS. (c) Pass-through entity. As provided in ? 200.332(d), the pass-through entity must be responsible for issuing a management decision for audit findings that relate to Federal awards it makes to subrecipients. (d) Time requirements. The Federal awarding agency or pass-through entity responsible for issuing a management decision must do so within six months of acceptance of the audit report by the FAC. The auditee must initiate and proceed with corrective action as rapidly as possible and corrective action should begin no later than upon receipt of the audit report. (e) Reference numbers. Management decisions must include the reference numbers the auditor assigned to each audit finding in accordance with ? 200.516(c). The University of Washington?s Policies, Procedures and Guidance (UW Research), GIM 8 ? Subrecipient Monitoring, states in part: Background Additionally, per the Federal Uniform Guidance, UW must evaluate each subrecipients? risk of noncompliance with federal regulations, include specific terms and conditions in the subaward as necessary, and monitor the activities of the subrecipient through various mechanisms. These mechanisms include: Training and technical assistance to subrecipients, on-site reviews, review of audit results, increased reporting requirements and enforcement action, if necessary. University Policy UW reviews each subrecipient entity according to an entity level comprehensive risk assessment prior to the issuance of a subaward. This risk assessment includes an entity level review of their fiscal systems, past audit activity, and if required, financial statements of the entity as well as the project specific activity proposed and that the required compliance approvals are obtained. When necessary, UW imposes limitations and requirements on the subrecipient through subaward terms and conditions per Federal Uniform Guidance, Section 200.521, prior to the issuance or renewal of a subaward. UW?s subrecipient monitoring requirements are comprised, at a minimum, of the following: ? Completion of the UW?s entity level comprehensive risk assessment (Certs & Reps, Annual Audit Certification) Subrecipient Monitoring ? Entity Level Entity level monitoring consists of a combination of the following: ? Initial Subrecipient Certification Form completion and assurance by subrecipient?s authorized official ? Annual audit assurance through an annual audit certification form ? Maintenance of a subrecipient profile list, which includes information on the entity?s past audit information and certifications ? Risk assessment carried out at each annual renewal of a subaward
2022-028 The University of Washington did not establish adequate internal controls to ensure payments to contractors and subrecipients for the Global AIDS program were allowable, properly supported and within the period of performance. Assistance Listing Number and Title: 93.067 Global AIDS 93.067 COVID-19 Global AIDS Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: NU2GGH001430; NU2GGH001968; NU2GGH002038; NU2GGH002116; NU2GGH002242; NUGGH002360; NU2GGH002157; NU2GGH002298; NU2GGH002374 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs / Cost Principles Period of Performance Known Questioned Cost Amount: None Background The Global AIDS program is a federal initiative focused on treating and preventing the transmission of HIV/AIDS around the world. The program is authorized by Sections 307 and 317(k)(2) of the Public Health Service Act, the U.S. Leadership Against HIV/AIDS, Tuberculosis, and Malaria Acts of 2003 and 2008, and the U.S. President?s Emergency Plan for AIDS Relief. Since it was established in 2003, the federal government has invested more than $100 billion in the global HIV/AIDS response, providing testing and treatment for millions of people, preventing transmission among affected communities, and supporting numerous countries to achieve HIV epidemic control. The program distributes funding through public and private sector partnerships to reach the populations most vulnerable to HIV/AIDS epidemics. The University of Washington administers this grant for the state through its International Training and Education Center for Health (I-TECH). I-TECH is a center in the University?s Department of Global Health operated by more than 2,000 staff in offices located in Africa, Asia, the Caribbean, Eastern Europe and the United States. In fiscal year 2022, the University spent more than $66 million in federal program funds, about $44 million of which it passed through to subrecipients. To achieve the performance goals of the program, the Seattle headquarters of I-TECH (Seattle HQ) provides funding to subrecipients and contractors. Invoices submitted by contractors directly to Seattle HQ are reviewed and approved for payment by budget managers who have delegated authority from the Principal Investigator. Invoices submitted by subrecipients are reviewed and approved for payment by a Principal Investigator. Principal Investigators are also responsible for monitoring the subrecipient?s technical progress and performance. Seattle HQ also provides funding to country offices operating within the University?s global network. The country offices incur costs associated with furnishing supplies and equipment to address the HIV/AIDS epidemic, as well as staffing resources and acquiring goods and services from contractors to carry out the objectives of the program. Payments made by country offices are approved by Country Directors and Country Representatives as delegated by the University. Under the University?s policies, country offices are reimbursed for locally incurred expenses at least monthly. An invoice, accompanied by a schedule of expenses incurred, is submitted and approved by the Country Director and then by the Director of Finance at Seattle HQ, prior to payment. Country offices also responsible for obtaining and retaining supporting documentation for costs incurred and paid on each project. Monthly, Budget Managers review and approve a Budget Activity Report (BAR) that details the expenses charged to the project for the previous month to ensure accurate posting of already approved expenses. This review is also to determine whether the work performed during the billing period reconciles to costs claimed within the contractor?s invoice so that payment may be authorized. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The University did not have adequate internal controls to ensure payments to contractors and subrecipients of the Global AIDS program were allowable properly supported and within the period of performance. Payments to country offices We used a statistical sampling method to randomly select and examine 58 out of 1,644 transactions for country offices. Of the 58 payments examined, we identified one payment (1.7 percent) that was not approved by the Country Director and the corresponding Budget Activity Report was not approved by the Director of Finance. Payments to contractors We used a statistical sampling method to randomly select and review 58 out of 3,040 payments to contractors. We found: ? Invoices for three payments (5 percent) were not approved by a Budget Manager ? Monthly Budget Activity Reports were not approved for 12 payments (20 percent) Subrecipient reimbursements We used a statistical sampling method to randomly select and review 55 out of 438 payments to subrecipients. We found the assigned Budget Manager did not review and approve the monthly Budget Activity Reports for 52 payments (94 percent). We consider these internal control deficiencies to be a material weakness. This issue was not reported as a finding in the prior audit. Cause of Condition Program management did not require supporting documentation for each payment to be forwarded to and reviewed by headquarters personnel prior to payment authorization. Management also did not monitor the submission of invoices and Budget Activity Reports to ensure they were approved by the responsible Budget Manager, as required. Effect of Condition Without establishing adequate internal controls, the University cannot reasonably ensure it is using federal funds for allowable purposes and that expenditures of federal funds are supported by adequate documentation. Recommendations We recommend the University: ? Improve its internal controls to ensure invoices are properly approved by Principal Investigators, as required ? Improve its internal controls to ensure Budget Mangers review and approve monthly Budget Activity Reports before authorizing payments for projects incurring reimbursement requests ? Ensure it retains supporting documentation sufficient to show costs incurred and paid by the program are allowable, and to demonstrate the required managerial reviews have occurred prior to issuing payment University?s Response In response to the findings for the Global Aids Program, we would like to clarify the following: General Clarification: The draft finding inaccurately represents the role of BARS approvals as part of the internal controls to ensure payments to country offices, contractors and subrecipients are allowable, properly supported and within the period of performance. This is not the role of the BARS review process. Compliance, Budget Manager and PI reviews are the controls that ensure allowability of payments and BARS approvals are after-the-fact validations of accurate posting of already approved expenditures. We provided edits to the Background section to reflect our process. We request in light of this that the description of condition, cause of condition and recommendation sections of this finding be updated accordingly. Payments to country offices I-TECH country offices are not contractors; the offices are an extension of the University of Washington. Your review identified one of fifty-eight samples (1.7%) did not meet the approval requirements set forth in I-TECH?s standard operating procedure. Based on the error percentage, we disagree with this finding. Payments to contractors Payments to contractors have multiple approvals. Upon receipt, individual invoices are approved by the program/budget manager either by signature or email. Invoices are then sent to the I-TECH Accounts Payable Administrator for input to the University?s procurement system, ARIBA, which requires compliance approval from the Accounts Payable Supervisor or other manager, as well as funding approval from the budget manager prior to payment. Approvals of Budget Activity Reports (BARS) are not approval of individual payments to contractors, they are reviews of the monthly expenses posted to the budget and the program manager?s concurrence that the expenses are as expected. The exceptions noted were payments made to country offices instead of contractors. The support for approvals were provided to the State Auditors on April 26, 2023, prior to the completion of fieldwork. We therefore disagree with this finding. We also request that the finding be adjusted to omit the 20% of missing BARS approvals as this is not related to the contractor payments. Subrecipient reimbursements Each subrecipient invoice is reviewed for reasonableness, allowability and allocability by the contracts manager and approved by both budget managers and principal investigators prior to being processed for payment in ARIBA. PI approvals were provided and verified for each subrecipient selection with no omissions noted by the auditors. Approvals of Budget Activity Reports (BARS) are not approval of individual payments to subrecipients, they are after-the-fact reviews of the monthly expenses posted to the budget, intended as documentation of the program manager?s concurrence that the expenses are posted as expected. We acknowledge the instances detailed in the finding where we were unable to produce related BARS approvals for 52 of the transactions; however, we request that the finding be adjusted as these BARS approvals are not related to subrecipient invoice review and approvals. Our record keeping process for BARS approvals was to save the emails in a folder within our Finance Team mailbox. We learned during this review that emails beyond a certain date are deleted but maintained in the MS360 file. We?ve searched for the missing BARS approvals but have not yet been able to locate them. We have since begun saving the approvals to our server to ensure we have access to the data going forward. Auditor?s Remarks The University?s I-TECH Global Operations Manual stipulates that BARs will be generated, reviewed and approved monthly by the Budget Manager and management team. This information was provided to our Office as part of the University?s overall design of internal controls over payments to contractors, subrecipients and country offices. The University responded to our Office on April 20, 2023 adding that ?BAR review is the University?s key post payment control designed to ensure charges are accurately processed, coded and allowable on the budget charged.? We interpret this response to indicate the BAR review process is a monitoring control, and the University asserted on multiple occasions this is a key internal control, which is why we tested it. On January 5, our Office notified University management in writing that the BAR review process would be tested as a key control over the cost principles and period of performance requirements for Global AIDS expenditures. We received no additional inquiry or concerns from University management regarding this internal control until the draft finding was issued on April 14. We provided the University with a final written summary of our fieldwork in this area on April 6, 2023, after fieldwork had concluded. On April 7, the Finance Director responded to our Office in writing confirming they had no further questions or concerns regarding our testing results. It was not until after the University received this finding that additional documentation supporting expenditures tested during the audit were ultimately given to our Office. The basis for this audit finding is the key internal control failure rate of BAR approvals that exceeds our established materiality threshold of five percent, and constitutes a material weakness in internal control, which under the Uniform Guidance is required to be reported as an audit finding in accordance with 2 CFR 200.516 ? Audit findings. We reaffirm our finding and will follow up on the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. The University of Washington?s Policies, Procedures and Guidance (UW Research), GIM 02 ? Acceptance of Sponsored Program Awards and Fiscal Compliance on Sponsored Program Accounts (Budget Numbers), states in part: Responsibilities Principal Investigator ? Supervises expenditure of sponsored program funds and approves sub-recipient invoices (see GIM 8) to assure: o That funds are used only for purposes that directly relate to and benefit the activity supported in the award. o That expenditures are consistent with all special terms, conditions, or limitations that apply to expenditures under the particular grant or contract. o That expenditures do not exceed the total funds authorized for a given period under the grant or contract. GIM 07 ? Sponsored Program Subaward Administration, states in part: Principal Investigator ? Review and approve subaward invoices. GIM 08 ? Subrecipient Monitoring, states in part: Roles & Responsibilities PI / Department Responsibilities Project level monitoring of subrecipient including: o Reviews that expenses are necessary, reasonable, and allocable to the work completed and are aligned with technical progress. o Approve invoices for payment. Subrecipient Monitoring ? Project Level Subrecipient invoices are reviewed and approved in accordance with the requirements of GIM 2 in the manner and frequency stated in the subaward. The University of Washington I-TECH Global Operations Manual (GRef 2.3), Section 2, Finance, Accounting Policy and Procedure Requirements, states in part: In addition to the Fiscal Guidelines set forth in the I-TECH Field Operations Manual, these country specific policies are implemented at I-TECH. 10. Budget Management and Reporting f. Reports that show the variance between the budget plan and the activity for each region and activity code will be generated, reviewed and approved by the budget managers and the Management Team each month.
2022-030 The University of Washington did not have adequate internal controls over and did not comply with federal requirements to ensure subrecipients of the Global AIDS program received required single or program-specific audits, and that it followed up on findings and issued management decisions. Assistance Listing Number and Title: 93.067 Global AIDS 93.067 COVID-19 Global AIDS Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: NU2GGH001430; NU2GGH001968; NU2GGH002038; NU2GGH002116; NU2GGH002242; NUGGH002360; NU2GGH002157; NU2GGH002298; NU2GGH002374 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Subrecipient Monitoring Known Questioned Cost Amount: None Background The Global AIDS program is a federal initiative focused on treating and preventing the transmission of HIV/AIDS around the world. The program is authorized by Sections 307 and 317(k)(2) of the Public Health Service Act, the U.S. Leadership Against HIV/AIDS, Tuberculosis, and Malaria Acts of 2003 and 2008, and the U.S. President?s Emergency Plan for AIDS Relief. Since it was established in 2003, the federal government has invested more than $100 billion in the global HIV/AIDS response, providing testing and treatment for millions of people, preventing transmission among affected communities, and supporting numerous countries to achieve HIV epidemic control. The program distributes funding through public and private sector partnerships to reach the populations most vulnerable to HIV/AIDS epidemics. The University of Washington administers this grant for the state through its International Training and Education Center for Health (I-TECH). I-TECH is a center in the University?s Department of Global Health operated by more than 2,000 staff in offices located in Africa, Asia, the Caribbean, Eastern Europe and the United States. In fiscal year 2022, the University spent more than $66 million in federal program funds, about $44 million of which it passed through to subrecipients. Federal regulations require the University to monitor its subrecipients? activities. This includes verifying that its subrecipients that spend $750,000 or more in federal awards during a fiscal year obtain a single or program-specific audit. For the Global AIDS program, the Centers for Disease Control and Prevention requires foreign subrecipients to submit their audits directly to the federal government and pass-through entity within 30 days after receiving the auditor?s report or nine months after the end of the subrecipient?s audit period, whichever is earlier. Additionally, for the awards it passes onto its subrecipients, the University must follow up and ensure the subrecipients take timely and appropriate corrective action on all deficiencies identified through audits. When a subrecipient receives an audit finding for a University-funded program, federal law requires the University to issue a management decision to the subrecipient within six months of the audit report?s acceptance by the federal government. The management decision must clearly state whether the audit finding is sustained, the reason for the decision, and the actions the subrecipient is expected to take, such as repaying unallowable costs or making financial adjustments. These requirements help ensure subrecipients use federal program funds for authorized purposes and within the provisions of contracts or grant agreements. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The University did not have adequate internal controls over and did not comply with federal requirements to ensure subrecipients of the Global AIDS program received required single or program-specific audits, and that it appropriately followed up on findings and issued management decisions. We found the University did not have adequate internal controls in place to verify whether: ? Subrecipients received required audits, if necessary, and appropriate remedies were taken if audits were not filed ? Management decisions were required to be issued for subrecipients who required a single or program-specific audit We used a nonstatistical sampling method to randomly select and examine seven out of a total population of 21 subrecipients. We found the University did not adequately monitor one subrecipient (14 percent) to ensure it received a required single or program-specific audit. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition Staff in the University?s Office of Sponsored Programs (OSP) used a spreadsheet to track subrecipient certifications and responses, and reviewed annual certifications from the subrecipient to monitor its audit status. However, OSP did not correctly interpret the subrecipient?s response and, therefore, did not require it to provide documentation of a single or program-specific audit. Additionally, management did not review the subrecipient?s federal assistance expenditures to detect that it required an audit and, therefore, also failed to adequately follow up to ensure any reported findings were resolved with appropriate corrective action, if required. Effect of Condition Without establishing adequate internal controls, the University cannot ensure all subrecipients that required a single or program-specific audit received one. Furthermore, the University cannot ensure it is following up on subrecipient audit findings and communicating required management decisions to subrecipients. By failing to ensure subrecipients establish corrective actions and management monitors them for effectiveness where required, the University cannot determine whether subrecipients have sufficiently corrected issues identified in audit findings. Recommendations We recommend the University: ? Follow policies and procedures to ensure subrecipients receive required single or program-specific audits ? Establish and follow effective internal controls to ensure it reviews audit reports for its subrecipients and issues written management decisions, as required ? Ensure subrecipients develop and perform acceptable corrective actions to adequately address all audit recommendations ? Follow up with the subrecipient to ensure the required audit reports are received and reviewed to determine if the subrecipient is required to take corrective action to address audit recommendations ? Issue a written management decision for all applicable audit findings, if necessary University?s Response The University of Washington has established internal controls to carry out a risk assessment per Uniform Guidance, 2 CFR ? 200.332, Requirements for pass-through entities, and our UW Grants Information Memorandum (GIM) 8. This involves using various factors to assess risk. Part of our process to obtain the information needed from each subrecipient is through a certification process. The certification was obtained from the subrecipient, along with additional documentation from the subrecipient, such as an audited financial statement. We made a risk assessment using our standard risk criteria. We did misinterpret the response provided from the subrecipient regarding whether it expended $750,000 or more in federal awards during a fiscal year in order to obtain a single or program-specific audit from this subrecipient. While this was not obtained and reviewed, a risk assessment using our standard criteria was performed with the subrecipient rated as a medium risk, and subject to monitoring throughout the project, per GIM 8. The monitoring at the program level occurred during the period in question. We will be improving our required communications with subrecipients to have clear questions and responses regarding whether the subrecipient expended $750,000 or more in federal awards during the fiscal year in order to obtain a single or program-specific audit, follow up with the subrecipient to ensure the required audit reports are received and reviewed to determine if the subrecipient is required to take corrective action to address audit recommendations, and issue a written management decision for all applicable audit findings, if necessary. Auditor?s Remarks We thank the University for its cooperation and assistance during the audit. Whether the University performed a risk assessment for the subrecipient is not being questioned. The University did not adequately monitor the subrecipient to ensure it detected whether the subrecipient was required to receive a single audit, or program-specific audit in accordance with 2 CFR ?200.332(f). There is no other mechanism for the Federal government to monitor subrecipients of the University and, because a single audit of the subrecipient was not performed, neither the federal grantor nor the University had reasonable assurance of the subrecipient?s compliance with federal award requirements. We reaffirm our finding and will follow up on the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200, Uniform Guidance, establishes the following applicable requirements: Section 200.332 Requirements for pass-through entities, states in part: All pass-through entities must: (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. (3) Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by ? 200.521. (4) The pass-through entity is responsible for resolving audit findings specifically related to the subaward and not responsible for resolving crosscutting findings. If a subrecipient has a current Single Audit report posted in the Federal Audit Clearinghouse and has not otherwise been excluded from receipt of Federal funding (e.g., has been debarred or suspended), the pass-through entity may rely on the subrecipient?s cognizant audit agency or cognizant oversight agency to perform audit follow-up and make management decisions related to cross-cutting findings in accordance with section ? 200.513(a)(3)(vii). Such reliance does not eliminate the responsibility of the pass-through entity to issue subawards that conform to agency and award-specific requirements, to manage risk through ongoing subaward monitoring, and to monitor the status of the findings that are specifically related to the subaward. (f) Verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the subrecipient?s Federal awards expended during the respective fiscal year equaled or exceeded the threshold set for the in ?200.501 Audit requirements. Section 200.339 Remedies for noncompliance, states: If a non-Federal entity fails to comply with the U.S. Constitution, Federal statutes, regulations or the terms and conditions of a Federal award, the Federal awarding agency or pass-through entity may impose additional conditions, as described in ? 200.208. If the Federal awarding agency or pass-through entity determines that noncompliance cannot be remedied by imposing additional conditions, the Federal awarding agency or pass-through entity may take one or more of the following actions, as appropriate in the circumstances: (a) Temporarily withhold cash payments pending correction of the deficiency by the non-Federal entity or more severe enforcement action by the Federal awarding agency or pass-through entity. (b) Disallow (that is, deny both use of funds and any applicable matching credit for) all or part of the cost of the activity or action not in compliance. (c) Wholly or partly suspend or terminate the Federal award. (d) Initiate suspension or debarment proceedings as authorized under 2 CFR part 180 and Federal awarding agency regulations (or in the case of a pass-through entity, recommend such a proceeding be initiated by a Federal awarding agency). (e) Withhold further Federal awards for the project or program. (f) Take other remedies that may be legally available. Section 200.501 Audit requirements, states in part: (a) Audit required. A non-Federal entity that expends $750,000 or more during the non-Federal entity?s fiscal year in Federal awards must have a single or program-specific audit conducted for that year in accordance with the provisions of this part. (b) Single audit. A non-Federal entity that expends $750,000 or more during the non-Federal entity?s fiscal year in Federal awards must have a single audit conducted in accordance with ? 200.514 except when it elects to have a program-specific audit conducted in accordance with paragraph (c) of this section. Section 200.521 Management decision, states in part: (a) General. The management decision must clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action. If the auditee has not completed corrective action, a timetable for follow-up should be given. Prior to issuing the management decision, the Federal agency or pass-through entity may request additional information or documentation from the auditee, including a request for auditor assurance related to the documentation, as a way of mitigating disallowed costs. The management decision should describe any appeal process available to the auditee. While not required, the Federal agency or pass-through entity may also issue a management decision on findings relating to the financial statements which are required to be reported in accordance with GAGAS. (c) Pass-through entity. As provided in ? 200.332(d), the pass-through entity must be responsible for issuing a management decision for audit findings that relate to Federal awards it makes to subrecipients. (d) Time requirements. The Federal awarding agency or pass-through entity responsible for issuing a management decision must do so within six months of acceptance of the audit report by the FAC. The auditee must initiate and proceed with corrective action as rapidly as possible and corrective action should begin no later than upon receipt of the audit report. (e) Reference numbers. Management decisions must include the reference numbers the auditor assigned to each audit finding in accordance with ? 200.516(c). The University of Washington?s Policies, Procedures and Guidance (UW Research), GIM 8 ? Subrecipient Monitoring, states in part: Background Additionally, per the Federal Uniform Guidance, UW must evaluate each subrecipients? risk of noncompliance with federal regulations, include specific terms and conditions in the subaward as necessary, and monitor the activities of the subrecipient through various mechanisms. These mechanisms include: Training and technical assistance to subrecipients, on-site reviews, review of audit results, increased reporting requirements and enforcement action, if necessary. University Policy UW reviews each subrecipient entity according to an entity level comprehensive risk assessment prior to the issuance of a subaward. This risk assessment includes an entity level review of their fiscal systems, past audit activity, and if required, financial statements of the entity as well as the project specific activity proposed and that the required compliance approvals are obtained. When necessary, UW imposes limitations and requirements on the subrecipient through subaward terms and conditions per Federal Uniform Guidance, Section 200.521, prior to the issuance or renewal of a subaward. UW?s subrecipient monitoring requirements are comprised, at a minimum, of the following: ? Completion of the UW?s entity level comprehensive risk assessment (Certs & Reps, Annual Audit Certification) Subrecipient Monitoring ? Entity Level Entity level monitoring consists of a combination of the following: ? Initial Subrecipient Certification Form completion and assurance by subrecipient?s authorized official ? Annual audit assurance through an annual audit certification form ? Maintenance of a subrecipient profile list, which includes information on the entity?s past audit information and certifications ? Risk assessment carried out at each annual renewal of a subaward
2022-028 The University of Washington did not establish adequate internal controls to ensure payments to contractors and subrecipients for the Global AIDS program were allowable, properly supported and within the period of performance. Assistance Listing Number and Title: 93.067 Global AIDS 93.067 COVID-19 Global AIDS Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: NU2GGH001430; NU2GGH001968; NU2GGH002038; NU2GGH002116; NU2GGH002242; NUGGH002360; NU2GGH002157; NU2GGH002298; NU2GGH002374 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs / Cost Principles Period of Performance Known Questioned Cost Amount: None Background The Global AIDS program is a federal initiative focused on treating and preventing the transmission of HIV/AIDS around the world. The program is authorized by Sections 307 and 317(k)(2) of the Public Health Service Act, the U.S. Leadership Against HIV/AIDS, Tuberculosis, and Malaria Acts of 2003 and 2008, and the U.S. President?s Emergency Plan for AIDS Relief. Since it was established in 2003, the federal government has invested more than $100 billion in the global HIV/AIDS response, providing testing and treatment for millions of people, preventing transmission among affected communities, and supporting numerous countries to achieve HIV epidemic control. The program distributes funding through public and private sector partnerships to reach the populations most vulnerable to HIV/AIDS epidemics. The University of Washington administers this grant for the state through its International Training and Education Center for Health (I-TECH). I-TECH is a center in the University?s Department of Global Health operated by more than 2,000 staff in offices located in Africa, Asia, the Caribbean, Eastern Europe and the United States. In fiscal year 2022, the University spent more than $66 million in federal program funds, about $44 million of which it passed through to subrecipients. To achieve the performance goals of the program, the Seattle headquarters of I-TECH (Seattle HQ) provides funding to subrecipients and contractors. Invoices submitted by contractors directly to Seattle HQ are reviewed and approved for payment by budget managers who have delegated authority from the Principal Investigator. Invoices submitted by subrecipients are reviewed and approved for payment by a Principal Investigator. Principal Investigators are also responsible for monitoring the subrecipient?s technical progress and performance. Seattle HQ also provides funding to country offices operating within the University?s global network. The country offices incur costs associated with furnishing supplies and equipment to address the HIV/AIDS epidemic, as well as staffing resources and acquiring goods and services from contractors to carry out the objectives of the program. Payments made by country offices are approved by Country Directors and Country Representatives as delegated by the University. Under the University?s policies, country offices are reimbursed for locally incurred expenses at least monthly. An invoice, accompanied by a schedule of expenses incurred, is submitted and approved by the Country Director and then by the Director of Finance at Seattle HQ, prior to payment. Country offices also responsible for obtaining and retaining supporting documentation for costs incurred and paid on each project. Monthly, Budget Managers review and approve a Budget Activity Report (BAR) that details the expenses charged to the project for the previous month to ensure accurate posting of already approved expenses. This review is also to determine whether the work performed during the billing period reconciles to costs claimed within the contractor?s invoice so that payment may be authorized. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The University did not have adequate internal controls to ensure payments to contractors and subrecipients of the Global AIDS program were allowable properly supported and within the period of performance. Payments to country offices We used a statistical sampling method to randomly select and examine 58 out of 1,644 transactions for country offices. Of the 58 payments examined, we identified one payment (1.7 percent) that was not approved by the Country Director and the corresponding Budget Activity Report was not approved by the Director of Finance. Payments to contractors We used a statistical sampling method to randomly select and review 58 out of 3,040 payments to contractors. We found: ? Invoices for three payments (5 percent) were not approved by a Budget Manager ? Monthly Budget Activity Reports were not approved for 12 payments (20 percent) Subrecipient reimbursements We used a statistical sampling method to randomly select and review 55 out of 438 payments to subrecipients. We found the assigned Budget Manager did not review and approve the monthly Budget Activity Reports for 52 payments (94 percent). We consider these internal control deficiencies to be a material weakness. This issue was not reported as a finding in the prior audit. Cause of Condition Program management did not require supporting documentation for each payment to be forwarded to and reviewed by headquarters personnel prior to payment authorization. Management also did not monitor the submission of invoices and Budget Activity Reports to ensure they were approved by the responsible Budget Manager, as required. Effect of Condition Without establishing adequate internal controls, the University cannot reasonably ensure it is using federal funds for allowable purposes and that expenditures of federal funds are supported by adequate documentation. Recommendations We recommend the University: ? Improve its internal controls to ensure invoices are properly approved by Principal Investigators, as required ? Improve its internal controls to ensure Budget Mangers review and approve monthly Budget Activity Reports before authorizing payments for projects incurring reimbursement requests ? Ensure it retains supporting documentation sufficient to show costs incurred and paid by the program are allowable, and to demonstrate the required managerial reviews have occurred prior to issuing payment University?s Response In response to the findings for the Global Aids Program, we would like to clarify the following: General Clarification: The draft finding inaccurately represents the role of BARS approvals as part of the internal controls to ensure payments to country offices, contractors and subrecipients are allowable, properly supported and within the period of performance. This is not the role of the BARS review process. Compliance, Budget Manager and PI reviews are the controls that ensure allowability of payments and BARS approvals are after-the-fact validations of accurate posting of already approved expenditures. We provided edits to the Background section to reflect our process. We request in light of this that the description of condition, cause of condition and recommendation sections of this finding be updated accordingly. Payments to country offices I-TECH country offices are not contractors; the offices are an extension of the University of Washington. Your review identified one of fifty-eight samples (1.7%) did not meet the approval requirements set forth in I-TECH?s standard operating procedure. Based on the error percentage, we disagree with this finding. Payments to contractors Payments to contractors have multiple approvals. Upon receipt, individual invoices are approved by the program/budget manager either by signature or email. Invoices are then sent to the I-TECH Accounts Payable Administrator for input to the University?s procurement system, ARIBA, which requires compliance approval from the Accounts Payable Supervisor or other manager, as well as funding approval from the budget manager prior to payment. Approvals of Budget Activity Reports (BARS) are not approval of individual payments to contractors, they are reviews of the monthly expenses posted to the budget and the program manager?s concurrence that the expenses are as expected. The exceptions noted were payments made to country offices instead of contractors. The support for approvals were provided to the State Auditors on April 26, 2023, prior to the completion of fieldwork. We therefore disagree with this finding. We also request that the finding be adjusted to omit the 20% of missing BARS approvals as this is not related to the contractor payments. Subrecipient reimbursements Each subrecipient invoice is reviewed for reasonableness, allowability and allocability by the contracts manager and approved by both budget managers and principal investigators prior to being processed for payment in ARIBA. PI approvals were provided and verified for each subrecipient selection with no omissions noted by the auditors. Approvals of Budget Activity Reports (BARS) are not approval of individual payments to subrecipients, they are after-the-fact reviews of the monthly expenses posted to the budget, intended as documentation of the program manager?s concurrence that the expenses are posted as expected. We acknowledge the instances detailed in the finding where we were unable to produce related BARS approvals for 52 of the transactions; however, we request that the finding be adjusted as these BARS approvals are not related to subrecipient invoice review and approvals. Our record keeping process for BARS approvals was to save the emails in a folder within our Finance Team mailbox. We learned during this review that emails beyond a certain date are deleted but maintained in the MS360 file. We?ve searched for the missing BARS approvals but have not yet been able to locate them. We have since begun saving the approvals to our server to ensure we have access to the data going forward. Auditor?s Remarks The University?s I-TECH Global Operations Manual stipulates that BARs will be generated, reviewed and approved monthly by the Budget Manager and management team. This information was provided to our Office as part of the University?s overall design of internal controls over payments to contractors, subrecipients and country offices. The University responded to our Office on April 20, 2023 adding that ?BAR review is the University?s key post payment control designed to ensure charges are accurately processed, coded and allowable on the budget charged.? We interpret this response to indicate the BAR review process is a monitoring control, and the University asserted on multiple occasions this is a key internal control, which is why we tested it. On January 5, our Office notified University management in writing that the BAR review process would be tested as a key control over the cost principles and period of performance requirements for Global AIDS expenditures. We received no additional inquiry or concerns from University management regarding this internal control until the draft finding was issued on April 14. We provided the University with a final written summary of our fieldwork in this area on April 6, 2023, after fieldwork had concluded. On April 7, the Finance Director responded to our Office in writing confirming they had no further questions or concerns regarding our testing results. It was not until after the University received this finding that additional documentation supporting expenditures tested during the audit were ultimately given to our Office. The basis for this audit finding is the key internal control failure rate of BAR approvals that exceeds our established materiality threshold of five percent, and constitutes a material weakness in internal control, which under the Uniform Guidance is required to be reported as an audit finding in accordance with 2 CFR 200.516 ? Audit findings. We reaffirm our finding and will follow up on the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. The University of Washington?s Policies, Procedures and Guidance (UW Research), GIM 02 ? Acceptance of Sponsored Program Awards and Fiscal Compliance on Sponsored Program Accounts (Budget Numbers), states in part: Responsibilities Principal Investigator ? Supervises expenditure of sponsored program funds and approves sub-recipient invoices (see GIM 8) to assure: o That funds are used only for purposes that directly relate to and benefit the activity supported in the award. o That expenditures are consistent with all special terms, conditions, or limitations that apply to expenditures under the particular grant or contract. o That expenditures do not exceed the total funds authorized for a given period under the grant or contract. GIM 07 ? Sponsored Program Subaward Administration, states in part: Principal Investigator ? Review and approve subaward invoices. GIM 08 ? Subrecipient Monitoring, states in part: Roles & Responsibilities PI / Department Responsibilities Project level monitoring of subrecipient including: o Reviews that expenses are necessary, reasonable, and allocable to the work completed and are aligned with technical progress. o Approve invoices for payment. Subrecipient Monitoring ? Project Level Subrecipient invoices are reviewed and approved in accordance with the requirements of GIM 2 in the manner and frequency stated in the subaward. The University of Washington I-TECH Global Operations Manual (GRef 2.3), Section 2, Finance, Accounting Policy and Procedure Requirements, states in part: In addition to the Fiscal Guidelines set forth in the I-TECH Field Operations Manual, these country specific policies are implemented at I-TECH. 10. Budget Management and Reporting f. Reports that show the variance between the budget plan and the activity for each region and activity code will be generated, reviewed and approved by the budget managers and the Management Team each month.
2022-030 The University of Washington did not have adequate internal controls over and did not comply with federal requirements to ensure subrecipients of the Global AIDS program received required single or program-specific audits, and that it followed up on findings and issued management decisions. Assistance Listing Number and Title: 93.067 Global AIDS 93.067 COVID-19 Global AIDS Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: NU2GGH001430; NU2GGH001968; NU2GGH002038; NU2GGH002116; NU2GGH002242; NUGGH002360; NU2GGH002157; NU2GGH002298; NU2GGH002374 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Subrecipient Monitoring Known Questioned Cost Amount: None Background The Global AIDS program is a federal initiative focused on treating and preventing the transmission of HIV/AIDS around the world. The program is authorized by Sections 307 and 317(k)(2) of the Public Health Service Act, the U.S. Leadership Against HIV/AIDS, Tuberculosis, and Malaria Acts of 2003 and 2008, and the U.S. President?s Emergency Plan for AIDS Relief. Since it was established in 2003, the federal government has invested more than $100 billion in the global HIV/AIDS response, providing testing and treatment for millions of people, preventing transmission among affected communities, and supporting numerous countries to achieve HIV epidemic control. The program distributes funding through public and private sector partnerships to reach the populations most vulnerable to HIV/AIDS epidemics. The University of Washington administers this grant for the state through its International Training and Education Center for Health (I-TECH). I-TECH is a center in the University?s Department of Global Health operated by more than 2,000 staff in offices located in Africa, Asia, the Caribbean, Eastern Europe and the United States. In fiscal year 2022, the University spent more than $66 million in federal program funds, about $44 million of which it passed through to subrecipients. Federal regulations require the University to monitor its subrecipients? activities. This includes verifying that its subrecipients that spend $750,000 or more in federal awards during a fiscal year obtain a single or program-specific audit. For the Global AIDS program, the Centers for Disease Control and Prevention requires foreign subrecipients to submit their audits directly to the federal government and pass-through entity within 30 days after receiving the auditor?s report or nine months after the end of the subrecipient?s audit period, whichever is earlier. Additionally, for the awards it passes onto its subrecipients, the University must follow up and ensure the subrecipients take timely and appropriate corrective action on all deficiencies identified through audits. When a subrecipient receives an audit finding for a University-funded program, federal law requires the University to issue a management decision to the subrecipient within six months of the audit report?s acceptance by the federal government. The management decision must clearly state whether the audit finding is sustained, the reason for the decision, and the actions the subrecipient is expected to take, such as repaying unallowable costs or making financial adjustments. These requirements help ensure subrecipients use federal program funds for authorized purposes and within the provisions of contracts or grant agreements. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The University did not have adequate internal controls over and did not comply with federal requirements to ensure subrecipients of the Global AIDS program received required single or program-specific audits, and that it appropriately followed up on findings and issued management decisions. We found the University did not have adequate internal controls in place to verify whether: ? Subrecipients received required audits, if necessary, and appropriate remedies were taken if audits were not filed ? Management decisions were required to be issued for subrecipients who required a single or program-specific audit We used a nonstatistical sampling method to randomly select and examine seven out of a total population of 21 subrecipients. We found the University did not adequately monitor one subrecipient (14 percent) to ensure it received a required single or program-specific audit. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition Staff in the University?s Office of Sponsored Programs (OSP) used a spreadsheet to track subrecipient certifications and responses, and reviewed annual certifications from the subrecipient to monitor its audit status. However, OSP did not correctly interpret the subrecipient?s response and, therefore, did not require it to provide documentation of a single or program-specific audit. Additionally, management did not review the subrecipient?s federal assistance expenditures to detect that it required an audit and, therefore, also failed to adequately follow up to ensure any reported findings were resolved with appropriate corrective action, if required. Effect of Condition Without establishing adequate internal controls, the University cannot ensure all subrecipients that required a single or program-specific audit received one. Furthermore, the University cannot ensure it is following up on subrecipient audit findings and communicating required management decisions to subrecipients. By failing to ensure subrecipients establish corrective actions and management monitors them for effectiveness where required, the University cannot determine whether subrecipients have sufficiently corrected issues identified in audit findings. Recommendations We recommend the University: ? Follow policies and procedures to ensure subrecipients receive required single or program-specific audits ? Establish and follow effective internal controls to ensure it reviews audit reports for its subrecipients and issues written management decisions, as required ? Ensure subrecipients develop and perform acceptable corrective actions to adequately address all audit recommendations ? Follow up with the subrecipient to ensure the required audit reports are received and reviewed to determine if the subrecipient is required to take corrective action to address audit recommendations ? Issue a written management decision for all applicable audit findings, if necessary University?s Response The University of Washington has established internal controls to carry out a risk assessment per Uniform Guidance, 2 CFR ? 200.332, Requirements for pass-through entities, and our UW Grants Information Memorandum (GIM) 8. This involves using various factors to assess risk. Part of our process to obtain the information needed from each subrecipient is through a certification process. The certification was obtained from the subrecipient, along with additional documentation from the subrecipient, such as an audited financial statement. We made a risk assessment using our standard risk criteria. We did misinterpret the response provided from the subrecipient regarding whether it expended $750,000 or more in federal awards during a fiscal year in order to obtain a single or program-specific audit from this subrecipient. While this was not obtained and reviewed, a risk assessment using our standard criteria was performed with the subrecipient rated as a medium risk, and subject to monitoring throughout the project, per GIM 8. The monitoring at the program level occurred during the period in question. We will be improving our required communications with subrecipients to have clear questions and responses regarding whether the subrecipient expended $750,000 or more in federal awards during the fiscal year in order to obtain a single or program-specific audit, follow up with the subrecipient to ensure the required audit reports are received and reviewed to determine if the subrecipient is required to take corrective action to address audit recommendations, and issue a written management decision for all applicable audit findings, if necessary. Auditor?s Remarks We thank the University for its cooperation and assistance during the audit. Whether the University performed a risk assessment for the subrecipient is not being questioned. The University did not adequately monitor the subrecipient to ensure it detected whether the subrecipient was required to receive a single audit, or program-specific audit in accordance with 2 CFR ?200.332(f). There is no other mechanism for the Federal government to monitor subrecipients of the University and, because a single audit of the subrecipient was not performed, neither the federal grantor nor the University had reasonable assurance of the subrecipient?s compliance with federal award requirements. We reaffirm our finding and will follow up on the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200, Uniform Guidance, establishes the following applicable requirements: Section 200.332 Requirements for pass-through entities, states in part: All pass-through entities must: (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. (3) Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by ? 200.521. (4) The pass-through entity is responsible for resolving audit findings specifically related to the subaward and not responsible for resolving crosscutting findings. If a subrecipient has a current Single Audit report posted in the Federal Audit Clearinghouse and has not otherwise been excluded from receipt of Federal funding (e.g., has been debarred or suspended), the pass-through entity may rely on the subrecipient?s cognizant audit agency or cognizant oversight agency to perform audit follow-up and make management decisions related to cross-cutting findings in accordance with section ? 200.513(a)(3)(vii). Such reliance does not eliminate the responsibility of the pass-through entity to issue subawards that conform to agency and award-specific requirements, to manage risk through ongoing subaward monitoring, and to monitor the status of the findings that are specifically related to the subaward. (f) Verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the subrecipient?s Federal awards expended during the respective fiscal year equaled or exceeded the threshold set for the in ?200.501 Audit requirements. Section 200.339 Remedies for noncompliance, states: If a non-Federal entity fails to comply with the U.S. Constitution, Federal statutes, regulations or the terms and conditions of a Federal award, the Federal awarding agency or pass-through entity may impose additional conditions, as described in ? 200.208. If the Federal awarding agency or pass-through entity determines that noncompliance cannot be remedied by imposing additional conditions, the Federal awarding agency or pass-through entity may take one or more of the following actions, as appropriate in the circumstances: (a) Temporarily withhold cash payments pending correction of the deficiency by the non-Federal entity or more severe enforcement action by the Federal awarding agency or pass-through entity. (b) Disallow (that is, deny both use of funds and any applicable matching credit for) all or part of the cost of the activity or action not in compliance. (c) Wholly or partly suspend or terminate the Federal award. (d) Initiate suspension or debarment proceedings as authorized under 2 CFR part 180 and Federal awarding agency regulations (or in the case of a pass-through entity, recommend such a proceeding be initiated by a Federal awarding agency). (e) Withhold further Federal awards for the project or program. (f) Take other remedies that may be legally available. Section 200.501 Audit requirements, states in part: (a) Audit required. A non-Federal entity that expends $750,000 or more during the non-Federal entity?s fiscal year in Federal awards must have a single or program-specific audit conducted for that year in accordance with the provisions of this part. (b) Single audit. A non-Federal entity that expends $750,000 or more during the non-Federal entity?s fiscal year in Federal awards must have a single audit conducted in accordance with ? 200.514 except when it elects to have a program-specific audit conducted in accordance with paragraph (c) of this section. Section 200.521 Management decision, states in part: (a) General. The management decision must clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action. If the auditee has not completed corrective action, a timetable for follow-up should be given. Prior to issuing the management decision, the Federal agency or pass-through entity may request additional information or documentation from the auditee, including a request for auditor assurance related to the documentation, as a way of mitigating disallowed costs. The management decision should describe any appeal process available to the auditee. While not required, the Federal agency or pass-through entity may also issue a management decision on findings relating to the financial statements which are required to be reported in accordance with GAGAS. (c) Pass-through entity. As provided in ? 200.332(d), the pass-through entity must be responsible for issuing a management decision for audit findings that relate to Federal awards it makes to subrecipients. (d) Time requirements. The Federal awarding agency or pass-through entity responsible for issuing a management decision must do so within six months of acceptance of the audit report by the FAC. The auditee must initiate and proceed with corrective action as rapidly as possible and corrective action should begin no later than upon receipt of the audit report. (e) Reference numbers. Management decisions must include the reference numbers the auditor assigned to each audit finding in accordance with ? 200.516(c). The University of Washington?s Policies, Procedures and Guidance (UW Research), GIM 8 ? Subrecipient Monitoring, states in part: Background Additionally, per the Federal Uniform Guidance, UW must evaluate each subrecipients? risk of noncompliance with federal regulations, include specific terms and conditions in the subaward as necessary, and monitor the activities of the subrecipient through various mechanisms. These mechanisms include: Training and technical assistance to subrecipients, on-site reviews, review of audit results, increased reporting requirements and enforcement action, if necessary. University Policy UW reviews each subrecipient entity according to an entity level comprehensive risk assessment prior to the issuance of a subaward. This risk assessment includes an entity level review of their fiscal systems, past audit activity, and if required, financial statements of the entity as well as the project specific activity proposed and that the required compliance approvals are obtained. When necessary, UW imposes limitations and requirements on the subrecipient through subaward terms and conditions per Federal Uniform Guidance, Section 200.521, prior to the issuance or renewal of a subaward. UW?s subrecipient monitoring requirements are comprised, at a minimum, of the following: ? Completion of the UW?s entity level comprehensive risk assessment (Certs & Reps, Annual Audit Certification) Subrecipient Monitoring ? Entity Level Entity level monitoring consists of a combination of the following: ? Initial Subrecipient Certification Form completion and assurance by subrecipient?s authorized official ? Annual audit assurance through an annual audit certification form ? Maintenance of a subrecipient profile list, which includes information on the entity?s past audit information and certifications ? Risk assessment carried out at each annual renewal of a subaward
2022-028 The University of Washington did not establish adequate internal controls to ensure payments to contractors and subrecipients for the Global AIDS program were allowable, properly supported and within the period of performance. Assistance Listing Number and Title: 93.067 Global AIDS 93.067 COVID-19 Global AIDS Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: NU2GGH001430; NU2GGH001968; NU2GGH002038; NU2GGH002116; NU2GGH002242; NUGGH002360; NU2GGH002157; NU2GGH002298; NU2GGH002374 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs / Cost Principles Period of Performance Known Questioned Cost Amount: None Background The Global AIDS program is a federal initiative focused on treating and preventing the transmission of HIV/AIDS around the world. The program is authorized by Sections 307 and 317(k)(2) of the Public Health Service Act, the U.S. Leadership Against HIV/AIDS, Tuberculosis, and Malaria Acts of 2003 and 2008, and the U.S. President?s Emergency Plan for AIDS Relief. Since it was established in 2003, the federal government has invested more than $100 billion in the global HIV/AIDS response, providing testing and treatment for millions of people, preventing transmission among affected communities, and supporting numerous countries to achieve HIV epidemic control. The program distributes funding through public and private sector partnerships to reach the populations most vulnerable to HIV/AIDS epidemics. The University of Washington administers this grant for the state through its International Training and Education Center for Health (I-TECH). I-TECH is a center in the University?s Department of Global Health operated by more than 2,000 staff in offices located in Africa, Asia, the Caribbean, Eastern Europe and the United States. In fiscal year 2022, the University spent more than $66 million in federal program funds, about $44 million of which it passed through to subrecipients. To achieve the performance goals of the program, the Seattle headquarters of I-TECH (Seattle HQ) provides funding to subrecipients and contractors. Invoices submitted by contractors directly to Seattle HQ are reviewed and approved for payment by budget managers who have delegated authority from the Principal Investigator. Invoices submitted by subrecipients are reviewed and approved for payment by a Principal Investigator. Principal Investigators are also responsible for monitoring the subrecipient?s technical progress and performance. Seattle HQ also provides funding to country offices operating within the University?s global network. The country offices incur costs associated with furnishing supplies and equipment to address the HIV/AIDS epidemic, as well as staffing resources and acquiring goods and services from contractors to carry out the objectives of the program. Payments made by country offices are approved by Country Directors and Country Representatives as delegated by the University. Under the University?s policies, country offices are reimbursed for locally incurred expenses at least monthly. An invoice, accompanied by a schedule of expenses incurred, is submitted and approved by the Country Director and then by the Director of Finance at Seattle HQ, prior to payment. Country offices also responsible for obtaining and retaining supporting documentation for costs incurred and paid on each project. Monthly, Budget Managers review and approve a Budget Activity Report (BAR) that details the expenses charged to the project for the previous month to ensure accurate posting of already approved expenses. This review is also to determine whether the work performed during the billing period reconciles to costs claimed within the contractor?s invoice so that payment may be authorized. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The University did not have adequate internal controls to ensure payments to contractors and subrecipients of the Global AIDS program were allowable properly supported and within the period of performance. Payments to country offices We used a statistical sampling method to randomly select and examine 58 out of 1,644 transactions for country offices. Of the 58 payments examined, we identified one payment (1.7 percent) that was not approved by the Country Director and the corresponding Budget Activity Report was not approved by the Director of Finance. Payments to contractors We used a statistical sampling method to randomly select and review 58 out of 3,040 payments to contractors. We found: ? Invoices for three payments (5 percent) were not approved by a Budget Manager ? Monthly Budget Activity Reports were not approved for 12 payments (20 percent) Subrecipient reimbursements We used a statistical sampling method to randomly select and review 55 out of 438 payments to subrecipients. We found the assigned Budget Manager did not review and approve the monthly Budget Activity Reports for 52 payments (94 percent). We consider these internal control deficiencies to be a material weakness. This issue was not reported as a finding in the prior audit. Cause of Condition Program management did not require supporting documentation for each payment to be forwarded to and reviewed by headquarters personnel prior to payment authorization. Management also did not monitor the submission of invoices and Budget Activity Reports to ensure they were approved by the responsible Budget Manager, as required. Effect of Condition Without establishing adequate internal controls, the University cannot reasonably ensure it is using federal funds for allowable purposes and that expenditures of federal funds are supported by adequate documentation. Recommendations We recommend the University: ? Improve its internal controls to ensure invoices are properly approved by Principal Investigators, as required ? Improve its internal controls to ensure Budget Mangers review and approve monthly Budget Activity Reports before authorizing payments for projects incurring reimbursement requests ? Ensure it retains supporting documentation sufficient to show costs incurred and paid by the program are allowable, and to demonstrate the required managerial reviews have occurred prior to issuing payment University?s Response In response to the findings for the Global Aids Program, we would like to clarify the following: General Clarification: The draft finding inaccurately represents the role of BARS approvals as part of the internal controls to ensure payments to country offices, contractors and subrecipients are allowable, properly supported and within the period of performance. This is not the role of the BARS review process. Compliance, Budget Manager and PI reviews are the controls that ensure allowability of payments and BARS approvals are after-the-fact validations of accurate posting of already approved expenditures. We provided edits to the Background section to reflect our process. We request in light of this that the description of condition, cause of condition and recommendation sections of this finding be updated accordingly. Payments to country offices I-TECH country offices are not contractors; the offices are an extension of the University of Washington. Your review identified one of fifty-eight samples (1.7%) did not meet the approval requirements set forth in I-TECH?s standard operating procedure. Based on the error percentage, we disagree with this finding. Payments to contractors Payments to contractors have multiple approvals. Upon receipt, individual invoices are approved by the program/budget manager either by signature or email. Invoices are then sent to the I-TECH Accounts Payable Administrator for input to the University?s procurement system, ARIBA, which requires compliance approval from the Accounts Payable Supervisor or other manager, as well as funding approval from the budget manager prior to payment. Approvals of Budget Activity Reports (BARS) are not approval of individual payments to contractors, they are reviews of the monthly expenses posted to the budget and the program manager?s concurrence that the expenses are as expected. The exceptions noted were payments made to country offices instead of contractors. The support for approvals were provided to the State Auditors on April 26, 2023, prior to the completion of fieldwork. We therefore disagree with this finding. We also request that the finding be adjusted to omit the 20% of missing BARS approvals as this is not related to the contractor payments. Subrecipient reimbursements Each subrecipient invoice is reviewed for reasonableness, allowability and allocability by the contracts manager and approved by both budget managers and principal investigators prior to being processed for payment in ARIBA. PI approvals were provided and verified for each subrecipient selection with no omissions noted by the auditors. Approvals of Budget Activity Reports (BARS) are not approval of individual payments to subrecipients, they are after-the-fact reviews of the monthly expenses posted to the budget, intended as documentation of the program manager?s concurrence that the expenses are posted as expected. We acknowledge the instances detailed in the finding where we were unable to produce related BARS approvals for 52 of the transactions; however, we request that the finding be adjusted as these BARS approvals are not related to subrecipient invoice review and approvals. Our record keeping process for BARS approvals was to save the emails in a folder within our Finance Team mailbox. We learned during this review that emails beyond a certain date are deleted but maintained in the MS360 file. We?ve searched for the missing BARS approvals but have not yet been able to locate them. We have since begun saving the approvals to our server to ensure we have access to the data going forward. Auditor?s Remarks The University?s I-TECH Global Operations Manual stipulates that BARs will be generated, reviewed and approved monthly by the Budget Manager and management team. This information was provided to our Office as part of the University?s overall design of internal controls over payments to contractors, subrecipients and country offices. The University responded to our Office on April 20, 2023 adding that ?BAR review is the University?s key post payment control designed to ensure charges are accurately processed, coded and allowable on the budget charged.? We interpret this response to indicate the BAR review process is a monitoring control, and the University asserted on multiple occasions this is a key internal control, which is why we tested it. On January 5, our Office notified University management in writing that the BAR review process would be tested as a key control over the cost principles and period of performance requirements for Global AIDS expenditures. We received no additional inquiry or concerns from University management regarding this internal control until the draft finding was issued on April 14. We provided the University with a final written summary of our fieldwork in this area on April 6, 2023, after fieldwork had concluded. On April 7, the Finance Director responded to our Office in writing confirming they had no further questions or concerns regarding our testing results. It was not until after the University received this finding that additional documentation supporting expenditures tested during the audit were ultimately given to our Office. The basis for this audit finding is the key internal control failure rate of BAR approvals that exceeds our established materiality threshold of five percent, and constitutes a material weakness in internal control, which under the Uniform Guidance is required to be reported as an audit finding in accordance with 2 CFR 200.516 ? Audit findings. We reaffirm our finding and will follow up on the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. The University of Washington?s Policies, Procedures and Guidance (UW Research), GIM 02 ? Acceptance of Sponsored Program Awards and Fiscal Compliance on Sponsored Program Accounts (Budget Numbers), states in part: Responsibilities Principal Investigator ? Supervises expenditure of sponsored program funds and approves sub-recipient invoices (see GIM 8) to assure: o That funds are used only for purposes that directly relate to and benefit the activity supported in the award. o That expenditures are consistent with all special terms, conditions, or limitations that apply to expenditures under the particular grant or contract. o That expenditures do not exceed the total funds authorized for a given period under the grant or contract. GIM 07 ? Sponsored Program Subaward Administration, states in part: Principal Investigator ? Review and approve subaward invoices. GIM 08 ? Subrecipient Monitoring, states in part: Roles & Responsibilities PI / Department Responsibilities Project level monitoring of subrecipient including: o Reviews that expenses are necessary, reasonable, and allocable to the work completed and are aligned with technical progress. o Approve invoices for payment. Subrecipient Monitoring ? Project Level Subrecipient invoices are reviewed and approved in accordance with the requirements of GIM 2 in the manner and frequency stated in the subaward. The University of Washington I-TECH Global Operations Manual (GRef 2.3), Section 2, Finance, Accounting Policy and Procedure Requirements, states in part: In addition to the Fiscal Guidelines set forth in the I-TECH Field Operations Manual, these country specific policies are implemented at I-TECH. 10. Budget Management and Reporting f. Reports that show the variance between the budget plan and the activity for each region and activity code will be generated, reviewed and approved by the budget managers and the Management Team each month.
2022-030 The University of Washington did not have adequate internal controls over and did not comply with federal requirements to ensure subrecipients of the Global AIDS program received required single or program-specific audits, and that it followed up on findings and issued management decisions. Assistance Listing Number and Title: 93.067 Global AIDS 93.067 COVID-19 Global AIDS Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: NU2GGH001430; NU2GGH001968; NU2GGH002038; NU2GGH002116; NU2GGH002242; NUGGH002360; NU2GGH002157; NU2GGH002298; NU2GGH002374 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Subrecipient Monitoring Known Questioned Cost Amount: None Background The Global AIDS program is a federal initiative focused on treating and preventing the transmission of HIV/AIDS around the world. The program is authorized by Sections 307 and 317(k)(2) of the Public Health Service Act, the U.S. Leadership Against HIV/AIDS, Tuberculosis, and Malaria Acts of 2003 and 2008, and the U.S. President?s Emergency Plan for AIDS Relief. Since it was established in 2003, the federal government has invested more than $100 billion in the global HIV/AIDS response, providing testing and treatment for millions of people, preventing transmission among affected communities, and supporting numerous countries to achieve HIV epidemic control. The program distributes funding through public and private sector partnerships to reach the populations most vulnerable to HIV/AIDS epidemics. The University of Washington administers this grant for the state through its International Training and Education Center for Health (I-TECH). I-TECH is a center in the University?s Department of Global Health operated by more than 2,000 staff in offices located in Africa, Asia, the Caribbean, Eastern Europe and the United States. In fiscal year 2022, the University spent more than $66 million in federal program funds, about $44 million of which it passed through to subrecipients. Federal regulations require the University to monitor its subrecipients? activities. This includes verifying that its subrecipients that spend $750,000 or more in federal awards during a fiscal year obtain a single or program-specific audit. For the Global AIDS program, the Centers for Disease Control and Prevention requires foreign subrecipients to submit their audits directly to the federal government and pass-through entity within 30 days after receiving the auditor?s report or nine months after the end of the subrecipient?s audit period, whichever is earlier. Additionally, for the awards it passes onto its subrecipients, the University must follow up and ensure the subrecipients take timely and appropriate corrective action on all deficiencies identified through audits. When a subrecipient receives an audit finding for a University-funded program, federal law requires the University to issue a management decision to the subrecipient within six months of the audit report?s acceptance by the federal government. The management decision must clearly state whether the audit finding is sustained, the reason for the decision, and the actions the subrecipient is expected to take, such as repaying unallowable costs or making financial adjustments. These requirements help ensure subrecipients use federal program funds for authorized purposes and within the provisions of contracts or grant agreements. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The University did not have adequate internal controls over and did not comply with federal requirements to ensure subrecipients of the Global AIDS program received required single or program-specific audits, and that it appropriately followed up on findings and issued management decisions. We found the University did not have adequate internal controls in place to verify whether: ? Subrecipients received required audits, if necessary, and appropriate remedies were taken if audits were not filed ? Management decisions were required to be issued for subrecipients who required a single or program-specific audit We used a nonstatistical sampling method to randomly select and examine seven out of a total population of 21 subrecipients. We found the University did not adequately monitor one subrecipient (14 percent) to ensure it received a required single or program-specific audit. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition Staff in the University?s Office of Sponsored Programs (OSP) used a spreadsheet to track subrecipient certifications and responses, and reviewed annual certifications from the subrecipient to monitor its audit status. However, OSP did not correctly interpret the subrecipient?s response and, therefore, did not require it to provide documentation of a single or program-specific audit. Additionally, management did not review the subrecipient?s federal assistance expenditures to detect that it required an audit and, therefore, also failed to adequately follow up to ensure any reported findings were resolved with appropriate corrective action, if required. Effect of Condition Without establishing adequate internal controls, the University cannot ensure all subrecipients that required a single or program-specific audit received one. Furthermore, the University cannot ensure it is following up on subrecipient audit findings and communicating required management decisions to subrecipients. By failing to ensure subrecipients establish corrective actions and management monitors them for effectiveness where required, the University cannot determine whether subrecipients have sufficiently corrected issues identified in audit findings. Recommendations We recommend the University: ? Follow policies and procedures to ensure subrecipients receive required single or program-specific audits ? Establish and follow effective internal controls to ensure it reviews audit reports for its subrecipients and issues written management decisions, as required ? Ensure subrecipients develop and perform acceptable corrective actions to adequately address all audit recommendations ? Follow up with the subrecipient to ensure the required audit reports are received and reviewed to determine if the subrecipient is required to take corrective action to address audit recommendations ? Issue a written management decision for all applicable audit findings, if necessary University?s Response The University of Washington has established internal controls to carry out a risk assessment per Uniform Guidance, 2 CFR ? 200.332, Requirements for pass-through entities, and our UW Grants Information Memorandum (GIM) 8. This involves using various factors to assess risk. Part of our process to obtain the information needed from each subrecipient is through a certification process. The certification was obtained from the subrecipient, along with additional documentation from the subrecipient, such as an audited financial statement. We made a risk assessment using our standard risk criteria. We did misinterpret the response provided from the subrecipient regarding whether it expended $750,000 or more in federal awards during a fiscal year in order to obtain a single or program-specific audit from this subrecipient. While this was not obtained and reviewed, a risk assessment using our standard criteria was performed with the subrecipient rated as a medium risk, and subject to monitoring throughout the project, per GIM 8. The monitoring at the program level occurred during the period in question. We will be improving our required communications with subrecipients to have clear questions and responses regarding whether the subrecipient expended $750,000 or more in federal awards during the fiscal year in order to obtain a single or program-specific audit, follow up with the subrecipient to ensure the required audit reports are received and reviewed to determine if the subrecipient is required to take corrective action to address audit recommendations, and issue a written management decision for all applicable audit findings, if necessary. Auditor?s Remarks We thank the University for its cooperation and assistance during the audit. Whether the University performed a risk assessment for the subrecipient is not being questioned. The University did not adequately monitor the subrecipient to ensure it detected whether the subrecipient was required to receive a single audit, or program-specific audit in accordance with 2 CFR ?200.332(f). There is no other mechanism for the Federal government to monitor subrecipients of the University and, because a single audit of the subrecipient was not performed, neither the federal grantor nor the University had reasonable assurance of the subrecipient?s compliance with federal award requirements. We reaffirm our finding and will follow up on the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200, Uniform Guidance, establishes the following applicable requirements: Section 200.332 Requirements for pass-through entities, states in part: All pass-through entities must: (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. (3) Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by ? 200.521. (4) The pass-through entity is responsible for resolving audit findings specifically related to the subaward and not responsible for resolving crosscutting findings. If a subrecipient has a current Single Audit report posted in the Federal Audit Clearinghouse and has not otherwise been excluded from receipt of Federal funding (e.g., has been debarred or suspended), the pass-through entity may rely on the subrecipient?s cognizant audit agency or cognizant oversight agency to perform audit follow-up and make management decisions related to cross-cutting findings in accordance with section ? 200.513(a)(3)(vii). Such reliance does not eliminate the responsibility of the pass-through entity to issue subawards that conform to agency and award-specific requirements, to manage risk through ongoing subaward monitoring, and to monitor the status of the findings that are specifically related to the subaward. (f) Verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the subrecipient?s Federal awards expended during the respective fiscal year equaled or exceeded the threshold set for the in ?200.501 Audit requirements. Section 200.339 Remedies for noncompliance, states: If a non-Federal entity fails to comply with the U.S. Constitution, Federal statutes, regulations or the terms and conditions of a Federal award, the Federal awarding agency or pass-through entity may impose additional conditions, as described in ? 200.208. If the Federal awarding agency or pass-through entity determines that noncompliance cannot be remedied by imposing additional conditions, the Federal awarding agency or pass-through entity may take one or more of the following actions, as appropriate in the circumstances: (a) Temporarily withhold cash payments pending correction of the deficiency by the non-Federal entity or more severe enforcement action by the Federal awarding agency or pass-through entity. (b) Disallow (that is, deny both use of funds and any applicable matching credit for) all or part of the cost of the activity or action not in compliance. (c) Wholly or partly suspend or terminate the Federal award. (d) Initiate suspension or debarment proceedings as authorized under 2 CFR part 180 and Federal awarding agency regulations (or in the case of a pass-through entity, recommend such a proceeding be initiated by a Federal awarding agency). (e) Withhold further Federal awards for the project or program. (f) Take other remedies that may be legally available. Section 200.501 Audit requirements, states in part: (a) Audit required. A non-Federal entity that expends $750,000 or more during the non-Federal entity?s fiscal year in Federal awards must have a single or program-specific audit conducted for that year in accordance with the provisions of this part. (b) Single audit. A non-Federal entity that expends $750,000 or more during the non-Federal entity?s fiscal year in Federal awards must have a single audit conducted in accordance with ? 200.514 except when it elects to have a program-specific audit conducted in accordance with paragraph (c) of this section. Section 200.521 Management decision, states in part: (a) General. The management decision must clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action. If the auditee has not completed corrective action, a timetable for follow-up should be given. Prior to issuing the management decision, the Federal agency or pass-through entity may request additional information or documentation from the auditee, including a request for auditor assurance related to the documentation, as a way of mitigating disallowed costs. The management decision should describe any appeal process available to the auditee. While not required, the Federal agency or pass-through entity may also issue a management decision on findings relating to the financial statements which are required to be reported in accordance with GAGAS. (c) Pass-through entity. As provided in ? 200.332(d), the pass-through entity must be responsible for issuing a management decision for audit findings that relate to Federal awards it makes to subrecipients. (d) Time requirements. The Federal awarding agency or pass-through entity responsible for issuing a management decision must do so within six months of acceptance of the audit report by the FAC. The auditee must initiate and proceed with corrective action as rapidly as possible and corrective action should begin no later than upon receipt of the audit report. (e) Reference numbers. Management decisions must include the reference numbers the auditor assigned to each audit finding in accordance with ? 200.516(c). The University of Washington?s Policies, Procedures and Guidance (UW Research), GIM 8 ? Subrecipient Monitoring, states in part: Background Additionally, per the Federal Uniform Guidance, UW must evaluate each subrecipients? risk of noncompliance with federal regulations, include specific terms and conditions in the subaward as necessary, and monitor the activities of the subrecipient through various mechanisms. These mechanisms include: Training and technical assistance to subrecipients, on-site reviews, review of audit results, increased reporting requirements and enforcement action, if necessary. University Policy UW reviews each subrecipient entity according to an entity level comprehensive risk assessment prior to the issuance of a subaward. This risk assessment includes an entity level review of their fiscal systems, past audit activity, and if required, financial statements of the entity as well as the project specific activity proposed and that the required compliance approvals are obtained. When necessary, UW imposes limitations and requirements on the subrecipient through subaward terms and conditions per Federal Uniform Guidance, Section 200.521, prior to the issuance or renewal of a subaward. UW?s subrecipient monitoring requirements are comprised, at a minimum, of the following: ? Completion of the UW?s entity level comprehensive risk assessment (Certs & Reps, Annual Audit Certification) Subrecipient Monitoring ? Entity Level Entity level monitoring consists of a combination of the following: ? Initial Subrecipient Certification Form completion and assurance by subrecipient?s authorized official ? Annual audit assurance through an annual audit certification form ? Maintenance of a subrecipient profile list, which includes information on the entity?s past audit information and certifications ? Risk assessment carried out at each annual renewal of a subaward
2022-028 The University of Washington did not establish adequate internal controls to ensure payments to contractors and subrecipients for the Global AIDS program were allowable, properly supported and within the period of performance. Assistance Listing Number and Title: 93.067 Global AIDS 93.067 COVID-19 Global AIDS Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: NU2GGH001430; NU2GGH001968; NU2GGH002038; NU2GGH002116; NU2GGH002242; NUGGH002360; NU2GGH002157; NU2GGH002298; NU2GGH002374 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs / Cost Principles Period of Performance Known Questioned Cost Amount: None Background The Global AIDS program is a federal initiative focused on treating and preventing the transmission of HIV/AIDS around the world. The program is authorized by Sections 307 and 317(k)(2) of the Public Health Service Act, the U.S. Leadership Against HIV/AIDS, Tuberculosis, and Malaria Acts of 2003 and 2008, and the U.S. President?s Emergency Plan for AIDS Relief. Since it was established in 2003, the federal government has invested more than $100 billion in the global HIV/AIDS response, providing testing and treatment for millions of people, preventing transmission among affected communities, and supporting numerous countries to achieve HIV epidemic control. The program distributes funding through public and private sector partnerships to reach the populations most vulnerable to HIV/AIDS epidemics. The University of Washington administers this grant for the state through its International Training and Education Center for Health (I-TECH). I-TECH is a center in the University?s Department of Global Health operated by more than 2,000 staff in offices located in Africa, Asia, the Caribbean, Eastern Europe and the United States. In fiscal year 2022, the University spent more than $66 million in federal program funds, about $44 million of which it passed through to subrecipients. To achieve the performance goals of the program, the Seattle headquarters of I-TECH (Seattle HQ) provides funding to subrecipients and contractors. Invoices submitted by contractors directly to Seattle HQ are reviewed and approved for payment by budget managers who have delegated authority from the Principal Investigator. Invoices submitted by subrecipients are reviewed and approved for payment by a Principal Investigator. Principal Investigators are also responsible for monitoring the subrecipient?s technical progress and performance. Seattle HQ also provides funding to country offices operating within the University?s global network. The country offices incur costs associated with furnishing supplies and equipment to address the HIV/AIDS epidemic, as well as staffing resources and acquiring goods and services from contractors to carry out the objectives of the program. Payments made by country offices are approved by Country Directors and Country Representatives as delegated by the University. Under the University?s policies, country offices are reimbursed for locally incurred expenses at least monthly. An invoice, accompanied by a schedule of expenses incurred, is submitted and approved by the Country Director and then by the Director of Finance at Seattle HQ, prior to payment. Country offices also responsible for obtaining and retaining supporting documentation for costs incurred and paid on each project. Monthly, Budget Managers review and approve a Budget Activity Report (BAR) that details the expenses charged to the project for the previous month to ensure accurate posting of already approved expenses. This review is also to determine whether the work performed during the billing period reconciles to costs claimed within the contractor?s invoice so that payment may be authorized. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The University did not have adequate internal controls to ensure payments to contractors and subrecipients of the Global AIDS program were allowable properly supported and within the period of performance. Payments to country offices We used a statistical sampling method to randomly select and examine 58 out of 1,644 transactions for country offices. Of the 58 payments examined, we identified one payment (1.7 percent) that was not approved by the Country Director and the corresponding Budget Activity Report was not approved by the Director of Finance. Payments to contractors We used a statistical sampling method to randomly select and review 58 out of 3,040 payments to contractors. We found: ? Invoices for three payments (5 percent) were not approved by a Budget Manager ? Monthly Budget Activity Reports were not approved for 12 payments (20 percent) Subrecipient reimbursements We used a statistical sampling method to randomly select and review 55 out of 438 payments to subrecipients. We found the assigned Budget Manager did not review and approve the monthly Budget Activity Reports for 52 payments (94 percent). We consider these internal control deficiencies to be a material weakness. This issue was not reported as a finding in the prior audit. Cause of Condition Program management did not require supporting documentation for each payment to be forwarded to and reviewed by headquarters personnel prior to payment authorization. Management also did not monitor the submission of invoices and Budget Activity Reports to ensure they were approved by the responsible Budget Manager, as required. Effect of Condition Without establishing adequate internal controls, the University cannot reasonably ensure it is using federal funds for allowable purposes and that expenditures of federal funds are supported by adequate documentation. Recommendations We recommend the University: ? Improve its internal controls to ensure invoices are properly approved by Principal Investigators, as required ? Improve its internal controls to ensure Budget Mangers review and approve monthly Budget Activity Reports before authorizing payments for projects incurring reimbursement requests ? Ensure it retains supporting documentation sufficient to show costs incurred and paid by the program are allowable, and to demonstrate the required managerial reviews have occurred prior to issuing payment University?s Response In response to the findings for the Global Aids Program, we would like to clarify the following: General Clarification: The draft finding inaccurately represents the role of BARS approvals as part of the internal controls to ensure payments to country offices, contractors and subrecipients are allowable, properly supported and within the period of performance. This is not the role of the BARS review process. Compliance, Budget Manager and PI reviews are the controls that ensure allowability of payments and BARS approvals are after-the-fact validations of accurate posting of already approved expenditures. We provided edits to the Background section to reflect our process. We request in light of this that the description of condition, cause of condition and recommendation sections of this finding be updated accordingly. Payments to country offices I-TECH country offices are not contractors; the offices are an extension of the University of Washington. Your review identified one of fifty-eight samples (1.7%) did not meet the approval requirements set forth in I-TECH?s standard operating procedure. Based on the error percentage, we disagree with this finding. Payments to contractors Payments to contractors have multiple approvals. Upon receipt, individual invoices are approved by the program/budget manager either by signature or email. Invoices are then sent to the I-TECH Accounts Payable Administrator for input to the University?s procurement system, ARIBA, which requires compliance approval from the Accounts Payable Supervisor or other manager, as well as funding approval from the budget manager prior to payment. Approvals of Budget Activity Reports (BARS) are not approval of individual payments to contractors, they are reviews of the monthly expenses posted to the budget and the program manager?s concurrence that the expenses are as expected. The exceptions noted were payments made to country offices instead of contractors. The support for approvals were provided to the State Auditors on April 26, 2023, prior to the completion of fieldwork. We therefore disagree with this finding. We also request that the finding be adjusted to omit the 20% of missing BARS approvals as this is not related to the contractor payments. Subrecipient reimbursements Each subrecipient invoice is reviewed for reasonableness, allowability and allocability by the contracts manager and approved by both budget managers and principal investigators prior to being processed for payment in ARIBA. PI approvals were provided and verified for each subrecipient selection with no omissions noted by the auditors. Approvals of Budget Activity Reports (BARS) are not approval of individual payments to subrecipients, they are after-the-fact reviews of the monthly expenses posted to the budget, intended as documentation of the program manager?s concurrence that the expenses are posted as expected. We acknowledge the instances detailed in the finding where we were unable to produce related BARS approvals for 52 of the transactions; however, we request that the finding be adjusted as these BARS approvals are not related to subrecipient invoice review and approvals. Our record keeping process for BARS approvals was to save the emails in a folder within our Finance Team mailbox. We learned during this review that emails beyond a certain date are deleted but maintained in the MS360 file. We?ve searched for the missing BARS approvals but have not yet been able to locate them. We have since begun saving the approvals to our server to ensure we have access to the data going forward. Auditor?s Remarks The University?s I-TECH Global Operations Manual stipulates that BARs will be generated, reviewed and approved monthly by the Budget Manager and management team. This information was provided to our Office as part of the University?s overall design of internal controls over payments to contractors, subrecipients and country offices. The University responded to our Office on April 20, 2023 adding that ?BAR review is the University?s key post payment control designed to ensure charges are accurately processed, coded and allowable on the budget charged.? We interpret this response to indicate the BAR review process is a monitoring control, and the University asserted on multiple occasions this is a key internal control, which is why we tested it. On January 5, our Office notified University management in writing that the BAR review process would be tested as a key control over the cost principles and period of performance requirements for Global AIDS expenditures. We received no additional inquiry or concerns from University management regarding this internal control until the draft finding was issued on April 14. We provided the University with a final written summary of our fieldwork in this area on April 6, 2023, after fieldwork had concluded. On April 7, the Finance Director responded to our Office in writing confirming they had no further questions or concerns regarding our testing results. It was not until after the University received this finding that additional documentation supporting expenditures tested during the audit were ultimately given to our Office. The basis for this audit finding is the key internal control failure rate of BAR approvals that exceeds our established materiality threshold of five percent, and constitutes a material weakness in internal control, which under the Uniform Guidance is required to be reported as an audit finding in accordance with 2 CFR 200.516 ? Audit findings. We reaffirm our finding and will follow up on the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. The University of Washington?s Policies, Procedures and Guidance (UW Research), GIM 02 ? Acceptance of Sponsored Program Awards and Fiscal Compliance on Sponsored Program Accounts (Budget Numbers), states in part: Responsibilities Principal Investigator ? Supervises expenditure of sponsored program funds and approves sub-recipient invoices (see GIM 8) to assure: o That funds are used only for purposes that directly relate to and benefit the activity supported in the award. o That expenditures are consistent with all special terms, conditions, or limitations that apply to expenditures under the particular grant or contract. o That expenditures do not exceed the total funds authorized for a given period under the grant or contract. GIM 07 ? Sponsored Program Subaward Administration, states in part: Principal Investigator ? Review and approve subaward invoices. GIM 08 ? Subrecipient Monitoring, states in part: Roles & Responsibilities PI / Department Responsibilities Project level monitoring of subrecipient including: o Reviews that expenses are necessary, reasonable, and allocable to the work completed and are aligned with technical progress. o Approve invoices for payment. Subrecipient Monitoring ? Project Level Subrecipient invoices are reviewed and approved in accordance with the requirements of GIM 2 in the manner and frequency stated in the subaward. The University of Washington I-TECH Global Operations Manual (GRef 2.3), Section 2, Finance, Accounting Policy and Procedure Requirements, states in part: In addition to the Fiscal Guidelines set forth in the I-TECH Field Operations Manual, these country specific policies are implemented at I-TECH. 10. Budget Management and Reporting f. Reports that show the variance between the budget plan and the activity for each region and activity code will be generated, reviewed and approved by the budget managers and the Management Team each month.
2022-030 The University of Washington did not have adequate internal controls over and did not comply with federal requirements to ensure subrecipients of the Global AIDS program received required single or program-specific audits, and that it followed up on findings and issued management decisions. Assistance Listing Number and Title: 93.067 Global AIDS 93.067 COVID-19 Global AIDS Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: NU2GGH001430; NU2GGH001968; NU2GGH002038; NU2GGH002116; NU2GGH002242; NUGGH002360; NU2GGH002157; NU2GGH002298; NU2GGH002374 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Subrecipient Monitoring Known Questioned Cost Amount: None Background The Global AIDS program is a federal initiative focused on treating and preventing the transmission of HIV/AIDS around the world. The program is authorized by Sections 307 and 317(k)(2) of the Public Health Service Act, the U.S. Leadership Against HIV/AIDS, Tuberculosis, and Malaria Acts of 2003 and 2008, and the U.S. President?s Emergency Plan for AIDS Relief. Since it was established in 2003, the federal government has invested more than $100 billion in the global HIV/AIDS response, providing testing and treatment for millions of people, preventing transmission among affected communities, and supporting numerous countries to achieve HIV epidemic control. The program distributes funding through public and private sector partnerships to reach the populations most vulnerable to HIV/AIDS epidemics. The University of Washington administers this grant for the state through its International Training and Education Center for Health (I-TECH). I-TECH is a center in the University?s Department of Global Health operated by more than 2,000 staff in offices located in Africa, Asia, the Caribbean, Eastern Europe and the United States. In fiscal year 2022, the University spent more than $66 million in federal program funds, about $44 million of which it passed through to subrecipients. Federal regulations require the University to monitor its subrecipients? activities. This includes verifying that its subrecipients that spend $750,000 or more in federal awards during a fiscal year obtain a single or program-specific audit. For the Global AIDS program, the Centers for Disease Control and Prevention requires foreign subrecipients to submit their audits directly to the federal government and pass-through entity within 30 days after receiving the auditor?s report or nine months after the end of the subrecipient?s audit period, whichever is earlier. Additionally, for the awards it passes onto its subrecipients, the University must follow up and ensure the subrecipients take timely and appropriate corrective action on all deficiencies identified through audits. When a subrecipient receives an audit finding for a University-funded program, federal law requires the University to issue a management decision to the subrecipient within six months of the audit report?s acceptance by the federal government. The management decision must clearly state whether the audit finding is sustained, the reason for the decision, and the actions the subrecipient is expected to take, such as repaying unallowable costs or making financial adjustments. These requirements help ensure subrecipients use federal program funds for authorized purposes and within the provisions of contracts or grant agreements. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The University did not have adequate internal controls over and did not comply with federal requirements to ensure subrecipients of the Global AIDS program received required single or program-specific audits, and that it appropriately followed up on findings and issued management decisions. We found the University did not have adequate internal controls in place to verify whether: ? Subrecipients received required audits, if necessary, and appropriate remedies were taken if audits were not filed ? Management decisions were required to be issued for subrecipients who required a single or program-specific audit We used a nonstatistical sampling method to randomly select and examine seven out of a total population of 21 subrecipients. We found the University did not adequately monitor one subrecipient (14 percent) to ensure it received a required single or program-specific audit. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition Staff in the University?s Office of Sponsored Programs (OSP) used a spreadsheet to track subrecipient certifications and responses, and reviewed annual certifications from the subrecipient to monitor its audit status. However, OSP did not correctly interpret the subrecipient?s response and, therefore, did not require it to provide documentation of a single or program-specific audit. Additionally, management did not review the subrecipient?s federal assistance expenditures to detect that it required an audit and, therefore, also failed to adequately follow up to ensure any reported findings were resolved with appropriate corrective action, if required. Effect of Condition Without establishing adequate internal controls, the University cannot ensure all subrecipients that required a single or program-specific audit received one. Furthermore, the University cannot ensure it is following up on subrecipient audit findings and communicating required management decisions to subrecipients. By failing to ensure subrecipients establish corrective actions and management monitors them for effectiveness where required, the University cannot determine whether subrecipients have sufficiently corrected issues identified in audit findings. Recommendations We recommend the University: ? Follow policies and procedures to ensure subrecipients receive required single or program-specific audits ? Establish and follow effective internal controls to ensure it reviews audit reports for its subrecipients and issues written management decisions, as required ? Ensure subrecipients develop and perform acceptable corrective actions to adequately address all audit recommendations ? Follow up with the subrecipient to ensure the required audit reports are received and reviewed to determine if the subrecipient is required to take corrective action to address audit recommendations ? Issue a written management decision for all applicable audit findings, if necessary University?s Response The University of Washington has established internal controls to carry out a risk assessment per Uniform Guidance, 2 CFR ? 200.332, Requirements for pass-through entities, and our UW Grants Information Memorandum (GIM) 8. This involves using various factors to assess risk. Part of our process to obtain the information needed from each subrecipient is through a certification process. The certification was obtained from the subrecipient, along with additional documentation from the subrecipient, such as an audited financial statement. We made a risk assessment using our standard risk criteria. We did misinterpret the response provided from the subrecipient regarding whether it expended $750,000 or more in federal awards during a fiscal year in order to obtain a single or program-specific audit from this subrecipient. While this was not obtained and reviewed, a risk assessment using our standard criteria was performed with the subrecipient rated as a medium risk, and subject to monitoring throughout the project, per GIM 8. The monitoring at the program level occurred during the period in question. We will be improving our required communications with subrecipients to have clear questions and responses regarding whether the subrecipient expended $750,000 or more in federal awards during the fiscal year in order to obtain a single or program-specific audit, follow up with the subrecipient to ensure the required audit reports are received and reviewed to determine if the subrecipient is required to take corrective action to address audit recommendations, and issue a written management decision for all applicable audit findings, if necessary. Auditor?s Remarks We thank the University for its cooperation and assistance during the audit. Whether the University performed a risk assessment for the subrecipient is not being questioned. The University did not adequately monitor the subrecipient to ensure it detected whether the subrecipient was required to receive a single audit, or program-specific audit in accordance with 2 CFR ?200.332(f). There is no other mechanism for the Federal government to monitor subrecipients of the University and, because a single audit of the subrecipient was not performed, neither the federal grantor nor the University had reasonable assurance of the subrecipient?s compliance with federal award requirements. We reaffirm our finding and will follow up on the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200, Uniform Guidance, establishes the following applicable requirements: Section 200.332 Requirements for pass-through entities, states in part: All pass-through entities must: (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. (3) Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by ? 200.521. (4) The pass-through entity is responsible for resolving audit findings specifically related to the subaward and not responsible for resolving crosscutting findings. If a subrecipient has a current Single Audit report posted in the Federal Audit Clearinghouse and has not otherwise been excluded from receipt of Federal funding (e.g., has been debarred or suspended), the pass-through entity may rely on the subrecipient?s cognizant audit agency or cognizant oversight agency to perform audit follow-up and make management decisions related to cross-cutting findings in accordance with section ? 200.513(a)(3)(vii). Such reliance does not eliminate the responsibility of the pass-through entity to issue subawards that conform to agency and award-specific requirements, to manage risk through ongoing subaward monitoring, and to monitor the status of the findings that are specifically related to the subaward. (f) Verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the subrecipient?s Federal awards expended during the respective fiscal year equaled or exceeded the threshold set for the in ?200.501 Audit requirements. Section 200.339 Remedies for noncompliance, states: If a non-Federal entity fails to comply with the U.S. Constitution, Federal statutes, regulations or the terms and conditions of a Federal award, the Federal awarding agency or pass-through entity may impose additional conditions, as described in ? 200.208. If the Federal awarding agency or pass-through entity determines that noncompliance cannot be remedied by imposing additional conditions, the Federal awarding agency or pass-through entity may take one or more of the following actions, as appropriate in the circumstances: (a) Temporarily withhold cash payments pending correction of the deficiency by the non-Federal entity or more severe enforcement action by the Federal awarding agency or pass-through entity. (b) Disallow (that is, deny both use of funds and any applicable matching credit for) all or part of the cost of the activity or action not in compliance. (c) Wholly or partly suspend or terminate the Federal award. (d) Initiate suspension or debarment proceedings as authorized under 2 CFR part 180 and Federal awarding agency regulations (or in the case of a pass-through entity, recommend such a proceeding be initiated by a Federal awarding agency). (e) Withhold further Federal awards for the project or program. (f) Take other remedies that may be legally available. Section 200.501 Audit requirements, states in part: (a) Audit required. A non-Federal entity that expends $750,000 or more during the non-Federal entity?s fiscal year in Federal awards must have a single or program-specific audit conducted for that year in accordance with the provisions of this part. (b) Single audit. A non-Federal entity that expends $750,000 or more during the non-Federal entity?s fiscal year in Federal awards must have a single audit conducted in accordance with ? 200.514 except when it elects to have a program-specific audit conducted in accordance with paragraph (c) of this section. Section 200.521 Management decision, states in part: (a) General. The management decision must clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action. If the auditee has not completed corrective action, a timetable for follow-up should be given. Prior to issuing the management decision, the Federal agency or pass-through entity may request additional information or documentation from the auditee, including a request for auditor assurance related to the documentation, as a way of mitigating disallowed costs. The management decision should describe any appeal process available to the auditee. While not required, the Federal agency or pass-through entity may also issue a management decision on findings relating to the financial statements which are required to be reported in accordance with GAGAS. (c) Pass-through entity. As provided in ? 200.332(d), the pass-through entity must be responsible for issuing a management decision for audit findings that relate to Federal awards it makes to subrecipients. (d) Time requirements. The Federal awarding agency or pass-through entity responsible for issuing a management decision must do so within six months of acceptance of the audit report by the FAC. The auditee must initiate and proceed with corrective action as rapidly as possible and corrective action should begin no later than upon receipt of the audit report. (e) Reference numbers. Management decisions must include the reference numbers the auditor assigned to each audit finding in accordance with ? 200.516(c). The University of Washington?s Policies, Procedures and Guidance (UW Research), GIM 8 ? Subrecipient Monitoring, states in part: Background Additionally, per the Federal Uniform Guidance, UW must evaluate each subrecipients? risk of noncompliance with federal regulations, include specific terms and conditions in the subaward as necessary, and monitor the activities of the subrecipient through various mechanisms. These mechanisms include: Training and technical assistance to subrecipients, on-site reviews, review of audit results, increased reporting requirements and enforcement action, if necessary. University Policy UW reviews each subrecipient entity according to an entity level comprehensive risk assessment prior to the issuance of a subaward. This risk assessment includes an entity level review of their fiscal systems, past audit activity, and if required, financial statements of the entity as well as the project specific activity proposed and that the required compliance approvals are obtained. When necessary, UW imposes limitations and requirements on the subrecipient through subaward terms and conditions per Federal Uniform Guidance, Section 200.521, prior to the issuance or renewal of a subaward. UW?s subrecipient monitoring requirements are comprised, at a minimum, of the following: ? Completion of the UW?s entity level comprehensive risk assessment (Certs & Reps, Annual Audit Certification) Subrecipient Monitoring ? Entity Level Entity level monitoring consists of a combination of the following: ? Initial Subrecipient Certification Form completion and assurance by subrecipient?s authorized official ? Annual audit assurance through an annual audit certification form ? Maintenance of a subrecipient profile list, which includes information on the entity?s past audit information and certifications ? Risk assessment carried out at each annual renewal of a subaward
2022-028 The University of Washington did not establish adequate internal controls to ensure payments to contractors and subrecipients for the Global AIDS program were allowable, properly supported and within the period of performance. Assistance Listing Number and Title: 93.067 Global AIDS 93.067 COVID-19 Global AIDS Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: NU2GGH001430; NU2GGH001968; NU2GGH002038; NU2GGH002116; NU2GGH002242; NUGGH002360; NU2GGH002157; NU2GGH002298; NU2GGH002374 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs / Cost Principles Period of Performance Known Questioned Cost Amount: None Background The Global AIDS program is a federal initiative focused on treating and preventing the transmission of HIV/AIDS around the world. The program is authorized by Sections 307 and 317(k)(2) of the Public Health Service Act, the U.S. Leadership Against HIV/AIDS, Tuberculosis, and Malaria Acts of 2003 and 2008, and the U.S. President?s Emergency Plan for AIDS Relief. Since it was established in 2003, the federal government has invested more than $100 billion in the global HIV/AIDS response, providing testing and treatment for millions of people, preventing transmission among affected communities, and supporting numerous countries to achieve HIV epidemic control. The program distributes funding through public and private sector partnerships to reach the populations most vulnerable to HIV/AIDS epidemics. The University of Washington administers this grant for the state through its International Training and Education Center for Health (I-TECH). I-TECH is a center in the University?s Department of Global Health operated by more than 2,000 staff in offices located in Africa, Asia, the Caribbean, Eastern Europe and the United States. In fiscal year 2022, the University spent more than $66 million in federal program funds, about $44 million of which it passed through to subrecipients. To achieve the performance goals of the program, the Seattle headquarters of I-TECH (Seattle HQ) provides funding to subrecipients and contractors. Invoices submitted by contractors directly to Seattle HQ are reviewed and approved for payment by budget managers who have delegated authority from the Principal Investigator. Invoices submitted by subrecipients are reviewed and approved for payment by a Principal Investigator. Principal Investigators are also responsible for monitoring the subrecipient?s technical progress and performance. Seattle HQ also provides funding to country offices operating within the University?s global network. The country offices incur costs associated with furnishing supplies and equipment to address the HIV/AIDS epidemic, as well as staffing resources and acquiring goods and services from contractors to carry out the objectives of the program. Payments made by country offices are approved by Country Directors and Country Representatives as delegated by the University. Under the University?s policies, country offices are reimbursed for locally incurred expenses at least monthly. An invoice, accompanied by a schedule of expenses incurred, is submitted and approved by the Country Director and then by the Director of Finance at Seattle HQ, prior to payment. Country offices also responsible for obtaining and retaining supporting documentation for costs incurred and paid on each project. Monthly, Budget Managers review and approve a Budget Activity Report (BAR) that details the expenses charged to the project for the previous month to ensure accurate posting of already approved expenses. This review is also to determine whether the work performed during the billing period reconciles to costs claimed within the contractor?s invoice so that payment may be authorized. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The University did not have adequate internal controls to ensure payments to contractors and subrecipients of the Global AIDS program were allowable properly supported and within the period of performance. Payments to country offices We used a statistical sampling method to randomly select and examine 58 out of 1,644 transactions for country offices. Of the 58 payments examined, we identified one payment (1.7 percent) that was not approved by the Country Director and the corresponding Budget Activity Report was not approved by the Director of Finance. Payments to contractors We used a statistical sampling method to randomly select and review 58 out of 3,040 payments to contractors. We found: ? Invoices for three payments (5 percent) were not approved by a Budget Manager ? Monthly Budget Activity Reports were not approved for 12 payments (20 percent) Subrecipient reimbursements We used a statistical sampling method to randomly select and review 55 out of 438 payments to subrecipients. We found the assigned Budget Manager did not review and approve the monthly Budget Activity Reports for 52 payments (94 percent). We consider these internal control deficiencies to be a material weakness. This issue was not reported as a finding in the prior audit. Cause of Condition Program management did not require supporting documentation for each payment to be forwarded to and reviewed by headquarters personnel prior to payment authorization. Management also did not monitor the submission of invoices and Budget Activity Reports to ensure they were approved by the responsible Budget Manager, as required. Effect of Condition Without establishing adequate internal controls, the University cannot reasonably ensure it is using federal funds for allowable purposes and that expenditures of federal funds are supported by adequate documentation. Recommendations We recommend the University: ? Improve its internal controls to ensure invoices are properly approved by Principal Investigators, as required ? Improve its internal controls to ensure Budget Mangers review and approve monthly Budget Activity Reports before authorizing payments for projects incurring reimbursement requests ? Ensure it retains supporting documentation sufficient to show costs incurred and paid by the program are allowable, and to demonstrate the required managerial reviews have occurred prior to issuing payment University?s Response In response to the findings for the Global Aids Program, we would like to clarify the following: General Clarification: The draft finding inaccurately represents the role of BARS approvals as part of the internal controls to ensure payments to country offices, contractors and subrecipients are allowable, properly supported and within the period of performance. This is not the role of the BARS review process. Compliance, Budget Manager and PI reviews are the controls that ensure allowability of payments and BARS approvals are after-the-fact validations of accurate posting of already approved expenditures. We provided edits to the Background section to reflect our process. We request in light of this that the description of condition, cause of condition and recommendation sections of this finding be updated accordingly. Payments to country offices I-TECH country offices are not contractors; the offices are an extension of the University of Washington. Your review identified one of fifty-eight samples (1.7%) did not meet the approval requirements set forth in I-TECH?s standard operating procedure. Based on the error percentage, we disagree with this finding. Payments to contractors Payments to contractors have multiple approvals. Upon receipt, individual invoices are approved by the program/budget manager either by signature or email. Invoices are then sent to the I-TECH Accounts Payable Administrator for input to the University?s procurement system, ARIBA, which requires compliance approval from the Accounts Payable Supervisor or other manager, as well as funding approval from the budget manager prior to payment. Approvals of Budget Activity Reports (BARS) are not approval of individual payments to contractors, they are reviews of the monthly expenses posted to the budget and the program manager?s concurrence that the expenses are as expected. The exceptions noted were payments made to country offices instead of contractors. The support for approvals were provided to the State Auditors on April 26, 2023, prior to the completion of fieldwork. We therefore disagree with this finding. We also request that the finding be adjusted to omit the 20% of missing BARS approvals as this is not related to the contractor payments. Subrecipient reimbursements Each subrecipient invoice is reviewed for reasonableness, allowability and allocability by the contracts manager and approved by both budget managers and principal investigators prior to being processed for payment in ARIBA. PI approvals were provided and verified for each subrecipient selection with no omissions noted by the auditors. Approvals of Budget Activity Reports (BARS) are not approval of individual payments to subrecipients, they are after-the-fact reviews of the monthly expenses posted to the budget, intended as documentation of the program manager?s concurrence that the expenses are posted as expected. We acknowledge the instances detailed in the finding where we were unable to produce related BARS approvals for 52 of the transactions; however, we request that the finding be adjusted as these BARS approvals are not related to subrecipient invoice review and approvals. Our record keeping process for BARS approvals was to save the emails in a folder within our Finance Team mailbox. We learned during this review that emails beyond a certain date are deleted but maintained in the MS360 file. We?ve searched for the missing BARS approvals but have not yet been able to locate them. We have since begun saving the approvals to our server to ensure we have access to the data going forward. Auditor?s Remarks The University?s I-TECH Global Operations Manual stipulates that BARs will be generated, reviewed and approved monthly by the Budget Manager and management team. This information was provided to our Office as part of the University?s overall design of internal controls over payments to contractors, subrecipients and country offices. The University responded to our Office on April 20, 2023 adding that ?BAR review is the University?s key post payment control designed to ensure charges are accurately processed, coded and allowable on the budget charged.? We interpret this response to indicate the BAR review process is a monitoring control, and the University asserted on multiple occasions this is a key internal control, which is why we tested it. On January 5, our Office notified University management in writing that the BAR review process would be tested as a key control over the cost principles and period of performance requirements for Global AIDS expenditures. We received no additional inquiry or concerns from University management regarding this internal control until the draft finding was issued on April 14. We provided the University with a final written summary of our fieldwork in this area on April 6, 2023, after fieldwork had concluded. On April 7, the Finance Director responded to our Office in writing confirming they had no further questions or concerns regarding our testing results. It was not until after the University received this finding that additional documentation supporting expenditures tested during the audit were ultimately given to our Office. The basis for this audit finding is the key internal control failure rate of BAR approvals that exceeds our established materiality threshold of five percent, and constitutes a material weakness in internal control, which under the Uniform Guidance is required to be reported as an audit finding in accordance with 2 CFR 200.516 ? Audit findings. We reaffirm our finding and will follow up on the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. The University of Washington?s Policies, Procedures and Guidance (UW Research), GIM 02 ? Acceptance of Sponsored Program Awards and Fiscal Compliance on Sponsored Program Accounts (Budget Numbers), states in part: Responsibilities Principal Investigator ? Supervises expenditure of sponsored program funds and approves sub-recipient invoices (see GIM 8) to assure: o That funds are used only for purposes that directly relate to and benefit the activity supported in the award. o That expenditures are consistent with all special terms, conditions, or limitations that apply to expenditures under the particular grant or contract. o That expenditures do not exceed the total funds authorized for a given period under the grant or contract. GIM 07 ? Sponsored Program Subaward Administration, states in part: Principal Investigator ? Review and approve subaward invoices. GIM 08 ? Subrecipient Monitoring, states in part: Roles & Responsibilities PI / Department Responsibilities Project level monitoring of subrecipient including: o Reviews that expenses are necessary, reasonable, and allocable to the work completed and are aligned with technical progress. o Approve invoices for payment. Subrecipient Monitoring ? Project Level Subrecipient invoices are reviewed and approved in accordance with the requirements of GIM 2 in the manner and frequency stated in the subaward. The University of Washington I-TECH Global Operations Manual (GRef 2.3), Section 2, Finance, Accounting Policy and Procedure Requirements, states in part: In addition to the Fiscal Guidelines set forth in the I-TECH Field Operations Manual, these country specific policies are implemented at I-TECH. 10. Budget Management and Reporting f. Reports that show the variance between the budget plan and the activity for each region and activity code will be generated, reviewed and approved by the budget managers and the Management Team each month.
2022-030 The University of Washington did not have adequate internal controls over and did not comply with federal requirements to ensure subrecipients of the Global AIDS program received required single or program-specific audits, and that it followed up on findings and issued management decisions. Assistance Listing Number and Title: 93.067 Global AIDS 93.067 COVID-19 Global AIDS Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: NU2GGH001430; NU2GGH001968; NU2GGH002038; NU2GGH002116; NU2GGH002242; NUGGH002360; NU2GGH002157; NU2GGH002298; NU2GGH002374 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Subrecipient Monitoring Known Questioned Cost Amount: None Background The Global AIDS program is a federal initiative focused on treating and preventing the transmission of HIV/AIDS around the world. The program is authorized by Sections 307 and 317(k)(2) of the Public Health Service Act, the U.S. Leadership Against HIV/AIDS, Tuberculosis, and Malaria Acts of 2003 and 2008, and the U.S. President?s Emergency Plan for AIDS Relief. Since it was established in 2003, the federal government has invested more than $100 billion in the global HIV/AIDS response, providing testing and treatment for millions of people, preventing transmission among affected communities, and supporting numerous countries to achieve HIV epidemic control. The program distributes funding through public and private sector partnerships to reach the populations most vulnerable to HIV/AIDS epidemics. The University of Washington administers this grant for the state through its International Training and Education Center for Health (I-TECH). I-TECH is a center in the University?s Department of Global Health operated by more than 2,000 staff in offices located in Africa, Asia, the Caribbean, Eastern Europe and the United States. In fiscal year 2022, the University spent more than $66 million in federal program funds, about $44 million of which it passed through to subrecipients. Federal regulations require the University to monitor its subrecipients? activities. This includes verifying that its subrecipients that spend $750,000 or more in federal awards during a fiscal year obtain a single or program-specific audit. For the Global AIDS program, the Centers for Disease Control and Prevention requires foreign subrecipients to submit their audits directly to the federal government and pass-through entity within 30 days after receiving the auditor?s report or nine months after the end of the subrecipient?s audit period, whichever is earlier. Additionally, for the awards it passes onto its subrecipients, the University must follow up and ensure the subrecipients take timely and appropriate corrective action on all deficiencies identified through audits. When a subrecipient receives an audit finding for a University-funded program, federal law requires the University to issue a management decision to the subrecipient within six months of the audit report?s acceptance by the federal government. The management decision must clearly state whether the audit finding is sustained, the reason for the decision, and the actions the subrecipient is expected to take, such as repaying unallowable costs or making financial adjustments. These requirements help ensure subrecipients use federal program funds for authorized purposes and within the provisions of contracts or grant agreements. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The University did not have adequate internal controls over and did not comply with federal requirements to ensure subrecipients of the Global AIDS program received required single or program-specific audits, and that it appropriately followed up on findings and issued management decisions. We found the University did not have adequate internal controls in place to verify whether: ? Subrecipients received required audits, if necessary, and appropriate remedies were taken if audits were not filed ? Management decisions were required to be issued for subrecipients who required a single or program-specific audit We used a nonstatistical sampling method to randomly select and examine seven out of a total population of 21 subrecipients. We found the University did not adequately monitor one subrecipient (14 percent) to ensure it received a required single or program-specific audit. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition Staff in the University?s Office of Sponsored Programs (OSP) used a spreadsheet to track subrecipient certifications and responses, and reviewed annual certifications from the subrecipient to monitor its audit status. However, OSP did not correctly interpret the subrecipient?s response and, therefore, did not require it to provide documentation of a single or program-specific audit. Additionally, management did not review the subrecipient?s federal assistance expenditures to detect that it required an audit and, therefore, also failed to adequately follow up to ensure any reported findings were resolved with appropriate corrective action, if required. Effect of Condition Without establishing adequate internal controls, the University cannot ensure all subrecipients that required a single or program-specific audit received one. Furthermore, the University cannot ensure it is following up on subrecipient audit findings and communicating required management decisions to subrecipients. By failing to ensure subrecipients establish corrective actions and management monitors them for effectiveness where required, the University cannot determine whether subrecipients have sufficiently corrected issues identified in audit findings. Recommendations We recommend the University: ? Follow policies and procedures to ensure subrecipients receive required single or program-specific audits ? Establish and follow effective internal controls to ensure it reviews audit reports for its subrecipients and issues written management decisions, as required ? Ensure subrecipients develop and perform acceptable corrective actions to adequately address all audit recommendations ? Follow up with the subrecipient to ensure the required audit reports are received and reviewed to determine if the subrecipient is required to take corrective action to address audit recommendations ? Issue a written management decision for all applicable audit findings, if necessary University?s Response The University of Washington has established internal controls to carry out a risk assessment per Uniform Guidance, 2 CFR ? 200.332, Requirements for pass-through entities, and our UW Grants Information Memorandum (GIM) 8. This involves using various factors to assess risk. Part of our process to obtain the information needed from each subrecipient is through a certification process. The certification was obtained from the subrecipient, along with additional documentation from the subrecipient, such as an audited financial statement. We made a risk assessment using our standard risk criteria. We did misinterpret the response provided from the subrecipient regarding whether it expended $750,000 or more in federal awards during a fiscal year in order to obtain a single or program-specific audit from this subrecipient. While this was not obtained and reviewed, a risk assessment using our standard criteria was performed with the subrecipient rated as a medium risk, and subject to monitoring throughout the project, per GIM 8. The monitoring at the program level occurred during the period in question. We will be improving our required communications with subrecipients to have clear questions and responses regarding whether the subrecipient expended $750,000 or more in federal awards during the fiscal year in order to obtain a single or program-specific audit, follow up with the subrecipient to ensure the required audit reports are received and reviewed to determine if the subrecipient is required to take corrective action to address audit recommendations, and issue a written management decision for all applicable audit findings, if necessary. Auditor?s Remarks We thank the University for its cooperation and assistance during the audit. Whether the University performed a risk assessment for the subrecipient is not being questioned. The University did not adequately monitor the subrecipient to ensure it detected whether the subrecipient was required to receive a single audit, or program-specific audit in accordance with 2 CFR ?200.332(f). There is no other mechanism for the Federal government to monitor subrecipients of the University and, because a single audit of the subrecipient was not performed, neither the federal grantor nor the University had reasonable assurance of the subrecipient?s compliance with federal award requirements. We reaffirm our finding and will follow up on the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200, Uniform Guidance, establishes the following applicable requirements: Section 200.332 Requirements for pass-through entities, states in part: All pass-through entities must: (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. (3) Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by ? 200.521. (4) The pass-through entity is responsible for resolving audit findings specifically related to the subaward and not responsible for resolving crosscutting findings. If a subrecipient has a current Single Audit report posted in the Federal Audit Clearinghouse and has not otherwise been excluded from receipt of Federal funding (e.g., has been debarred or suspended), the pass-through entity may rely on the subrecipient?s cognizant audit agency or cognizant oversight agency to perform audit follow-up and make management decisions related to cross-cutting findings in accordance with section ? 200.513(a)(3)(vii). Such reliance does not eliminate the responsibility of the pass-through entity to issue subawards that conform to agency and award-specific requirements, to manage risk through ongoing subaward monitoring, and to monitor the status of the findings that are specifically related to the subaward. (f) Verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the subrecipient?s Federal awards expended during the respective fiscal year equaled or exceeded the threshold set for the in ?200.501 Audit requirements. Section 200.339 Remedies for noncompliance, states: If a non-Federal entity fails to comply with the U.S. Constitution, Federal statutes, regulations or the terms and conditions of a Federal award, the Federal awarding agency or pass-through entity may impose additional conditions, as described in ? 200.208. If the Federal awarding agency or pass-through entity determines that noncompliance cannot be remedied by imposing additional conditions, the Federal awarding agency or pass-through entity may take one or more of the following actions, as appropriate in the circumstances: (a) Temporarily withhold cash payments pending correction of the deficiency by the non-Federal entity or more severe enforcement action by the Federal awarding agency or pass-through entity. (b) Disallow (that is, deny both use of funds and any applicable matching credit for) all or part of the cost of the activity or action not in compliance. (c) Wholly or partly suspend or terminate the Federal award. (d) Initiate suspension or debarment proceedings as authorized under 2 CFR part 180 and Federal awarding agency regulations (or in the case of a pass-through entity, recommend such a proceeding be initiated by a Federal awarding agency). (e) Withhold further Federal awards for the project or program. (f) Take other remedies that may be legally available. Section 200.501 Audit requirements, states in part: (a) Audit required. A non-Federal entity that expends $750,000 or more during the non-Federal entity?s fiscal year in Federal awards must have a single or program-specific audit conducted for that year in accordance with the provisions of this part. (b) Single audit. A non-Federal entity that expends $750,000 or more during the non-Federal entity?s fiscal year in Federal awards must have a single audit conducted in accordance with ? 200.514 except when it elects to have a program-specific audit conducted in accordance with paragraph (c) of this section. Section 200.521 Management decision, states in part: (a) General. The management decision must clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action. If the auditee has not completed corrective action, a timetable for follow-up should be given. Prior to issuing the management decision, the Federal agency or pass-through entity may request additional information or documentation from the auditee, including a request for auditor assurance related to the documentation, as a way of mitigating disallowed costs. The management decision should describe any appeal process available to the auditee. While not required, the Federal agency or pass-through entity may also issue a management decision on findings relating to the financial statements which are required to be reported in accordance with GAGAS. (c) Pass-through entity. As provided in ? 200.332(d), the pass-through entity must be responsible for issuing a management decision for audit findings that relate to Federal awards it makes to subrecipients. (d) Time requirements. The Federal awarding agency or pass-through entity responsible for issuing a management decision must do so within six months of acceptance of the audit report by the FAC. The auditee must initiate and proceed with corrective action as rapidly as possible and corrective action should begin no later than upon receipt of the audit report. (e) Reference numbers. Management decisions must include the reference numbers the auditor assigned to each audit finding in accordance with ? 200.516(c). The University of Washington?s Policies, Procedures and Guidance (UW Research), GIM 8 ? Subrecipient Monitoring, states in part: Background Additionally, per the Federal Uniform Guidance, UW must evaluate each subrecipients? risk of noncompliance with federal regulations, include specific terms and conditions in the subaward as necessary, and monitor the activities of the subrecipient through various mechanisms. These mechanisms include: Training and technical assistance to subrecipients, on-site reviews, review of audit results, increased reporting requirements and enforcement action, if necessary. University Policy UW reviews each subrecipient entity according to an entity level comprehensive risk assessment prior to the issuance of a subaward. This risk assessment includes an entity level review of their fiscal systems, past audit activity, and if required, financial statements of the entity as well as the project specific activity proposed and that the required compliance approvals are obtained. When necessary, UW imposes limitations and requirements on the subrecipient through subaward terms and conditions per Federal Uniform Guidance, Section 200.521, prior to the issuance or renewal of a subaward. UW?s subrecipient monitoring requirements are comprised, at a minimum, of the following: ? Completion of the UW?s entity level comprehensive risk assessment (Certs & Reps, Annual Audit Certification) Subrecipient Monitoring ? Entity Level Entity level monitoring consists of a combination of the following: ? Initial Subrecipient Certification Form completion and assurance by subrecipient?s authorized official ? Annual audit assurance through an annual audit certification form ? Maintenance of a subrecipient profile list, which includes information on the entity?s past audit information and certifications ? Risk assessment carried out at each annual renewal of a subaward
2022-028 The University of Washington did not establish adequate internal controls to ensure payments to contractors and subrecipients for the Global AIDS program were allowable, properly supported and within the period of performance. Assistance Listing Number and Title: 93.067 Global AIDS 93.067 COVID-19 Global AIDS Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: NU2GGH001430; NU2GGH001968; NU2GGH002038; NU2GGH002116; NU2GGH002242; NUGGH002360; NU2GGH002157; NU2GGH002298; NU2GGH002374 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs / Cost Principles Period of Performance Known Questioned Cost Amount: None Background The Global AIDS program is a federal initiative focused on treating and preventing the transmission of HIV/AIDS around the world. The program is authorized by Sections 307 and 317(k)(2) of the Public Health Service Act, the U.S. Leadership Against HIV/AIDS, Tuberculosis, and Malaria Acts of 2003 and 2008, and the U.S. President?s Emergency Plan for AIDS Relief. Since it was established in 2003, the federal government has invested more than $100 billion in the global HIV/AIDS response, providing testing and treatment for millions of people, preventing transmission among affected communities, and supporting numerous countries to achieve HIV epidemic control. The program distributes funding through public and private sector partnerships to reach the populations most vulnerable to HIV/AIDS epidemics. The University of Washington administers this grant for the state through its International Training and Education Center for Health (I-TECH). I-TECH is a center in the University?s Department of Global Health operated by more than 2,000 staff in offices located in Africa, Asia, the Caribbean, Eastern Europe and the United States. In fiscal year 2022, the University spent more than $66 million in federal program funds, about $44 million of which it passed through to subrecipients. To achieve the performance goals of the program, the Seattle headquarters of I-TECH (Seattle HQ) provides funding to subrecipients and contractors. Invoices submitted by contractors directly to Seattle HQ are reviewed and approved for payment by budget managers who have delegated authority from the Principal Investigator. Invoices submitted by subrecipients are reviewed and approved for payment by a Principal Investigator. Principal Investigators are also responsible for monitoring the subrecipient?s technical progress and performance. Seattle HQ also provides funding to country offices operating within the University?s global network. The country offices incur costs associated with furnishing supplies and equipment to address the HIV/AIDS epidemic, as well as staffing resources and acquiring goods and services from contractors to carry out the objectives of the program. Payments made by country offices are approved by Country Directors and Country Representatives as delegated by the University. Under the University?s policies, country offices are reimbursed for locally incurred expenses at least monthly. An invoice, accompanied by a schedule of expenses incurred, is submitted and approved by the Country Director and then by the Director of Finance at Seattle HQ, prior to payment. Country offices also responsible for obtaining and retaining supporting documentation for costs incurred and paid on each project. Monthly, Budget Managers review and approve a Budget Activity Report (BAR) that details the expenses charged to the project for the previous month to ensure accurate posting of already approved expenses. This review is also to determine whether the work performed during the billing period reconciles to costs claimed within the contractor?s invoice so that payment may be authorized. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The University did not have adequate internal controls to ensure payments to contractors and subrecipients of the Global AIDS program were allowable properly supported and within the period of performance. Payments to country offices We used a statistical sampling method to randomly select and examine 58 out of 1,644 transactions for country offices. Of the 58 payments examined, we identified one payment (1.7 percent) that was not approved by the Country Director and the corresponding Budget Activity Report was not approved by the Director of Finance. Payments to contractors We used a statistical sampling method to randomly select and review 58 out of 3,040 payments to contractors. We found: ? Invoices for three payments (5 percent) were not approved by a Budget Manager ? Monthly Budget Activity Reports were not approved for 12 payments (20 percent) Subrecipient reimbursements We used a statistical sampling method to randomly select and review 55 out of 438 payments to subrecipients. We found the assigned Budget Manager did not review and approve the monthly Budget Activity Reports for 52 payments (94 percent). We consider these internal control deficiencies to be a material weakness. This issue was not reported as a finding in the prior audit. Cause of Condition Program management did not require supporting documentation for each payment to be forwarded to and reviewed by headquarters personnel prior to payment authorization. Management also did not monitor the submission of invoices and Budget Activity Reports to ensure they were approved by the responsible Budget Manager, as required. Effect of Condition Without establishing adequate internal controls, the University cannot reasonably ensure it is using federal funds for allowable purposes and that expenditures of federal funds are supported by adequate documentation. Recommendations We recommend the University: ? Improve its internal controls to ensure invoices are properly approved by Principal Investigators, as required ? Improve its internal controls to ensure Budget Mangers review and approve monthly Budget Activity Reports before authorizing payments for projects incurring reimbursement requests ? Ensure it retains supporting documentation sufficient to show costs incurred and paid by the program are allowable, and to demonstrate the required managerial reviews have occurred prior to issuing payment University?s Response In response to the findings for the Global Aids Program, we would like to clarify the following: General Clarification: The draft finding inaccurately represents the role of BARS approvals as part of the internal controls to ensure payments to country offices, contractors and subrecipients are allowable, properly supported and within the period of performance. This is not the role of the BARS review process. Compliance, Budget Manager and PI reviews are the controls that ensure allowability of payments and BARS approvals are after-the-fact validations of accurate posting of already approved expenditures. We provided edits to the Background section to reflect our process. We request in light of this that the description of condition, cause of condition and recommendation sections of this finding be updated accordingly. Payments to country offices I-TECH country offices are not contractors; the offices are an extension of the University of Washington. Your review identified one of fifty-eight samples (1.7%) did not meet the approval requirements set forth in I-TECH?s standard operating procedure. Based on the error percentage, we disagree with this finding. Payments to contractors Payments to contractors have multiple approvals. Upon receipt, individual invoices are approved by the program/budget manager either by signature or email. Invoices are then sent to the I-TECH Accounts Payable Administrator for input to the University?s procurement system, ARIBA, which requires compliance approval from the Accounts Payable Supervisor or other manager, as well as funding approval from the budget manager prior to payment. Approvals of Budget Activity Reports (BARS) are not approval of individual payments to contractors, they are reviews of the monthly expenses posted to the budget and the program manager?s concurrence that the expenses are as expected. The exceptions noted were payments made to country offices instead of contractors. The support for approvals were provided to the State Auditors on April 26, 2023, prior to the completion of fieldwork. We therefore disagree with this finding. We also request that the finding be adjusted to omit the 20% of missing BARS approvals as this is not related to the contractor payments. Subrecipient reimbursements Each subrecipient invoice is reviewed for reasonableness, allowability and allocability by the contracts manager and approved by both budget managers and principal investigators prior to being processed for payment in ARIBA. PI approvals were provided and verified for each subrecipient selection with no omissions noted by the auditors. Approvals of Budget Activity Reports (BARS) are not approval of individual payments to subrecipients, they are after-the-fact reviews of the monthly expenses posted to the budget, intended as documentation of the program manager?s concurrence that the expenses are posted as expected. We acknowledge the instances detailed in the finding where we were unable to produce related BARS approvals for 52 of the transactions; however, we request that the finding be adjusted as these BARS approvals are not related to subrecipient invoice review and approvals. Our record keeping process for BARS approvals was to save the emails in a folder within our Finance Team mailbox. We learned during this review that emails beyond a certain date are deleted but maintained in the MS360 file. We?ve searched for the missing BARS approvals but have not yet been able to locate them. We have since begun saving the approvals to our server to ensure we have access to the data going forward. Auditor?s Remarks The University?s I-TECH Global Operations Manual stipulates that BARs will be generated, reviewed and approved monthly by the Budget Manager and management team. This information was provided to our Office as part of the University?s overall design of internal controls over payments to contractors, subrecipients and country offices. The University responded to our Office on April 20, 2023 adding that ?BAR review is the University?s key post payment control designed to ensure charges are accurately processed, coded and allowable on the budget charged.? We interpret this response to indicate the BAR review process is a monitoring control, and the University asserted on multiple occasions this is a key internal control, which is why we tested it. On January 5, our Office notified University management in writing that the BAR review process would be tested as a key control over the cost principles and period of performance requirements for Global AIDS expenditures. We received no additional inquiry or concerns from University management regarding this internal control until the draft finding was issued on April 14. We provided the University with a final written summary of our fieldwork in this area on April 6, 2023, after fieldwork had concluded. On April 7, the Finance Director responded to our Office in writing confirming they had no further questions or concerns regarding our testing results. It was not until after the University received this finding that additional documentation supporting expenditures tested during the audit were ultimately given to our Office. The basis for this audit finding is the key internal control failure rate of BAR approvals that exceeds our established materiality threshold of five percent, and constitutes a material weakness in internal control, which under the Uniform Guidance is required to be reported as an audit finding in accordance with 2 CFR 200.516 ? Audit findings. We reaffirm our finding and will follow up on the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. The University of Washington?s Policies, Procedures and Guidance (UW Research), GIM 02 ? Acceptance of Sponsored Program Awards and Fiscal Compliance on Sponsored Program Accounts (Budget Numbers), states in part: Responsibilities Principal Investigator ? Supervises expenditure of sponsored program funds and approves sub-recipient invoices (see GIM 8) to assure: o That funds are used only for purposes that directly relate to and benefit the activity supported in the award. o That expenditures are consistent with all special terms, conditions, or limitations that apply to expenditures under the particular grant or contract. o That expenditures do not exceed the total funds authorized for a given period under the grant or contract. GIM 07 ? Sponsored Program Subaward Administration, states in part: Principal Investigator ? Review and approve subaward invoices. GIM 08 ? Subrecipient Monitoring, states in part: Roles & Responsibilities PI / Department Responsibilities Project level monitoring of subrecipient including: o Reviews that expenses are necessary, reasonable, and allocable to the work completed and are aligned with technical progress. o Approve invoices for payment. Subrecipient Monitoring ? Project Level Subrecipient invoices are reviewed and approved in accordance with the requirements of GIM 2 in the manner and frequency stated in the subaward. The University of Washington I-TECH Global Operations Manual (GRef 2.3), Section 2, Finance, Accounting Policy and Procedure Requirements, states in part: In addition to the Fiscal Guidelines set forth in the I-TECH Field Operations Manual, these country specific policies are implemented at I-TECH. 10. Budget Management and Reporting f. Reports that show the variance between the budget plan and the activity for each region and activity code will be generated, reviewed and approved by the budget managers and the Management Team each month.
2022-030 The University of Washington did not have adequate internal controls over and did not comply with federal requirements to ensure subrecipients of the Global AIDS program received required single or program-specific audits, and that it followed up on findings and issued management decisions. Assistance Listing Number and Title: 93.067 Global AIDS 93.067 COVID-19 Global AIDS Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: NU2GGH001430; NU2GGH001968; NU2GGH002038; NU2GGH002116; NU2GGH002242; NUGGH002360; NU2GGH002157; NU2GGH002298; NU2GGH002374 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Subrecipient Monitoring Known Questioned Cost Amount: None Background The Global AIDS program is a federal initiative focused on treating and preventing the transmission of HIV/AIDS around the world. The program is authorized by Sections 307 and 317(k)(2) of the Public Health Service Act, the U.S. Leadership Against HIV/AIDS, Tuberculosis, and Malaria Acts of 2003 and 2008, and the U.S. President?s Emergency Plan for AIDS Relief. Since it was established in 2003, the federal government has invested more than $100 billion in the global HIV/AIDS response, providing testing and treatment for millions of people, preventing transmission among affected communities, and supporting numerous countries to achieve HIV epidemic control. The program distributes funding through public and private sector partnerships to reach the populations most vulnerable to HIV/AIDS epidemics. The University of Washington administers this grant for the state through its International Training and Education Center for Health (I-TECH). I-TECH is a center in the University?s Department of Global Health operated by more than 2,000 staff in offices located in Africa, Asia, the Caribbean, Eastern Europe and the United States. In fiscal year 2022, the University spent more than $66 million in federal program funds, about $44 million of which it passed through to subrecipients. Federal regulations require the University to monitor its subrecipients? activities. This includes verifying that its subrecipients that spend $750,000 or more in federal awards during a fiscal year obtain a single or program-specific audit. For the Global AIDS program, the Centers for Disease Control and Prevention requires foreign subrecipients to submit their audits directly to the federal government and pass-through entity within 30 days after receiving the auditor?s report or nine months after the end of the subrecipient?s audit period, whichever is earlier. Additionally, for the awards it passes onto its subrecipients, the University must follow up and ensure the subrecipients take timely and appropriate corrective action on all deficiencies identified through audits. When a subrecipient receives an audit finding for a University-funded program, federal law requires the University to issue a management decision to the subrecipient within six months of the audit report?s acceptance by the federal government. The management decision must clearly state whether the audit finding is sustained, the reason for the decision, and the actions the subrecipient is expected to take, such as repaying unallowable costs or making financial adjustments. These requirements help ensure subrecipients use federal program funds for authorized purposes and within the provisions of contracts or grant agreements. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The University did not have adequate internal controls over and did not comply with federal requirements to ensure subrecipients of the Global AIDS program received required single or program-specific audits, and that it appropriately followed up on findings and issued management decisions. We found the University did not have adequate internal controls in place to verify whether: ? Subrecipients received required audits, if necessary, and appropriate remedies were taken if audits were not filed ? Management decisions were required to be issued for subrecipients who required a single or program-specific audit We used a nonstatistical sampling method to randomly select and examine seven out of a total population of 21 subrecipients. We found the University did not adequately monitor one subrecipient (14 percent) to ensure it received a required single or program-specific audit. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition Staff in the University?s Office of Sponsored Programs (OSP) used a spreadsheet to track subrecipient certifications and responses, and reviewed annual certifications from the subrecipient to monitor its audit status. However, OSP did not correctly interpret the subrecipient?s response and, therefore, did not require it to provide documentation of a single or program-specific audit. Additionally, management did not review the subrecipient?s federal assistance expenditures to detect that it required an audit and, therefore, also failed to adequately follow up to ensure any reported findings were resolved with appropriate corrective action, if required. Effect of Condition Without establishing adequate internal controls, the University cannot ensure all subrecipients that required a single or program-specific audit received one. Furthermore, the University cannot ensure it is following up on subrecipient audit findings and communicating required management decisions to subrecipients. By failing to ensure subrecipients establish corrective actions and management monitors them for effectiveness where required, the University cannot determine whether subrecipients have sufficiently corrected issues identified in audit findings. Recommendations We recommend the University: ? Follow policies and procedures to ensure subrecipients receive required single or program-specific audits ? Establish and follow effective internal controls to ensure it reviews audit reports for its subrecipients and issues written management decisions, as required ? Ensure subrecipients develop and perform acceptable corrective actions to adequately address all audit recommendations ? Follow up with the subrecipient to ensure the required audit reports are received and reviewed to determine if the subrecipient is required to take corrective action to address audit recommendations ? Issue a written management decision for all applicable audit findings, if necessary University?s Response The University of Washington has established internal controls to carry out a risk assessment per Uniform Guidance, 2 CFR ? 200.332, Requirements for pass-through entities, and our UW Grants Information Memorandum (GIM) 8. This involves using various factors to assess risk. Part of our process to obtain the information needed from each subrecipient is through a certification process. The certification was obtained from the subrecipient, along with additional documentation from the subrecipient, such as an audited financial statement. We made a risk assessment using our standard risk criteria. We did misinterpret the response provided from the subrecipient regarding whether it expended $750,000 or more in federal awards during a fiscal year in order to obtain a single or program-specific audit from this subrecipient. While this was not obtained and reviewed, a risk assessment using our standard criteria was performed with the subrecipient rated as a medium risk, and subject to monitoring throughout the project, per GIM 8. The monitoring at the program level occurred during the period in question. We will be improving our required communications with subrecipients to have clear questions and responses regarding whether the subrecipient expended $750,000 or more in federal awards during the fiscal year in order to obtain a single or program-specific audit, follow up with the subrecipient to ensure the required audit reports are received and reviewed to determine if the subrecipient is required to take corrective action to address audit recommendations, and issue a written management decision for all applicable audit findings, if necessary. Auditor?s Remarks We thank the University for its cooperation and assistance during the audit. Whether the University performed a risk assessment for the subrecipient is not being questioned. The University did not adequately monitor the subrecipient to ensure it detected whether the subrecipient was required to receive a single audit, or program-specific audit in accordance with 2 CFR ?200.332(f). There is no other mechanism for the Federal government to monitor subrecipients of the University and, because a single audit of the subrecipient was not performed, neither the federal grantor nor the University had reasonable assurance of the subrecipient?s compliance with federal award requirements. We reaffirm our finding and will follow up on the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200, Uniform Guidance, establishes the following applicable requirements: Section 200.332 Requirements for pass-through entities, states in part: All pass-through entities must: (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. (3) Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by ? 200.521. (4) The pass-through entity is responsible for resolving audit findings specifically related to the subaward and not responsible for resolving crosscutting findings. If a subrecipient has a current Single Audit report posted in the Federal Audit Clearinghouse and has not otherwise been excluded from receipt of Federal funding (e.g., has been debarred or suspended), the pass-through entity may rely on the subrecipient?s cognizant audit agency or cognizant oversight agency to perform audit follow-up and make management decisions related to cross-cutting findings in accordance with section ? 200.513(a)(3)(vii). Such reliance does not eliminate the responsibility of the pass-through entity to issue subawards that conform to agency and award-specific requirements, to manage risk through ongoing subaward monitoring, and to monitor the status of the findings that are specifically related to the subaward. (f) Verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the subrecipient?s Federal awards expended during the respective fiscal year equaled or exceeded the threshold set for the in ?200.501 Audit requirements. Section 200.339 Remedies for noncompliance, states: If a non-Federal entity fails to comply with the U.S. Constitution, Federal statutes, regulations or the terms and conditions of a Federal award, the Federal awarding agency or pass-through entity may impose additional conditions, as described in ? 200.208. If the Federal awarding agency or pass-through entity determines that noncompliance cannot be remedied by imposing additional conditions, the Federal awarding agency or pass-through entity may take one or more of the following actions, as appropriate in the circumstances: (a) Temporarily withhold cash payments pending correction of the deficiency by the non-Federal entity or more severe enforcement action by the Federal awarding agency or pass-through entity. (b) Disallow (that is, deny both use of funds and any applicable matching credit for) all or part of the cost of the activity or action not in compliance. (c) Wholly or partly suspend or terminate the Federal award. (d) Initiate suspension or debarment proceedings as authorized under 2 CFR part 180 and Federal awarding agency regulations (or in the case of a pass-through entity, recommend such a proceeding be initiated by a Federal awarding agency). (e) Withhold further Federal awards for the project or program. (f) Take other remedies that may be legally available. Section 200.501 Audit requirements, states in part: (a) Audit required. A non-Federal entity that expends $750,000 or more during the non-Federal entity?s fiscal year in Federal awards must have a single or program-specific audit conducted for that year in accordance with the provisions of this part. (b) Single audit. A non-Federal entity that expends $750,000 or more during the non-Federal entity?s fiscal year in Federal awards must have a single audit conducted in accordance with ? 200.514 except when it elects to have a program-specific audit conducted in accordance with paragraph (c) of this section. Section 200.521 Management decision, states in part: (a) General. The management decision must clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action. If the auditee has not completed corrective action, a timetable for follow-up should be given. Prior to issuing the management decision, the Federal agency or pass-through entity may request additional information or documentation from the auditee, including a request for auditor assurance related to the documentation, as a way of mitigating disallowed costs. The management decision should describe any appeal process available to the auditee. While not required, the Federal agency or pass-through entity may also issue a management decision on findings relating to the financial statements which are required to be reported in accordance with GAGAS. (c) Pass-through entity. As provided in ? 200.332(d), the pass-through entity must be responsible for issuing a management decision for audit findings that relate to Federal awards it makes to subrecipients. (d) Time requirements. The Federal awarding agency or pass-through entity responsible for issuing a management decision must do so within six months of acceptance of the audit report by the FAC. The auditee must initiate and proceed with corrective action as rapidly as possible and corrective action should begin no later than upon receipt of the audit report. (e) Reference numbers. Management decisions must include the reference numbers the auditor assigned to each audit finding in accordance with ? 200.516(c). The University of Washington?s Policies, Procedures and Guidance (UW Research), GIM 8 ? Subrecipient Monitoring, states in part: Background Additionally, per the Federal Uniform Guidance, UW must evaluate each subrecipients? risk of noncompliance with federal regulations, include specific terms and conditions in the subaward as necessary, and monitor the activities of the subrecipient through various mechanisms. These mechanisms include: Training and technical assistance to subrecipients, on-site reviews, review of audit results, increased reporting requirements and enforcement action, if necessary. University Policy UW reviews each subrecipient entity according to an entity level comprehensive risk assessment prior to the issuance of a subaward. This risk assessment includes an entity level review of their fiscal systems, past audit activity, and if required, financial statements of the entity as well as the project specific activity proposed and that the required compliance approvals are obtained. When necessary, UW imposes limitations and requirements on the subrecipient through subaward terms and conditions per Federal Uniform Guidance, Section 200.521, prior to the issuance or renewal of a subaward. UW?s subrecipient monitoring requirements are comprised, at a minimum, of the following: ? Completion of the UW?s entity level comprehensive risk assessment (Certs & Reps, Annual Audit Certification) Subrecipient Monitoring ? Entity Level Entity level monitoring consists of a combination of the following: ? Initial Subrecipient Certification Form completion and assurance by subrecipient?s authorized official ? Annual audit assurance through an annual audit certification form ? Maintenance of a subrecipient profile list, which includes information on the entity?s past audit information and certifications ? Risk assessment carried out at each annual renewal of a subaward
2022-028 The University of Washington did not establish adequate internal controls to ensure payments to contractors and subrecipients for the Global AIDS program were allowable, properly supported and within the period of performance. Assistance Listing Number and Title: 93.067 Global AIDS 93.067 COVID-19 Global AIDS Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: NU2GGH001430; NU2GGH001968; NU2GGH002038; NU2GGH002116; NU2GGH002242; NUGGH002360; NU2GGH002157; NU2GGH002298; NU2GGH002374 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs / Cost Principles Period of Performance Known Questioned Cost Amount: None Background The Global AIDS program is a federal initiative focused on treating and preventing the transmission of HIV/AIDS around the world. The program is authorized by Sections 307 and 317(k)(2) of the Public Health Service Act, the U.S. Leadership Against HIV/AIDS, Tuberculosis, and Malaria Acts of 2003 and 2008, and the U.S. President?s Emergency Plan for AIDS Relief. Since it was established in 2003, the federal government has invested more than $100 billion in the global HIV/AIDS response, providing testing and treatment for millions of people, preventing transmission among affected communities, and supporting numerous countries to achieve HIV epidemic control. The program distributes funding through public and private sector partnerships to reach the populations most vulnerable to HIV/AIDS epidemics. The University of Washington administers this grant for the state through its International Training and Education Center for Health (I-TECH). I-TECH is a center in the University?s Department of Global Health operated by more than 2,000 staff in offices located in Africa, Asia, the Caribbean, Eastern Europe and the United States. In fiscal year 2022, the University spent more than $66 million in federal program funds, about $44 million of which it passed through to subrecipients. To achieve the performance goals of the program, the Seattle headquarters of I-TECH (Seattle HQ) provides funding to subrecipients and contractors. Invoices submitted by contractors directly to Seattle HQ are reviewed and approved for payment by budget managers who have delegated authority from the Principal Investigator. Invoices submitted by subrecipients are reviewed and approved for payment by a Principal Investigator. Principal Investigators are also responsible for monitoring the subrecipient?s technical progress and performance. Seattle HQ also provides funding to country offices operating within the University?s global network. The country offices incur costs associated with furnishing supplies and equipment to address the HIV/AIDS epidemic, as well as staffing resources and acquiring goods and services from contractors to carry out the objectives of the program. Payments made by country offices are approved by Country Directors and Country Representatives as delegated by the University. Under the University?s policies, country offices are reimbursed for locally incurred expenses at least monthly. An invoice, accompanied by a schedule of expenses incurred, is submitted and approved by the Country Director and then by the Director of Finance at Seattle HQ, prior to payment. Country offices also responsible for obtaining and retaining supporting documentation for costs incurred and paid on each project. Monthly, Budget Managers review and approve a Budget Activity Report (BAR) that details the expenses charged to the project for the previous month to ensure accurate posting of already approved expenses. This review is also to determine whether the work performed during the billing period reconciles to costs claimed within the contractor?s invoice so that payment may be authorized. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The University did not have adequate internal controls to ensure payments to contractors and subrecipients of the Global AIDS program were allowable properly supported and within the period of performance. Payments to country offices We used a statistical sampling method to randomly select and examine 58 out of 1,644 transactions for country offices. Of the 58 payments examined, we identified one payment (1.7 percent) that was not approved by the Country Director and the corresponding Budget Activity Report was not approved by the Director of Finance. Payments to contractors We used a statistical sampling method to randomly select and review 58 out of 3,040 payments to contractors. We found: ? Invoices for three payments (5 percent) were not approved by a Budget Manager ? Monthly Budget Activity Reports were not approved for 12 payments (20 percent) Subrecipient reimbursements We used a statistical sampling method to randomly select and review 55 out of 438 payments to subrecipients. We found the assigned Budget Manager did not review and approve the monthly Budget Activity Reports for 52 payments (94 percent). We consider these internal control deficiencies to be a material weakness. This issue was not reported as a finding in the prior audit. Cause of Condition Program management did not require supporting documentation for each payment to be forwarded to and reviewed by headquarters personnel prior to payment authorization. Management also did not monitor the submission of invoices and Budget Activity Reports to ensure they were approved by the responsible Budget Manager, as required. Effect of Condition Without establishing adequate internal controls, the University cannot reasonably ensure it is using federal funds for allowable purposes and that expenditures of federal funds are supported by adequate documentation. Recommendations We recommend the University: ? Improve its internal controls to ensure invoices are properly approved by Principal Investigators, as required ? Improve its internal controls to ensure Budget Mangers review and approve monthly Budget Activity Reports before authorizing payments for projects incurring reimbursement requests ? Ensure it retains supporting documentation sufficient to show costs incurred and paid by the program are allowable, and to demonstrate the required managerial reviews have occurred prior to issuing payment University?s Response In response to the findings for the Global Aids Program, we would like to clarify the following: General Clarification: The draft finding inaccurately represents the role of BARS approvals as part of the internal controls to ensure payments to country offices, contractors and subrecipients are allowable, properly supported and within the period of performance. This is not the role of the BARS review process. Compliance, Budget Manager and PI reviews are the controls that ensure allowability of payments and BARS approvals are after-the-fact validations of accurate posting of already approved expenditures. We provided edits to the Background section to reflect our process. We request in light of this that the description of condition, cause of condition and recommendation sections of this finding be updated accordingly. Payments to country offices I-TECH country offices are not contractors; the offices are an extension of the University of Washington. Your review identified one of fifty-eight samples (1.7%) did not meet the approval requirements set forth in I-TECH?s standard operating procedure. Based on the error percentage, we disagree with this finding. Payments to contractors Payments to contractors have multiple approvals. Upon receipt, individual invoices are approved by the program/budget manager either by signature or email. Invoices are then sent to the I-TECH Accounts Payable Administrator for input to the University?s procurement system, ARIBA, which requires compliance approval from the Accounts Payable Supervisor or other manager, as well as funding approval from the budget manager prior to payment. Approvals of Budget Activity Reports (BARS) are not approval of individual payments to contractors, they are reviews of the monthly expenses posted to the budget and the program manager?s concurrence that the expenses are as expected. The exceptions noted were payments made to country offices instead of contractors. The support for approvals were provided to the State Auditors on April 26, 2023, prior to the completion of fieldwork. We therefore disagree with this finding. We also request that the finding be adjusted to omit the 20% of missing BARS approvals as this is not related to the contractor payments. Subrecipient reimbursements Each subrecipient invoice is reviewed for reasonableness, allowability and allocability by the contracts manager and approved by both budget managers and principal investigators prior to being processed for payment in ARIBA. PI approvals were provided and verified for each subrecipient selection with no omissions noted by the auditors. Approvals of Budget Activity Reports (BARS) are not approval of individual payments to subrecipients, they are after-the-fact reviews of the monthly expenses posted to the budget, intended as documentation of the program manager?s concurrence that the expenses are posted as expected. We acknowledge the instances detailed in the finding where we were unable to produce related BARS approvals for 52 of the transactions; however, we request that the finding be adjusted as these BARS approvals are not related to subrecipient invoice review and approvals. Our record keeping process for BARS approvals was to save the emails in a folder within our Finance Team mailbox. We learned during this review that emails beyond a certain date are deleted but maintained in the MS360 file. We?ve searched for the missing BARS approvals but have not yet been able to locate them. We have since begun saving the approvals to our server to ensure we have access to the data going forward. Auditor?s Remarks The University?s I-TECH Global Operations Manual stipulates that BARs will be generated, reviewed and approved monthly by the Budget Manager and management team. This information was provided to our Office as part of the University?s overall design of internal controls over payments to contractors, subrecipients and country offices. The University responded to our Office on April 20, 2023 adding that ?BAR review is the University?s key post payment control designed to ensure charges are accurately processed, coded and allowable on the budget charged.? We interpret this response to indicate the BAR review process is a monitoring control, and the University asserted on multiple occasions this is a key internal control, which is why we tested it. On January 5, our Office notified University management in writing that the BAR review process would be tested as a key control over the cost principles and period of performance requirements for Global AIDS expenditures. We received no additional inquiry or concerns from University management regarding this internal control until the draft finding was issued on April 14. We provided the University with a final written summary of our fieldwork in this area on April 6, 2023, after fieldwork had concluded. On April 7, the Finance Director responded to our Office in writing confirming they had no further questions or concerns regarding our testing results. It was not until after the University received this finding that additional documentation supporting expenditures tested during the audit were ultimately given to our Office. The basis for this audit finding is the key internal control failure rate of BAR approvals that exceeds our established materiality threshold of five percent, and constitutes a material weakness in internal control, which under the Uniform Guidance is required to be reported as an audit finding in accordance with 2 CFR 200.516 ? Audit findings. We reaffirm our finding and will follow up on the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. The University of Washington?s Policies, Procedures and Guidance (UW Research), GIM 02 ? Acceptance of Sponsored Program Awards and Fiscal Compliance on Sponsored Program Accounts (Budget Numbers), states in part: Responsibilities Principal Investigator ? Supervises expenditure of sponsored program funds and approves sub-recipient invoices (see GIM 8) to assure: o That funds are used only for purposes that directly relate to and benefit the activity supported in the award. o That expenditures are consistent with all special terms, conditions, or limitations that apply to expenditures under the particular grant or contract. o That expenditures do not exceed the total funds authorized for a given period under the grant or contract. GIM 07 ? Sponsored Program Subaward Administration, states in part: Principal Investigator ? Review and approve subaward invoices. GIM 08 ? Subrecipient Monitoring, states in part: Roles & Responsibilities PI / Department Responsibilities Project level monitoring of subrecipient including: o Reviews that expenses are necessary, reasonable, and allocable to the work completed and are aligned with technical progress. o Approve invoices for payment. Subrecipient Monitoring ? Project Level Subrecipient invoices are reviewed and approved in accordance with the requirements of GIM 2 in the manner and frequency stated in the subaward. The University of Washington I-TECH Global Operations Manual (GRef 2.3), Section 2, Finance, Accounting Policy and Procedure Requirements, states in part: In addition to the Fiscal Guidelines set forth in the I-TECH Field Operations Manual, these country specific policies are implemented at I-TECH. 10. Budget Management and Reporting f. Reports that show the variance between the budget plan and the activity for each region and activity code will be generated, reviewed and approved by the budget managers and the Management Team each month.
2022-030 The University of Washington did not have adequate internal controls over and did not comply with federal requirements to ensure subrecipients of the Global AIDS program received required single or program-specific audits, and that it followed up on findings and issued management decisions. Assistance Listing Number and Title: 93.067 Global AIDS 93.067 COVID-19 Global AIDS Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: NU2GGH001430; NU2GGH001968; NU2GGH002038; NU2GGH002116; NU2GGH002242; NUGGH002360; NU2GGH002157; NU2GGH002298; NU2GGH002374 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Subrecipient Monitoring Known Questioned Cost Amount: None Background The Global AIDS program is a federal initiative focused on treating and preventing the transmission of HIV/AIDS around the world. The program is authorized by Sections 307 and 317(k)(2) of the Public Health Service Act, the U.S. Leadership Against HIV/AIDS, Tuberculosis, and Malaria Acts of 2003 and 2008, and the U.S. President?s Emergency Plan for AIDS Relief. Since it was established in 2003, the federal government has invested more than $100 billion in the global HIV/AIDS response, providing testing and treatment for millions of people, preventing transmission among affected communities, and supporting numerous countries to achieve HIV epidemic control. The program distributes funding through public and private sector partnerships to reach the populations most vulnerable to HIV/AIDS epidemics. The University of Washington administers this grant for the state through its International Training and Education Center for Health (I-TECH). I-TECH is a center in the University?s Department of Global Health operated by more than 2,000 staff in offices located in Africa, Asia, the Caribbean, Eastern Europe and the United States. In fiscal year 2022, the University spent more than $66 million in federal program funds, about $44 million of which it passed through to subrecipients. Federal regulations require the University to monitor its subrecipients? activities. This includes verifying that its subrecipients that spend $750,000 or more in federal awards during a fiscal year obtain a single or program-specific audit. For the Global AIDS program, the Centers for Disease Control and Prevention requires foreign subrecipients to submit their audits directly to the federal government and pass-through entity within 30 days after receiving the auditor?s report or nine months after the end of the subrecipient?s audit period, whichever is earlier. Additionally, for the awards it passes onto its subrecipients, the University must follow up and ensure the subrecipients take timely and appropriate corrective action on all deficiencies identified through audits. When a subrecipient receives an audit finding for a University-funded program, federal law requires the University to issue a management decision to the subrecipient within six months of the audit report?s acceptance by the federal government. The management decision must clearly state whether the audit finding is sustained, the reason for the decision, and the actions the subrecipient is expected to take, such as repaying unallowable costs or making financial adjustments. These requirements help ensure subrecipients use federal program funds for authorized purposes and within the provisions of contracts or grant agreements. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The University did not have adequate internal controls over and did not comply with federal requirements to ensure subrecipients of the Global AIDS program received required single or program-specific audits, and that it appropriately followed up on findings and issued management decisions. We found the University did not have adequate internal controls in place to verify whether: ? Subrecipients received required audits, if necessary, and appropriate remedies were taken if audits were not filed ? Management decisions were required to be issued for subrecipients who required a single or program-specific audit We used a nonstatistical sampling method to randomly select and examine seven out of a total population of 21 subrecipients. We found the University did not adequately monitor one subrecipient (14 percent) to ensure it received a required single or program-specific audit. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition Staff in the University?s Office of Sponsored Programs (OSP) used a spreadsheet to track subrecipient certifications and responses, and reviewed annual certifications from the subrecipient to monitor its audit status. However, OSP did not correctly interpret the subrecipient?s response and, therefore, did not require it to provide documentation of a single or program-specific audit. Additionally, management did not review the subrecipient?s federal assistance expenditures to detect that it required an audit and, therefore, also failed to adequately follow up to ensure any reported findings were resolved with appropriate corrective action, if required. Effect of Condition Without establishing adequate internal controls, the University cannot ensure all subrecipients that required a single or program-specific audit received one. Furthermore, the University cannot ensure it is following up on subrecipient audit findings and communicating required management decisions to subrecipients. By failing to ensure subrecipients establish corrective actions and management monitors them for effectiveness where required, the University cannot determine whether subrecipients have sufficiently corrected issues identified in audit findings. Recommendations We recommend the University: ? Follow policies and procedures to ensure subrecipients receive required single or program-specific audits ? Establish and follow effective internal controls to ensure it reviews audit reports for its subrecipients and issues written management decisions, as required ? Ensure subrecipients develop and perform acceptable corrective actions to adequately address all audit recommendations ? Follow up with the subrecipient to ensure the required audit reports are received and reviewed to determine if the subrecipient is required to take corrective action to address audit recommendations ? Issue a written management decision for all applicable audit findings, if necessary University?s Response The University of Washington has established internal controls to carry out a risk assessment per Uniform Guidance, 2 CFR ? 200.332, Requirements for pass-through entities, and our UW Grants Information Memorandum (GIM) 8. This involves using various factors to assess risk. Part of our process to obtain the information needed from each subrecipient is through a certification process. The certification was obtained from the subrecipient, along with additional documentation from the subrecipient, such as an audited financial statement. We made a risk assessment using our standard risk criteria. We did misinterpret the response provided from the subrecipient regarding whether it expended $750,000 or more in federal awards during a fiscal year in order to obtain a single or program-specific audit from this subrecipient. While this was not obtained and reviewed, a risk assessment using our standard criteria was performed with the subrecipient rated as a medium risk, and subject to monitoring throughout the project, per GIM 8. The monitoring at the program level occurred during the period in question. We will be improving our required communications with subrecipients to have clear questions and responses regarding whether the subrecipient expended $750,000 or more in federal awards during the fiscal year in order to obtain a single or program-specific audit, follow up with the subrecipient to ensure the required audit reports are received and reviewed to determine if the subrecipient is required to take corrective action to address audit recommendations, and issue a written management decision for all applicable audit findings, if necessary. Auditor?s Remarks We thank the University for its cooperation and assistance during the audit. Whether the University performed a risk assessment for the subrecipient is not being questioned. The University did not adequately monitor the subrecipient to ensure it detected whether the subrecipient was required to receive a single audit, or program-specific audit in accordance with 2 CFR ?200.332(f). There is no other mechanism for the Federal government to monitor subrecipients of the University and, because a single audit of the subrecipient was not performed, neither the federal grantor nor the University had reasonable assurance of the subrecipient?s compliance with federal award requirements. We reaffirm our finding and will follow up on the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200, Uniform Guidance, establishes the following applicable requirements: Section 200.332 Requirements for pass-through entities, states in part: All pass-through entities must: (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. (3) Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by ? 200.521. (4) The pass-through entity is responsible for resolving audit findings specifically related to the subaward and not responsible for resolving crosscutting findings. If a subrecipient has a current Single Audit report posted in the Federal Audit Clearinghouse and has not otherwise been excluded from receipt of Federal funding (e.g., has been debarred or suspended), the pass-through entity may rely on the subrecipient?s cognizant audit agency or cognizant oversight agency to perform audit follow-up and make management decisions related to cross-cutting findings in accordance with section ? 200.513(a)(3)(vii). Such reliance does not eliminate the responsibility of the pass-through entity to issue subawards that conform to agency and award-specific requirements, to manage risk through ongoing subaward monitoring, and to monitor the status of the findings that are specifically related to the subaward. (f) Verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the subrecipient?s Federal awards expended during the respective fiscal year equaled or exceeded the threshold set for the in ?200.501 Audit requirements. Section 200.339 Remedies for noncompliance, states: If a non-Federal entity fails to comply with the U.S. Constitution, Federal statutes, regulations or the terms and conditions of a Federal award, the Federal awarding agency or pass-through entity may impose additional conditions, as described in ? 200.208. If the Federal awarding agency or pass-through entity determines that noncompliance cannot be remedied by imposing additional conditions, the Federal awarding agency or pass-through entity may take one or more of the following actions, as appropriate in the circumstances: (a) Temporarily withhold cash payments pending correction of the deficiency by the non-Federal entity or more severe enforcement action by the Federal awarding agency or pass-through entity. (b) Disallow (that is, deny both use of funds and any applicable matching credit for) all or part of the cost of the activity or action not in compliance. (c) Wholly or partly suspend or terminate the Federal award. (d) Initiate suspension or debarment proceedings as authorized under 2 CFR part 180 and Federal awarding agency regulations (or in the case of a pass-through entity, recommend such a proceeding be initiated by a Federal awarding agency). (e) Withhold further Federal awards for the project or program. (f) Take other remedies that may be legally available. Section 200.501 Audit requirements, states in part: (a) Audit required. A non-Federal entity that expends $750,000 or more during the non-Federal entity?s fiscal year in Federal awards must have a single or program-specific audit conducted for that year in accordance with the provisions of this part. (b) Single audit. A non-Federal entity that expends $750,000 or more during the non-Federal entity?s fiscal year in Federal awards must have a single audit conducted in accordance with ? 200.514 except when it elects to have a program-specific audit conducted in accordance with paragraph (c) of this section. Section 200.521 Management decision, states in part: (a) General. The management decision must clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action. If the auditee has not completed corrective action, a timetable for follow-up should be given. Prior to issuing the management decision, the Federal agency or pass-through entity may request additional information or documentation from the auditee, including a request for auditor assurance related to the documentation, as a way of mitigating disallowed costs. The management decision should describe any appeal process available to the auditee. While not required, the Federal agency or pass-through entity may also issue a management decision on findings relating to the financial statements which are required to be reported in accordance with GAGAS. (c) Pass-through entity. As provided in ? 200.332(d), the pass-through entity must be responsible for issuing a management decision for audit findings that relate to Federal awards it makes to subrecipients. (d) Time requirements. The Federal awarding agency or pass-through entity responsible for issuing a management decision must do so within six months of acceptance of the audit report by the FAC. The auditee must initiate and proceed with corrective action as rapidly as possible and corrective action should begin no later than upon receipt of the audit report. (e) Reference numbers. Management decisions must include the reference numbers the auditor assigned to each audit finding in accordance with ? 200.516(c). The University of Washington?s Policies, Procedures and Guidance (UW Research), GIM 8 ? Subrecipient Monitoring, states in part: Background Additionally, per the Federal Uniform Guidance, UW must evaluate each subrecipients? risk of noncompliance with federal regulations, include specific terms and conditions in the subaward as necessary, and monitor the activities of the subrecipient through various mechanisms. These mechanisms include: Training and technical assistance to subrecipients, on-site reviews, review of audit results, increased reporting requirements and enforcement action, if necessary. University Policy UW reviews each subrecipient entity according to an entity level comprehensive risk assessment prior to the issuance of a subaward. This risk assessment includes an entity level review of their fiscal systems, past audit activity, and if required, financial statements of the entity as well as the project specific activity proposed and that the required compliance approvals are obtained. When necessary, UW imposes limitations and requirements on the subrecipient through subaward terms and conditions per Federal Uniform Guidance, Section 200.521, prior to the issuance or renewal of a subaward. UW?s subrecipient monitoring requirements are comprised, at a minimum, of the following: ? Completion of the UW?s entity level comprehensive risk assessment (Certs & Reps, Annual Audit Certification) Subrecipient Monitoring ? Entity Level Entity level monitoring consists of a combination of the following: ? Initial Subrecipient Certification Form completion and assurance by subrecipient?s authorized official ? Annual audit assurance through an annual audit certification form ? Maintenance of a subrecipient profile list, which includes information on the entity?s past audit information and certifications ? Risk assessment carried out at each annual renewal of a subaward
2022-028 The University of Washington did not establish adequate internal controls to ensure payments to contractors and subrecipients for the Global AIDS program were allowable, properly supported and within the period of performance. Assistance Listing Number and Title: 93.067 Global AIDS 93.067 COVID-19 Global AIDS Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: NU2GGH001430; NU2GGH001968; NU2GGH002038; NU2GGH002116; NU2GGH002242; NUGGH002360; NU2GGH002157; NU2GGH002298; NU2GGH002374 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs / Cost Principles Period of Performance Known Questioned Cost Amount: None Background The Global AIDS program is a federal initiative focused on treating and preventing the transmission of HIV/AIDS around the world. The program is authorized by Sections 307 and 317(k)(2) of the Public Health Service Act, the U.S. Leadership Against HIV/AIDS, Tuberculosis, and Malaria Acts of 2003 and 2008, and the U.S. President?s Emergency Plan for AIDS Relief. Since it was established in 2003, the federal government has invested more than $100 billion in the global HIV/AIDS response, providing testing and treatment for millions of people, preventing transmission among affected communities, and supporting numerous countries to achieve HIV epidemic control. The program distributes funding through public and private sector partnerships to reach the populations most vulnerable to HIV/AIDS epidemics. The University of Washington administers this grant for the state through its International Training and Education Center for Health (I-TECH). I-TECH is a center in the University?s Department of Global Health operated by more than 2,000 staff in offices located in Africa, Asia, the Caribbean, Eastern Europe and the United States. In fiscal year 2022, the University spent more than $66 million in federal program funds, about $44 million of which it passed through to subrecipients. To achieve the performance goals of the program, the Seattle headquarters of I-TECH (Seattle HQ) provides funding to subrecipients and contractors. Invoices submitted by contractors directly to Seattle HQ are reviewed and approved for payment by budget managers who have delegated authority from the Principal Investigator. Invoices submitted by subrecipients are reviewed and approved for payment by a Principal Investigator. Principal Investigators are also responsible for monitoring the subrecipient?s technical progress and performance. Seattle HQ also provides funding to country offices operating within the University?s global network. The country offices incur costs associated with furnishing supplies and equipment to address the HIV/AIDS epidemic, as well as staffing resources and acquiring goods and services from contractors to carry out the objectives of the program. Payments made by country offices are approved by Country Directors and Country Representatives as delegated by the University. Under the University?s policies, country offices are reimbursed for locally incurred expenses at least monthly. An invoice, accompanied by a schedule of expenses incurred, is submitted and approved by the Country Director and then by the Director of Finance at Seattle HQ, prior to payment. Country offices also responsible for obtaining and retaining supporting documentation for costs incurred and paid on each project. Monthly, Budget Managers review and approve a Budget Activity Report (BAR) that details the expenses charged to the project for the previous month to ensure accurate posting of already approved expenses. This review is also to determine whether the work performed during the billing period reconciles to costs claimed within the contractor?s invoice so that payment may be authorized. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The University did not have adequate internal controls to ensure payments to contractors and subrecipients of the Global AIDS program were allowable properly supported and within the period of performance. Payments to country offices We used a statistical sampling method to randomly select and examine 58 out of 1,644 transactions for country offices. Of the 58 payments examined, we identified one payment (1.7 percent) that was not approved by the Country Director and the corresponding Budget Activity Report was not approved by the Director of Finance. Payments to contractors We used a statistical sampling method to randomly select and review 58 out of 3,040 payments to contractors. We found: ? Invoices for three payments (5 percent) were not approved by a Budget Manager ? Monthly Budget Activity Reports were not approved for 12 payments (20 percent) Subrecipient reimbursements We used a statistical sampling method to randomly select and review 55 out of 438 payments to subrecipients. We found the assigned Budget Manager did not review and approve the monthly Budget Activity Reports for 52 payments (94 percent). We consider these internal control deficiencies to be a material weakness. This issue was not reported as a finding in the prior audit. Cause of Condition Program management did not require supporting documentation for each payment to be forwarded to and reviewed by headquarters personnel prior to payment authorization. Management also did not monitor the submission of invoices and Budget Activity Reports to ensure they were approved by the responsible Budget Manager, as required. Effect of Condition Without establishing adequate internal controls, the University cannot reasonably ensure it is using federal funds for allowable purposes and that expenditures of federal funds are supported by adequate documentation. Recommendations We recommend the University: ? Improve its internal controls to ensure invoices are properly approved by Principal Investigators, as required ? Improve its internal controls to ensure Budget Mangers review and approve monthly Budget Activity Reports before authorizing payments for projects incurring reimbursement requests ? Ensure it retains supporting documentation sufficient to show costs incurred and paid by the program are allowable, and to demonstrate the required managerial reviews have occurred prior to issuing payment University?s Response In response to the findings for the Global Aids Program, we would like to clarify the following: General Clarification: The draft finding inaccurately represents the role of BARS approvals as part of the internal controls to ensure payments to country offices, contractors and subrecipients are allowable, properly supported and within the period of performance. This is not the role of the BARS review process. Compliance, Budget Manager and PI reviews are the controls that ensure allowability of payments and BARS approvals are after-the-fact validations of accurate posting of already approved expenditures. We provided edits to the Background section to reflect our process. We request in light of this that the description of condition, cause of condition and recommendation sections of this finding be updated accordingly. Payments to country offices I-TECH country offices are not contractors; the offices are an extension of the University of Washington. Your review identified one of fifty-eight samples (1.7%) did not meet the approval requirements set forth in I-TECH?s standard operating procedure. Based on the error percentage, we disagree with this finding. Payments to contractors Payments to contractors have multiple approvals. Upon receipt, individual invoices are approved by the program/budget manager either by signature or email. Invoices are then sent to the I-TECH Accounts Payable Administrator for input to the University?s procurement system, ARIBA, which requires compliance approval from the Accounts Payable Supervisor or other manager, as well as funding approval from the budget manager prior to payment. Approvals of Budget Activity Reports (BARS) are not approval of individual payments to contractors, they are reviews of the monthly expenses posted to the budget and the program manager?s concurrence that the expenses are as expected. The exceptions noted were payments made to country offices instead of contractors. The support for approvals were provided to the State Auditors on April 26, 2023, prior to the completion of fieldwork. We therefore disagree with this finding. We also request that the finding be adjusted to omit the 20% of missing BARS approvals as this is not related to the contractor payments. Subrecipient reimbursements Each subrecipient invoice is reviewed for reasonableness, allowability and allocability by the contracts manager and approved by both budget managers and principal investigators prior to being processed for payment in ARIBA. PI approvals were provided and verified for each subrecipient selection with no omissions noted by the auditors. Approvals of Budget Activity Reports (BARS) are not approval of individual payments to subrecipients, they are after-the-fact reviews of the monthly expenses posted to the budget, intended as documentation of the program manager?s concurrence that the expenses are posted as expected. We acknowledge the instances detailed in the finding where we were unable to produce related BARS approvals for 52 of the transactions; however, we request that the finding be adjusted as these BARS approvals are not related to subrecipient invoice review and approvals. Our record keeping process for BARS approvals was to save the emails in a folder within our Finance Team mailbox. We learned during this review that emails beyond a certain date are deleted but maintained in the MS360 file. We?ve searched for the missing BARS approvals but have not yet been able to locate them. We have since begun saving the approvals to our server to ensure we have access to the data going forward. Auditor?s Remarks The University?s I-TECH Global Operations Manual stipulates that BARs will be generated, reviewed and approved monthly by the Budget Manager and management team. This information was provided to our Office as part of the University?s overall design of internal controls over payments to contractors, subrecipients and country offices. The University responded to our Office on April 20, 2023 adding that ?BAR review is the University?s key post payment control designed to ensure charges are accurately processed, coded and allowable on the budget charged.? We interpret this response to indicate the BAR review process is a monitoring control, and the University asserted on multiple occasions this is a key internal control, which is why we tested it. On January 5, our Office notified University management in writing that the BAR review process would be tested as a key control over the cost principles and period of performance requirements for Global AIDS expenditures. We received no additional inquiry or concerns from University management regarding this internal control until the draft finding was issued on April 14. We provided the University with a final written summary of our fieldwork in this area on April 6, 2023, after fieldwork had concluded. On April 7, the Finance Director responded to our Office in writing confirming they had no further questions or concerns regarding our testing results. It was not until after the University received this finding that additional documentation supporting expenditures tested during the audit were ultimately given to our Office. The basis for this audit finding is the key internal control failure rate of BAR approvals that exceeds our established materiality threshold of five percent, and constitutes a material weakness in internal control, which under the Uniform Guidance is required to be reported as an audit finding in accordance with 2 CFR 200.516 ? Audit findings. We reaffirm our finding and will follow up on the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. The University of Washington?s Policies, Procedures and Guidance (UW Research), GIM 02 ? Acceptance of Sponsored Program Awards and Fiscal Compliance on Sponsored Program Accounts (Budget Numbers), states in part: Responsibilities Principal Investigator ? Supervises expenditure of sponsored program funds and approves sub-recipient invoices (see GIM 8) to assure: o That funds are used only for purposes that directly relate to and benefit the activity supported in the award. o That expenditures are consistent with all special terms, conditions, or limitations that apply to expenditures under the particular grant or contract. o That expenditures do not exceed the total funds authorized for a given period under the grant or contract. GIM 07 ? Sponsored Program Subaward Administration, states in part: Principal Investigator ? Review and approve subaward invoices. GIM 08 ? Subrecipient Monitoring, states in part: Roles & Responsibilities PI / Department Responsibilities Project level monitoring of subrecipient including: o Reviews that expenses are necessary, reasonable, and allocable to the work completed and are aligned with technical progress. o Approve invoices for payment. Subrecipient Monitoring ? Project Level Subrecipient invoices are reviewed and approved in accordance with the requirements of GIM 2 in the manner and frequency stated in the subaward. The University of Washington I-TECH Global Operations Manual (GRef 2.3), Section 2, Finance, Accounting Policy and Procedure Requirements, states in part: In addition to the Fiscal Guidelines set forth in the I-TECH Field Operations Manual, these country specific policies are implemented at I-TECH. 10. Budget Management and Reporting f. Reports that show the variance between the budget plan and the activity for each region and activity code will be generated, reviewed and approved by the budget managers and the Management Team each month.
2022-030 The University of Washington did not have adequate internal controls over and did not comply with federal requirements to ensure subrecipients of the Global AIDS program received required single or program-specific audits, and that it followed up on findings and issued management decisions. Assistance Listing Number and Title: 93.067 Global AIDS 93.067 COVID-19 Global AIDS Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: NU2GGH001430; NU2GGH001968; NU2GGH002038; NU2GGH002116; NU2GGH002242; NUGGH002360; NU2GGH002157; NU2GGH002298; NU2GGH002374 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Subrecipient Monitoring Known Questioned Cost Amount: None Background The Global AIDS program is a federal initiative focused on treating and preventing the transmission of HIV/AIDS around the world. The program is authorized by Sections 307 and 317(k)(2) of the Public Health Service Act, the U.S. Leadership Against HIV/AIDS, Tuberculosis, and Malaria Acts of 2003 and 2008, and the U.S. President?s Emergency Plan for AIDS Relief. Since it was established in 2003, the federal government has invested more than $100 billion in the global HIV/AIDS response, providing testing and treatment for millions of people, preventing transmission among affected communities, and supporting numerous countries to achieve HIV epidemic control. The program distributes funding through public and private sector partnerships to reach the populations most vulnerable to HIV/AIDS epidemics. The University of Washington administers this grant for the state through its International Training and Education Center for Health (I-TECH). I-TECH is a center in the University?s Department of Global Health operated by more than 2,000 staff in offices located in Africa, Asia, the Caribbean, Eastern Europe and the United States. In fiscal year 2022, the University spent more than $66 million in federal program funds, about $44 million of which it passed through to subrecipients. Federal regulations require the University to monitor its subrecipients? activities. This includes verifying that its subrecipients that spend $750,000 or more in federal awards during a fiscal year obtain a single or program-specific audit. For the Global AIDS program, the Centers for Disease Control and Prevention requires foreign subrecipients to submit their audits directly to the federal government and pass-through entity within 30 days after receiving the auditor?s report or nine months after the end of the subrecipient?s audit period, whichever is earlier. Additionally, for the awards it passes onto its subrecipients, the University must follow up and ensure the subrecipients take timely and appropriate corrective action on all deficiencies identified through audits. When a subrecipient receives an audit finding for a University-funded program, federal law requires the University to issue a management decision to the subrecipient within six months of the audit report?s acceptance by the federal government. The management decision must clearly state whether the audit finding is sustained, the reason for the decision, and the actions the subrecipient is expected to take, such as repaying unallowable costs or making financial adjustments. These requirements help ensure subrecipients use federal program funds for authorized purposes and within the provisions of contracts or grant agreements. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The University did not have adequate internal controls over and did not comply with federal requirements to ensure subrecipients of the Global AIDS program received required single or program-specific audits, and that it appropriately followed up on findings and issued management decisions. We found the University did not have adequate internal controls in place to verify whether: ? Subrecipients received required audits, if necessary, and appropriate remedies were taken if audits were not filed ? Management decisions were required to be issued for subrecipients who required a single or program-specific audit We used a nonstatistical sampling method to randomly select and examine seven out of a total population of 21 subrecipients. We found the University did not adequately monitor one subrecipient (14 percent) to ensure it received a required single or program-specific audit. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition Staff in the University?s Office of Sponsored Programs (OSP) used a spreadsheet to track subrecipient certifications and responses, and reviewed annual certifications from the subrecipient to monitor its audit status. However, OSP did not correctly interpret the subrecipient?s response and, therefore, did not require it to provide documentation of a single or program-specific audit. Additionally, management did not review the subrecipient?s federal assistance expenditures to detect that it required an audit and, therefore, also failed to adequately follow up to ensure any reported findings were resolved with appropriate corrective action, if required. Effect of Condition Without establishing adequate internal controls, the University cannot ensure all subrecipients that required a single or program-specific audit received one. Furthermore, the University cannot ensure it is following up on subrecipient audit findings and communicating required management decisions to subrecipients. By failing to ensure subrecipients establish corrective actions and management monitors them for effectiveness where required, the University cannot determine whether subrecipients have sufficiently corrected issues identified in audit findings. Recommendations We recommend the University: ? Follow policies and procedures to ensure subrecipients receive required single or program-specific audits ? Establish and follow effective internal controls to ensure it reviews audit reports for its subrecipients and issues written management decisions, as required ? Ensure subrecipients develop and perform acceptable corrective actions to adequately address all audit recommendations ? Follow up with the subrecipient to ensure the required audit reports are received and reviewed to determine if the subrecipient is required to take corrective action to address audit recommendations ? Issue a written management decision for all applicable audit findings, if necessary University?s Response The University of Washington has established internal controls to carry out a risk assessment per Uniform Guidance, 2 CFR ? 200.332, Requirements for pass-through entities, and our UW Grants Information Memorandum (GIM) 8. This involves using various factors to assess risk. Part of our process to obtain the information needed from each subrecipient is through a certification process. The certification was obtained from the subrecipient, along with additional documentation from the subrecipient, such as an audited financial statement. We made a risk assessment using our standard risk criteria. We did misinterpret the response provided from the subrecipient regarding whether it expended $750,000 or more in federal awards during a fiscal year in order to obtain a single or program-specific audit from this subrecipient. While this was not obtained and reviewed, a risk assessment using our standard criteria was performed with the subrecipient rated as a medium risk, and subject to monitoring throughout the project, per GIM 8. The monitoring at the program level occurred during the period in question. We will be improving our required communications with subrecipients to have clear questions and responses regarding whether the subrecipient expended $750,000 or more in federal awards during the fiscal year in order to obtain a single or program-specific audit, follow up with the subrecipient to ensure the required audit reports are received and reviewed to determine if the subrecipient is required to take corrective action to address audit recommendations, and issue a written management decision for all applicable audit findings, if necessary. Auditor?s Remarks We thank the University for its cooperation and assistance during the audit. Whether the University performed a risk assessment for the subrecipient is not being questioned. The University did not adequately monitor the subrecipient to ensure it detected whether the subrecipient was required to receive a single audit, or program-specific audit in accordance with 2 CFR ?200.332(f). There is no other mechanism for the Federal government to monitor subrecipients of the University and, because a single audit of the subrecipient was not performed, neither the federal grantor nor the University had reasonable assurance of the subrecipient?s compliance with federal award requirements. We reaffirm our finding and will follow up on the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200, Uniform Guidance, establishes the following applicable requirements: Section 200.332 Requirements for pass-through entities, states in part: All pass-through entities must: (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. (3) Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by ? 200.521. (4) The pass-through entity is responsible for resolving audit findings specifically related to the subaward and not responsible for resolving crosscutting findings. If a subrecipient has a current Single Audit report posted in the Federal Audit Clearinghouse and has not otherwise been excluded from receipt of Federal funding (e.g., has been debarred or suspended), the pass-through entity may rely on the subrecipient?s cognizant audit agency or cognizant oversight agency to perform audit follow-up and make management decisions related to cross-cutting findings in accordance with section ? 200.513(a)(3)(vii). Such reliance does not eliminate the responsibility of the pass-through entity to issue subawards that conform to agency and award-specific requirements, to manage risk through ongoing subaward monitoring, and to monitor the status of the findings that are specifically related to the subaward. (f) Verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the subrecipient?s Federal awards expended during the respective fiscal year equaled or exceeded the threshold set for the in ?200.501 Audit requirements. Section 200.339 Remedies for noncompliance, states: If a non-Federal entity fails to comply with the U.S. Constitution, Federal statutes, regulations or the terms and conditions of a Federal award, the Federal awarding agency or pass-through entity may impose additional conditions, as described in ? 200.208. If the Federal awarding agency or pass-through entity determines that noncompliance cannot be remedied by imposing additional conditions, the Federal awarding agency or pass-through entity may take one or more of the following actions, as appropriate in the circumstances: (a) Temporarily withhold cash payments pending correction of the deficiency by the non-Federal entity or more severe enforcement action by the Federal awarding agency or pass-through entity. (b) Disallow (that is, deny both use of funds and any applicable matching credit for) all or part of the cost of the activity or action not in compliance. (c) Wholly or partly suspend or terminate the Federal award. (d) Initiate suspension or debarment proceedings as authorized under 2 CFR part 180 and Federal awarding agency regulations (or in the case of a pass-through entity, recommend such a proceeding be initiated by a Federal awarding agency). (e) Withhold further Federal awards for the project or program. (f) Take other remedies that may be legally available. Section 200.501 Audit requirements, states in part: (a) Audit required. A non-Federal entity that expends $750,000 or more during the non-Federal entity?s fiscal year in Federal awards must have a single or program-specific audit conducted for that year in accordance with the provisions of this part. (b) Single audit. A non-Federal entity that expends $750,000 or more during the non-Federal entity?s fiscal year in Federal awards must have a single audit conducted in accordance with ? 200.514 except when it elects to have a program-specific audit conducted in accordance with paragraph (c) of this section. Section 200.521 Management decision, states in part: (a) General. The management decision must clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action. If the auditee has not completed corrective action, a timetable for follow-up should be given. Prior to issuing the management decision, the Federal agency or pass-through entity may request additional information or documentation from the auditee, including a request for auditor assurance related to the documentation, as a way of mitigating disallowed costs. The management decision should describe any appeal process available to the auditee. While not required, the Federal agency or pass-through entity may also issue a management decision on findings relating to the financial statements which are required to be reported in accordance with GAGAS. (c) Pass-through entity. As provided in ? 200.332(d), the pass-through entity must be responsible for issuing a management decision for audit findings that relate to Federal awards it makes to subrecipients. (d) Time requirements. The Federal awarding agency or pass-through entity responsible for issuing a management decision must do so within six months of acceptance of the audit report by the FAC. The auditee must initiate and proceed with corrective action as rapidly as possible and corrective action should begin no later than upon receipt of the audit report. (e) Reference numbers. Management decisions must include the reference numbers the auditor assigned to each audit finding in accordance with ? 200.516(c). The University of Washington?s Policies, Procedures and Guidance (UW Research), GIM 8 ? Subrecipient Monitoring, states in part: Background Additionally, per the Federal Uniform Guidance, UW must evaluate each subrecipients? risk of noncompliance with federal regulations, include specific terms and conditions in the subaward as necessary, and monitor the activities of the subrecipient through various mechanisms. These mechanisms include: Training and technical assistance to subrecipients, on-site reviews, review of audit results, increased reporting requirements and enforcement action, if necessary. University Policy UW reviews each subrecipient entity according to an entity level comprehensive risk assessment prior to the issuance of a subaward. This risk assessment includes an entity level review of their fiscal systems, past audit activity, and if required, financial statements of the entity as well as the project specific activity proposed and that the required compliance approvals are obtained. When necessary, UW imposes limitations and requirements on the subrecipient through subaward terms and conditions per Federal Uniform Guidance, Section 200.521, prior to the issuance or renewal of a subaward. UW?s subrecipient monitoring requirements are comprised, at a minimum, of the following: ? Completion of the UW?s entity level comprehensive risk assessment (Certs & Reps, Annual Audit Certification) Subrecipient Monitoring ? Entity Level Entity level monitoring consists of a combination of the following: ? Initial Subrecipient Certification Form completion and assurance by subrecipient?s authorized official ? Annual audit assurance through an annual audit certification form ? Maintenance of a subrecipient profile list, which includes information on the entity?s past audit information and certifications ? Risk assessment carried out at each annual renewal of a subaward
2022-028 The University of Washington did not establish adequate internal controls to ensure payments to contractors and subrecipients for the Global AIDS program were allowable, properly supported and within the period of performance. Assistance Listing Number and Title: 93.067 Global AIDS 93.067 COVID-19 Global AIDS Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: NU2GGH001430; NU2GGH001968; NU2GGH002038; NU2GGH002116; NU2GGH002242; NUGGH002360; NU2GGH002157; NU2GGH002298; NU2GGH002374 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs / Cost Principles Period of Performance Known Questioned Cost Amount: None Background The Global AIDS program is a federal initiative focused on treating and preventing the transmission of HIV/AIDS around the world. The program is authorized by Sections 307 and 317(k)(2) of the Public Health Service Act, the U.S. Leadership Against HIV/AIDS, Tuberculosis, and Malaria Acts of 2003 and 2008, and the U.S. President?s Emergency Plan for AIDS Relief. Since it was established in 2003, the federal government has invested more than $100 billion in the global HIV/AIDS response, providing testing and treatment for millions of people, preventing transmission among affected communities, and supporting numerous countries to achieve HIV epidemic control. The program distributes funding through public and private sector partnerships to reach the populations most vulnerable to HIV/AIDS epidemics. The University of Washington administers this grant for the state through its International Training and Education Center for Health (I-TECH). I-TECH is a center in the University?s Department of Global Health operated by more than 2,000 staff in offices located in Africa, Asia, the Caribbean, Eastern Europe and the United States. In fiscal year 2022, the University spent more than $66 million in federal program funds, about $44 million of which it passed through to subrecipients. To achieve the performance goals of the program, the Seattle headquarters of I-TECH (Seattle HQ) provides funding to subrecipients and contractors. Invoices submitted by contractors directly to Seattle HQ are reviewed and approved for payment by budget managers who have delegated authority from the Principal Investigator. Invoices submitted by subrecipients are reviewed and approved for payment by a Principal Investigator. Principal Investigators are also responsible for monitoring the subrecipient?s technical progress and performance. Seattle HQ also provides funding to country offices operating within the University?s global network. The country offices incur costs associated with furnishing supplies and equipment to address the HIV/AIDS epidemic, as well as staffing resources and acquiring goods and services from contractors to carry out the objectives of the program. Payments made by country offices are approved by Country Directors and Country Representatives as delegated by the University. Under the University?s policies, country offices are reimbursed for locally incurred expenses at least monthly. An invoice, accompanied by a schedule of expenses incurred, is submitted and approved by the Country Director and then by the Director of Finance at Seattle HQ, prior to payment. Country offices also responsible for obtaining and retaining supporting documentation for costs incurred and paid on each project. Monthly, Budget Managers review and approve a Budget Activity Report (BAR) that details the expenses charged to the project for the previous month to ensure accurate posting of already approved expenses. This review is also to determine whether the work performed during the billing period reconciles to costs claimed within the contractor?s invoice so that payment may be authorized. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The University did not have adequate internal controls to ensure payments to contractors and subrecipients of the Global AIDS program were allowable properly supported and within the period of performance. Payments to country offices We used a statistical sampling method to randomly select and examine 58 out of 1,644 transactions for country offices. Of the 58 payments examined, we identified one payment (1.7 percent) that was not approved by the Country Director and the corresponding Budget Activity Report was not approved by the Director of Finance. Payments to contractors We used a statistical sampling method to randomly select and review 58 out of 3,040 payments to contractors. We found: ? Invoices for three payments (5 percent) were not approved by a Budget Manager ? Monthly Budget Activity Reports were not approved for 12 payments (20 percent) Subrecipient reimbursements We used a statistical sampling method to randomly select and review 55 out of 438 payments to subrecipients. We found the assigned Budget Manager did not review and approve the monthly Budget Activity Reports for 52 payments (94 percent). We consider these internal control deficiencies to be a material weakness. This issue was not reported as a finding in the prior audit. Cause of Condition Program management did not require supporting documentation for each payment to be forwarded to and reviewed by headquarters personnel prior to payment authorization. Management also did not monitor the submission of invoices and Budget Activity Reports to ensure they were approved by the responsible Budget Manager, as required. Effect of Condition Without establishing adequate internal controls, the University cannot reasonably ensure it is using federal funds for allowable purposes and that expenditures of federal funds are supported by adequate documentation. Recommendations We recommend the University: ? Improve its internal controls to ensure invoices are properly approved by Principal Investigators, as required ? Improve its internal controls to ensure Budget Mangers review and approve monthly Budget Activity Reports before authorizing payments for projects incurring reimbursement requests ? Ensure it retains supporting documentation sufficient to show costs incurred and paid by the program are allowable, and to demonstrate the required managerial reviews have occurred prior to issuing payment University?s Response In response to the findings for the Global Aids Program, we would like to clarify the following: General Clarification: The draft finding inaccurately represents the role of BARS approvals as part of the internal controls to ensure payments to country offices, contractors and subrecipients are allowable, properly supported and within the period of performance. This is not the role of the BARS review process. Compliance, Budget Manager and PI reviews are the controls that ensure allowability of payments and BARS approvals are after-the-fact validations of accurate posting of already approved expenditures. We provided edits to the Background section to reflect our process. We request in light of this that the description of condition, cause of condition and recommendation sections of this finding be updated accordingly. Payments to country offices I-TECH country offices are not contractors; the offices are an extension of the University of Washington. Your review identified one of fifty-eight samples (1.7%) did not meet the approval requirements set forth in I-TECH?s standard operating procedure. Based on the error percentage, we disagree with this finding. Payments to contractors Payments to contractors have multiple approvals. Upon receipt, individual invoices are approved by the program/budget manager either by signature or email. Invoices are then sent to the I-TECH Accounts Payable Administrator for input to the University?s procurement system, ARIBA, which requires compliance approval from the Accounts Payable Supervisor or other manager, as well as funding approval from the budget manager prior to payment. Approvals of Budget Activity Reports (BARS) are not approval of individual payments to contractors, they are reviews of the monthly expenses posted to the budget and the program manager?s concurrence that the expenses are as expected. The exceptions noted were payments made to country offices instead of contractors. The support for approvals were provided to the State Auditors on April 26, 2023, prior to the completion of fieldwork. We therefore disagree with this finding. We also request that the finding be adjusted to omit the 20% of missing BARS approvals as this is not related to the contractor payments. Subrecipient reimbursements Each subrecipient invoice is reviewed for reasonableness, allowability and allocability by the contracts manager and approved by both budget managers and principal investigators prior to being processed for payment in ARIBA. PI approvals were provided and verified for each subrecipient selection with no omissions noted by the auditors. Approvals of Budget Activity Reports (BARS) are not approval of individual payments to subrecipients, they are after-the-fact reviews of the monthly expenses posted to the budget, intended as documentation of the program manager?s concurrence that the expenses are posted as expected. We acknowledge the instances detailed in the finding where we were unable to produce related BARS approvals for 52 of the transactions; however, we request that the finding be adjusted as these BARS approvals are not related to subrecipient invoice review and approvals. Our record keeping process for BARS approvals was to save the emails in a folder within our Finance Team mailbox. We learned during this review that emails beyond a certain date are deleted but maintained in the MS360 file. We?ve searched for the missing BARS approvals but have not yet been able to locate them. We have since begun saving the approvals to our server to ensure we have access to the data going forward. Auditor?s Remarks The University?s I-TECH Global Operations Manual stipulates that BARs will be generated, reviewed and approved monthly by the Budget Manager and management team. This information was provided to our Office as part of the University?s overall design of internal controls over payments to contractors, subrecipients and country offices. The University responded to our Office on April 20, 2023 adding that ?BAR review is the University?s key post payment control designed to ensure charges are accurately processed, coded and allowable on the budget charged.? We interpret this response to indicate the BAR review process is a monitoring control, and the University asserted on multiple occasions this is a key internal control, which is why we tested it. On January 5, our Office notified University management in writing that the BAR review process would be tested as a key control over the cost principles and period of performance requirements for Global AIDS expenditures. We received no additional inquiry or concerns from University management regarding this internal control until the draft finding was issued on April 14. We provided the University with a final written summary of our fieldwork in this area on April 6, 2023, after fieldwork had concluded. On April 7, the Finance Director responded to our Office in writing confirming they had no further questions or concerns regarding our testing results. It was not until after the University received this finding that additional documentation supporting expenditures tested during the audit were ultimately given to our Office. The basis for this audit finding is the key internal control failure rate of BAR approvals that exceeds our established materiality threshold of five percent, and constitutes a material weakness in internal control, which under the Uniform Guidance is required to be reported as an audit finding in accordance with 2 CFR 200.516 ? Audit findings. We reaffirm our finding and will follow up on the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. The University of Washington?s Policies, Procedures and Guidance (UW Research), GIM 02 ? Acceptance of Sponsored Program Awards and Fiscal Compliance on Sponsored Program Accounts (Budget Numbers), states in part: Responsibilities Principal Investigator ? Supervises expenditure of sponsored program funds and approves sub-recipient invoices (see GIM 8) to assure: o That funds are used only for purposes that directly relate to and benefit the activity supported in the award. o That expenditures are consistent with all special terms, conditions, or limitations that apply to expenditures under the particular grant or contract. o That expenditures do not exceed the total funds authorized for a given period under the grant or contract. GIM 07 ? Sponsored Program Subaward Administration, states in part: Principal Investigator ? Review and approve subaward invoices. GIM 08 ? Subrecipient Monitoring, states in part: Roles & Responsibilities PI / Department Responsibilities Project level monitoring of subrecipient including: o Reviews that expenses are necessary, reasonable, and allocable to the work completed and are aligned with technical progress. o Approve invoices for payment. Subrecipient Monitoring ? Project Level Subrecipient invoices are reviewed and approved in accordance with the requirements of GIM 2 in the manner and frequency stated in the subaward. The University of Washington I-TECH Global Operations Manual (GRef 2.3), Section 2, Finance, Accounting Policy and Procedure Requirements, states in part: In addition to the Fiscal Guidelines set forth in the I-TECH Field Operations Manual, these country specific policies are implemented at I-TECH. 10. Budget Management and Reporting f. Reports that show the variance between the budget plan and the activity for each region and activity code will be generated, reviewed and approved by the budget managers and the Management Team each month.
2022-030 The University of Washington did not have adequate internal controls over and did not comply with federal requirements to ensure subrecipients of the Global AIDS program received required single or program-specific audits, and that it followed up on findings and issued management decisions. Assistance Listing Number and Title: 93.067 Global AIDS 93.067 COVID-19 Global AIDS Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: NU2GGH001430; NU2GGH001968; NU2GGH002038; NU2GGH002116; NU2GGH002242; NUGGH002360; NU2GGH002157; NU2GGH002298; NU2GGH002374 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Subrecipient Monitoring Known Questioned Cost Amount: None Background The Global AIDS program is a federal initiative focused on treating and preventing the transmission of HIV/AIDS around the world. The program is authorized by Sections 307 and 317(k)(2) of the Public Health Service Act, the U.S. Leadership Against HIV/AIDS, Tuberculosis, and Malaria Acts of 2003 and 2008, and the U.S. President?s Emergency Plan for AIDS Relief. Since it was established in 2003, the federal government has invested more than $100 billion in the global HIV/AIDS response, providing testing and treatment for millions of people, preventing transmission among affected communities, and supporting numerous countries to achieve HIV epidemic control. The program distributes funding through public and private sector partnerships to reach the populations most vulnerable to HIV/AIDS epidemics. The University of Washington administers this grant for the state through its International Training and Education Center for Health (I-TECH). I-TECH is a center in the University?s Department of Global Health operated by more than 2,000 staff in offices located in Africa, Asia, the Caribbean, Eastern Europe and the United States. In fiscal year 2022, the University spent more than $66 million in federal program funds, about $44 million of which it passed through to subrecipients. Federal regulations require the University to monitor its subrecipients? activities. This includes verifying that its subrecipients that spend $750,000 or more in federal awards during a fiscal year obtain a single or program-specific audit. For the Global AIDS program, the Centers for Disease Control and Prevention requires foreign subrecipients to submit their audits directly to the federal government and pass-through entity within 30 days after receiving the auditor?s report or nine months after the end of the subrecipient?s audit period, whichever is earlier. Additionally, for the awards it passes onto its subrecipients, the University must follow up and ensure the subrecipients take timely and appropriate corrective action on all deficiencies identified through audits. When a subrecipient receives an audit finding for a University-funded program, federal law requires the University to issue a management decision to the subrecipient within six months of the audit report?s acceptance by the federal government. The management decision must clearly state whether the audit finding is sustained, the reason for the decision, and the actions the subrecipient is expected to take, such as repaying unallowable costs or making financial adjustments. These requirements help ensure subrecipients use federal program funds for authorized purposes and within the provisions of contracts or grant agreements. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The University did not have adequate internal controls over and did not comply with federal requirements to ensure subrecipients of the Global AIDS program received required single or program-specific audits, and that it appropriately followed up on findings and issued management decisions. We found the University did not have adequate internal controls in place to verify whether: ? Subrecipients received required audits, if necessary, and appropriate remedies were taken if audits were not filed ? Management decisions were required to be issued for subrecipients who required a single or program-specific audit We used a nonstatistical sampling method to randomly select and examine seven out of a total population of 21 subrecipients. We found the University did not adequately monitor one subrecipient (14 percent) to ensure it received a required single or program-specific audit. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition Staff in the University?s Office of Sponsored Programs (OSP) used a spreadsheet to track subrecipient certifications and responses, and reviewed annual certifications from the subrecipient to monitor its audit status. However, OSP did not correctly interpret the subrecipient?s response and, therefore, did not require it to provide documentation of a single or program-specific audit. Additionally, management did not review the subrecipient?s federal assistance expenditures to detect that it required an audit and, therefore, also failed to adequately follow up to ensure any reported findings were resolved with appropriate corrective action, if required. Effect of Condition Without establishing adequate internal controls, the University cannot ensure all subrecipients that required a single or program-specific audit received one. Furthermore, the University cannot ensure it is following up on subrecipient audit findings and communicating required management decisions to subrecipients. By failing to ensure subrecipients establish corrective actions and management monitors them for effectiveness where required, the University cannot determine whether subrecipients have sufficiently corrected issues identified in audit findings. Recommendations We recommend the University: ? Follow policies and procedures to ensure subrecipients receive required single or program-specific audits ? Establish and follow effective internal controls to ensure it reviews audit reports for its subrecipients and issues written management decisions, as required ? Ensure subrecipients develop and perform acceptable corrective actions to adequately address all audit recommendations ? Follow up with the subrecipient to ensure the required audit reports are received and reviewed to determine if the subrecipient is required to take corrective action to address audit recommendations ? Issue a written management decision for all applicable audit findings, if necessary University?s Response The University of Washington has established internal controls to carry out a risk assessment per Uniform Guidance, 2 CFR ? 200.332, Requirements for pass-through entities, and our UW Grants Information Memorandum (GIM) 8. This involves using various factors to assess risk. Part of our process to obtain the information needed from each subrecipient is through a certification process. The certification was obtained from the subrecipient, along with additional documentation from the subrecipient, such as an audited financial statement. We made a risk assessment using our standard risk criteria. We did misinterpret the response provided from the subrecipient regarding whether it expended $750,000 or more in federal awards during a fiscal year in order to obtain a single or program-specific audit from this subrecipient. While this was not obtained and reviewed, a risk assessment using our standard criteria was performed with the subrecipient rated as a medium risk, and subject to monitoring throughout the project, per GIM 8. The monitoring at the program level occurred during the period in question. We will be improving our required communications with subrecipients to have clear questions and responses regarding whether the subrecipient expended $750,000 or more in federal awards during the fiscal year in order to obtain a single or program-specific audit, follow up with the subrecipient to ensure the required audit reports are received and reviewed to determine if the subrecipient is required to take corrective action to address audit recommendations, and issue a written management decision for all applicable audit findings, if necessary. Auditor?s Remarks We thank the University for its cooperation and assistance during the audit. Whether the University performed a risk assessment for the subrecipient is not being questioned. The University did not adequately monitor the subrecipient to ensure it detected whether the subrecipient was required to receive a single audit, or program-specific audit in accordance with 2 CFR ?200.332(f). There is no other mechanism for the Federal government to monitor subrecipients of the University and, because a single audit of the subrecipient was not performed, neither the federal grantor nor the University had reasonable assurance of the subrecipient?s compliance with federal award requirements. We reaffirm our finding and will follow up on the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200, Uniform Guidance, establishes the following applicable requirements: Section 200.332 Requirements for pass-through entities, states in part: All pass-through entities must: (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. (3) Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by ? 200.521. (4) The pass-through entity is responsible for resolving audit findings specifically related to the subaward and not responsible for resolving crosscutting findings. If a subrecipient has a current Single Audit report posted in the Federal Audit Clearinghouse and has not otherwise been excluded from receipt of Federal funding (e.g., has been debarred or suspended), the pass-through entity may rely on the subrecipient?s cognizant audit agency or cognizant oversight agency to perform audit follow-up and make management decisions related to cross-cutting findings in accordance with section ? 200.513(a)(3)(vii). Such reliance does not eliminate the responsibility of the pass-through entity to issue subawards that conform to agency and award-specific requirements, to manage risk through ongoing subaward monitoring, and to monitor the status of the findings that are specifically related to the subaward. (f) Verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the subrecipient?s Federal awards expended during the respective fiscal year equaled or exceeded the threshold set for the in ?200.501 Audit requirements. Section 200.339 Remedies for noncompliance, states: If a non-Federal entity fails to comply with the U.S. Constitution, Federal statutes, regulations or the terms and conditions of a Federal award, the Federal awarding agency or pass-through entity may impose additional conditions, as described in ? 200.208. If the Federal awarding agency or pass-through entity determines that noncompliance cannot be remedied by imposing additional conditions, the Federal awarding agency or pass-through entity may take one or more of the following actions, as appropriate in the circumstances: (a) Temporarily withhold cash payments pending correction of the deficiency by the non-Federal entity or more severe enforcement action by the Federal awarding agency or pass-through entity. (b) Disallow (that is, deny both use of funds and any applicable matching credit for) all or part of the cost of the activity or action not in compliance. (c) Wholly or partly suspend or terminate the Federal award. (d) Initiate suspension or debarment proceedings as authorized under 2 CFR part 180 and Federal awarding agency regulations (or in the case of a pass-through entity, recommend such a proceeding be initiated by a Federal awarding agency). (e) Withhold further Federal awards for the project or program. (f) Take other remedies that may be legally available. Section 200.501 Audit requirements, states in part: (a) Audit required. A non-Federal entity that expends $750,000 or more during the non-Federal entity?s fiscal year in Federal awards must have a single or program-specific audit conducted for that year in accordance with the provisions of this part. (b) Single audit. A non-Federal entity that expends $750,000 or more during the non-Federal entity?s fiscal year in Federal awards must have a single audit conducted in accordance with ? 200.514 except when it elects to have a program-specific audit conducted in accordance with paragraph (c) of this section. Section 200.521 Management decision, states in part: (a) General. The management decision must clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action. If the auditee has not completed corrective action, a timetable for follow-up should be given. Prior to issuing the management decision, the Federal agency or pass-through entity may request additional information or documentation from the auditee, including a request for auditor assurance related to the documentation, as a way of mitigating disallowed costs. The management decision should describe any appeal process available to the auditee. While not required, the Federal agency or pass-through entity may also issue a management decision on findings relating to the financial statements which are required to be reported in accordance with GAGAS. (c) Pass-through entity. As provided in ? 200.332(d), the pass-through entity must be responsible for issuing a management decision for audit findings that relate to Federal awards it makes to subrecipients. (d) Time requirements. The Federal awarding agency or pass-through entity responsible for issuing a management decision must do so within six months of acceptance of the audit report by the FAC. The auditee must initiate and proceed with corrective action as rapidly as possible and corrective action should begin no later than upon receipt of the audit report. (e) Reference numbers. Management decisions must include the reference numbers the auditor assigned to each audit finding in accordance with ? 200.516(c). The University of Washington?s Policies, Procedures and Guidance (UW Research), GIM 8 ? Subrecipient Monitoring, states in part: Background Additionally, per the Federal Uniform Guidance, UW must evaluate each subrecipients? risk of noncompliance with federal regulations, include specific terms and conditions in the subaward as necessary, and monitor the activities of the subrecipient through various mechanisms. These mechanisms include: Training and technical assistance to subrecipients, on-site reviews, review of audit results, increased reporting requirements and enforcement action, if necessary. University Policy UW reviews each subrecipient entity according to an entity level comprehensive risk assessment prior to the issuance of a subaward. This risk assessment includes an entity level review of their fiscal systems, past audit activity, and if required, financial statements of the entity as well as the project specific activity proposed and that the required compliance approvals are obtained. When necessary, UW imposes limitations and requirements on the subrecipient through subaward terms and conditions per Federal Uniform Guidance, Section 200.521, prior to the issuance or renewal of a subaward. UW?s subrecipient monitoring requirements are comprised, at a minimum, of the following: ? Completion of the UW?s entity level comprehensive risk assessment (Certs & Reps, Annual Audit Certification) Subrecipient Monitoring ? Entity Level Entity level monitoring consists of a combination of the following: ? Initial Subrecipient Certification Form completion and assurance by subrecipient?s authorized official ? Annual audit assurance through an annual audit certification form ? Maintenance of a subrecipient profile list, which includes information on the entity?s past audit information and certifications ? Risk assessment carried out at each annual renewal of a subaward
2022-028 The University of Washington did not establish adequate internal controls to ensure payments to contractors and subrecipients for the Global AIDS program were allowable, properly supported and within the period of performance. Assistance Listing Number and Title: 93.067 Global AIDS 93.067 COVID-19 Global AIDS Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: NU2GGH001430; NU2GGH001968; NU2GGH002038; NU2GGH002116; NU2GGH002242; NUGGH002360; NU2GGH002157; NU2GGH002298; NU2GGH002374 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs / Cost Principles Period of Performance Known Questioned Cost Amount: None Background The Global AIDS program is a federal initiative focused on treating and preventing the transmission of HIV/AIDS around the world. The program is authorized by Sections 307 and 317(k)(2) of the Public Health Service Act, the U.S. Leadership Against HIV/AIDS, Tuberculosis, and Malaria Acts of 2003 and 2008, and the U.S. President?s Emergency Plan for AIDS Relief. Since it was established in 2003, the federal government has invested more than $100 billion in the global HIV/AIDS response, providing testing and treatment for millions of people, preventing transmission among affected communities, and supporting numerous countries to achieve HIV epidemic control. The program distributes funding through public and private sector partnerships to reach the populations most vulnerable to HIV/AIDS epidemics. The University of Washington administers this grant for the state through its International Training and Education Center for Health (I-TECH). I-TECH is a center in the University?s Department of Global Health operated by more than 2,000 staff in offices located in Africa, Asia, the Caribbean, Eastern Europe and the United States. In fiscal year 2022, the University spent more than $66 million in federal program funds, about $44 million of which it passed through to subrecipients. To achieve the performance goals of the program, the Seattle headquarters of I-TECH (Seattle HQ) provides funding to subrecipients and contractors. Invoices submitted by contractors directly to Seattle HQ are reviewed and approved for payment by budget managers who have delegated authority from the Principal Investigator. Invoices submitted by subrecipients are reviewed and approved for payment by a Principal Investigator. Principal Investigators are also responsible for monitoring the subrecipient?s technical progress and performance. Seattle HQ also provides funding to country offices operating within the University?s global network. The country offices incur costs associated with furnishing supplies and equipment to address the HIV/AIDS epidemic, as well as staffing resources and acquiring goods and services from contractors to carry out the objectives of the program. Payments made by country offices are approved by Country Directors and Country Representatives as delegated by the University. Under the University?s policies, country offices are reimbursed for locally incurred expenses at least monthly. An invoice, accompanied by a schedule of expenses incurred, is submitted and approved by the Country Director and then by the Director of Finance at Seattle HQ, prior to payment. Country offices also responsible for obtaining and retaining supporting documentation for costs incurred and paid on each project. Monthly, Budget Managers review and approve a Budget Activity Report (BAR) that details the expenses charged to the project for the previous month to ensure accurate posting of already approved expenses. This review is also to determine whether the work performed during the billing period reconciles to costs claimed within the contractor?s invoice so that payment may be authorized. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The University did not have adequate internal controls to ensure payments to contractors and subrecipients of the Global AIDS program were allowable properly supported and within the period of performance. Payments to country offices We used a statistical sampling method to randomly select and examine 58 out of 1,644 transactions for country offices. Of the 58 payments examined, we identified one payment (1.7 percent) that was not approved by the Country Director and the corresponding Budget Activity Report was not approved by the Director of Finance. Payments to contractors We used a statistical sampling method to randomly select and review 58 out of 3,040 payments to contractors. We found: ? Invoices for three payments (5 percent) were not approved by a Budget Manager ? Monthly Budget Activity Reports were not approved for 12 payments (20 percent) Subrecipient reimbursements We used a statistical sampling method to randomly select and review 55 out of 438 payments to subrecipients. We found the assigned Budget Manager did not review and approve the monthly Budget Activity Reports for 52 payments (94 percent). We consider these internal control deficiencies to be a material weakness. This issue was not reported as a finding in the prior audit. Cause of Condition Program management did not require supporting documentation for each payment to be forwarded to and reviewed by headquarters personnel prior to payment authorization. Management also did not monitor the submission of invoices and Budget Activity Reports to ensure they were approved by the responsible Budget Manager, as required. Effect of Condition Without establishing adequate internal controls, the University cannot reasonably ensure it is using federal funds for allowable purposes and that expenditures of federal funds are supported by adequate documentation. Recommendations We recommend the University: ? Improve its internal controls to ensure invoices are properly approved by Principal Investigators, as required ? Improve its internal controls to ensure Budget Mangers review and approve monthly Budget Activity Reports before authorizing payments for projects incurring reimbursement requests ? Ensure it retains supporting documentation sufficient to show costs incurred and paid by the program are allowable, and to demonstrate the required managerial reviews have occurred prior to issuing payment University?s Response In response to the findings for the Global Aids Program, we would like to clarify the following: General Clarification: The draft finding inaccurately represents the role of BARS approvals as part of the internal controls to ensure payments to country offices, contractors and subrecipients are allowable, properly supported and within the period of performance. This is not the role of the BARS review process. Compliance, Budget Manager and PI reviews are the controls that ensure allowability of payments and BARS approvals are after-the-fact validations of accurate posting of already approved expenditures. We provided edits to the Background section to reflect our process. We request in light of this that the description of condition, cause of condition and recommendation sections of this finding be updated accordingly. Payments to country offices I-TECH country offices are not contractors; the offices are an extension of the University of Washington. Your review identified one of fifty-eight samples (1.7%) did not meet the approval requirements set forth in I-TECH?s standard operating procedure. Based on the error percentage, we disagree with this finding. Payments to contractors Payments to contractors have multiple approvals. Upon receipt, individual invoices are approved by the program/budget manager either by signature or email. Invoices are then sent to the I-TECH Accounts Payable Administrator for input to the University?s procurement system, ARIBA, which requires compliance approval from the Accounts Payable Supervisor or other manager, as well as funding approval from the budget manager prior to payment. Approvals of Budget Activity Reports (BARS) are not approval of individual payments to contractors, they are reviews of the monthly expenses posted to the budget and the program manager?s concurrence that the expenses are as expected. The exceptions noted were payments made to country offices instead of contractors. The support for approvals were provided to the State Auditors on April 26, 2023, prior to the completion of fieldwork. We therefore disagree with this finding. We also request that the finding be adjusted to omit the 20% of missing BARS approvals as this is not related to the contractor payments. Subrecipient reimbursements Each subrecipient invoice is reviewed for reasonableness, allowability and allocability by the contracts manager and approved by both budget managers and principal investigators prior to being processed for payment in ARIBA. PI approvals were provided and verified for each subrecipient selection with no omissions noted by the auditors. Approvals of Budget Activity Reports (BARS) are not approval of individual payments to subrecipients, they are after-the-fact reviews of the monthly expenses posted to the budget, intended as documentation of the program manager?s concurrence that the expenses are posted as expected. We acknowledge the instances detailed in the finding where we were unable to produce related BARS approvals for 52 of the transactions; however, we request that the finding be adjusted as these BARS approvals are not related to subrecipient invoice review and approvals. Our record keeping process for BARS approvals was to save the emails in a folder within our Finance Team mailbox. We learned during this review that emails beyond a certain date are deleted but maintained in the MS360 file. We?ve searched for the missing BARS approvals but have not yet been able to locate them. We have since begun saving the approvals to our server to ensure we have access to the data going forward. Auditor?s Remarks The University?s I-TECH Global Operations Manual stipulates that BARs will be generated, reviewed and approved monthly by the Budget Manager and management team. This information was provided to our Office as part of the University?s overall design of internal controls over payments to contractors, subrecipients and country offices. The University responded to our Office on April 20, 2023 adding that ?BAR review is the University?s key post payment control designed to ensure charges are accurately processed, coded and allowable on the budget charged.? We interpret this response to indicate the BAR review process is a monitoring control, and the University asserted on multiple occasions this is a key internal control, which is why we tested it. On January 5, our Office notified University management in writing that the BAR review process would be tested as a key control over the cost principles and period of performance requirements for Global AIDS expenditures. We received no additional inquiry or concerns from University management regarding this internal control until the draft finding was issued on April 14. We provided the University with a final written summary of our fieldwork in this area on April 6, 2023, after fieldwork had concluded. On April 7, the Finance Director responded to our Office in writing confirming they had no further questions or concerns regarding our testing results. It was not until after the University received this finding that additional documentation supporting expenditures tested during the audit were ultimately given to our Office. The basis for this audit finding is the key internal control failure rate of BAR approvals that exceeds our established materiality threshold of five percent, and constitutes a material weakness in internal control, which under the Uniform Guidance is required to be reported as an audit finding in accordance with 2 CFR 200.516 ? Audit findings. We reaffirm our finding and will follow up on the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. The University of Washington?s Policies, Procedures and Guidance (UW Research), GIM 02 ? Acceptance of Sponsored Program Awards and Fiscal Compliance on Sponsored Program Accounts (Budget Numbers), states in part: Responsibilities Principal Investigator ? Supervises expenditure of sponsored program funds and approves sub-recipient invoices (see GIM 8) to assure: o That funds are used only for purposes that directly relate to and benefit the activity supported in the award. o That expenditures are consistent with all special terms, conditions, or limitations that apply to expenditures under the particular grant or contract. o That expenditures do not exceed the total funds authorized for a given period under the grant or contract. GIM 07 ? Sponsored Program Subaward Administration, states in part: Principal Investigator ? Review and approve subaward invoices. GIM 08 ? Subrecipient Monitoring, states in part: Roles & Responsibilities PI / Department Responsibilities Project level monitoring of subrecipient including: o Reviews that expenses are necessary, reasonable, and allocable to the work completed and are aligned with technical progress. o Approve invoices for payment. Subrecipient Monitoring ? Project Level Subrecipient invoices are reviewed and approved in accordance with the requirements of GIM 2 in the manner and frequency stated in the subaward. The University of Washington I-TECH Global Operations Manual (GRef 2.3), Section 2, Finance, Accounting Policy and Procedure Requirements, states in part: In addition to the Fiscal Guidelines set forth in the I-TECH Field Operations Manual, these country specific policies are implemented at I-TECH. 10. Budget Management and Reporting f. Reports that show the variance between the budget plan and the activity for each region and activity code will be generated, reviewed and approved by the budget managers and the Management Team each month.
2022-030 The University of Washington did not have adequate internal controls over and did not comply with federal requirements to ensure subrecipients of the Global AIDS program received required single or program-specific audits, and that it followed up on findings and issued management decisions. Assistance Listing Number and Title: 93.067 Global AIDS 93.067 COVID-19 Global AIDS Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: NU2GGH001430; NU2GGH001968; NU2GGH002038; NU2GGH002116; NU2GGH002242; NUGGH002360; NU2GGH002157; NU2GGH002298; NU2GGH002374 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Subrecipient Monitoring Known Questioned Cost Amount: None Background The Global AIDS program is a federal initiative focused on treating and preventing the transmission of HIV/AIDS around the world. The program is authorized by Sections 307 and 317(k)(2) of the Public Health Service Act, the U.S. Leadership Against HIV/AIDS, Tuberculosis, and Malaria Acts of 2003 and 2008, and the U.S. President?s Emergency Plan for AIDS Relief. Since it was established in 2003, the federal government has invested more than $100 billion in the global HIV/AIDS response, providing testing and treatment for millions of people, preventing transmission among affected communities, and supporting numerous countries to achieve HIV epidemic control. The program distributes funding through public and private sector partnerships to reach the populations most vulnerable to HIV/AIDS epidemics. The University of Washington administers this grant for the state through its International Training and Education Center for Health (I-TECH). I-TECH is a center in the University?s Department of Global Health operated by more than 2,000 staff in offices located in Africa, Asia, the Caribbean, Eastern Europe and the United States. In fiscal year 2022, the University spent more than $66 million in federal program funds, about $44 million of which it passed through to subrecipients. Federal regulations require the University to monitor its subrecipients? activities. This includes verifying that its subrecipients that spend $750,000 or more in federal awards during a fiscal year obtain a single or program-specific audit. For the Global AIDS program, the Centers for Disease Control and Prevention requires foreign subrecipients to submit their audits directly to the federal government and pass-through entity within 30 days after receiving the auditor?s report or nine months after the end of the subrecipient?s audit period, whichever is earlier. Additionally, for the awards it passes onto its subrecipients, the University must follow up and ensure the subrecipients take timely and appropriate corrective action on all deficiencies identified through audits. When a subrecipient receives an audit finding for a University-funded program, federal law requires the University to issue a management decision to the subrecipient within six months of the audit report?s acceptance by the federal government. The management decision must clearly state whether the audit finding is sustained, the reason for the decision, and the actions the subrecipient is expected to take, such as repaying unallowable costs or making financial adjustments. These requirements help ensure subrecipients use federal program funds for authorized purposes and within the provisions of contracts or grant agreements. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The University did not have adequate internal controls over and did not comply with federal requirements to ensure subrecipients of the Global AIDS program received required single or program-specific audits, and that it appropriately followed up on findings and issued management decisions. We found the University did not have adequate internal controls in place to verify whether: ? Subrecipients received required audits, if necessary, and appropriate remedies were taken if audits were not filed ? Management decisions were required to be issued for subrecipients who required a single or program-specific audit We used a nonstatistical sampling method to randomly select and examine seven out of a total population of 21 subrecipients. We found the University did not adequately monitor one subrecipient (14 percent) to ensure it received a required single or program-specific audit. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition Staff in the University?s Office of Sponsored Programs (OSP) used a spreadsheet to track subrecipient certifications and responses, and reviewed annual certifications from the subrecipient to monitor its audit status. However, OSP did not correctly interpret the subrecipient?s response and, therefore, did not require it to provide documentation of a single or program-specific audit. Additionally, management did not review the subrecipient?s federal assistance expenditures to detect that it required an audit and, therefore, also failed to adequately follow up to ensure any reported findings were resolved with appropriate corrective action, if required. Effect of Condition Without establishing adequate internal controls, the University cannot ensure all subrecipients that required a single or program-specific audit received one. Furthermore, the University cannot ensure it is following up on subrecipient audit findings and communicating required management decisions to subrecipients. By failing to ensure subrecipients establish corrective actions and management monitors them for effectiveness where required, the University cannot determine whether subrecipients have sufficiently corrected issues identified in audit findings. Recommendations We recommend the University: ? Follow policies and procedures to ensure subrecipients receive required single or program-specific audits ? Establish and follow effective internal controls to ensure it reviews audit reports for its subrecipients and issues written management decisions, as required ? Ensure subrecipients develop and perform acceptable corrective actions to adequately address all audit recommendations ? Follow up with the subrecipient to ensure the required audit reports are received and reviewed to determine if the subrecipient is required to take corrective action to address audit recommendations ? Issue a written management decision for all applicable audit findings, if necessary University?s Response The University of Washington has established internal controls to carry out a risk assessment per Uniform Guidance, 2 CFR ? 200.332, Requirements for pass-through entities, and our UW Grants Information Memorandum (GIM) 8. This involves using various factors to assess risk. Part of our process to obtain the information needed from each subrecipient is through a certification process. The certification was obtained from the subrecipient, along with additional documentation from the subrecipient, such as an audited financial statement. We made a risk assessment using our standard risk criteria. We did misinterpret the response provided from the subrecipient regarding whether it expended $750,000 or more in federal awards during a fiscal year in order to obtain a single or program-specific audit from this subrecipient. While this was not obtained and reviewed, a risk assessment using our standard criteria was performed with the subrecipient rated as a medium risk, and subject to monitoring throughout the project, per GIM 8. The monitoring at the program level occurred during the period in question. We will be improving our required communications with subrecipients to have clear questions and responses regarding whether the subrecipient expended $750,000 or more in federal awards during the fiscal year in order to obtain a single or program-specific audit, follow up with the subrecipient to ensure the required audit reports are received and reviewed to determine if the subrecipient is required to take corrective action to address audit recommendations, and issue a written management decision for all applicable audit findings, if necessary. Auditor?s Remarks We thank the University for its cooperation and assistance during the audit. Whether the University performed a risk assessment for the subrecipient is not being questioned. The University did not adequately monitor the subrecipient to ensure it detected whether the subrecipient was required to receive a single audit, or program-specific audit in accordance with 2 CFR ?200.332(f). There is no other mechanism for the Federal government to monitor subrecipients of the University and, because a single audit of the subrecipient was not performed, neither the federal grantor nor the University had reasonable assurance of the subrecipient?s compliance with federal award requirements. We reaffirm our finding and will follow up on the status of the University?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200, Uniform Guidance, establishes the following applicable requirements: Section 200.332 Requirements for pass-through entities, states in part: All pass-through entities must: (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. (3) Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by ? 200.521. (4) The pass-through entity is responsible for resolving audit findings specifically related to the subaward and not responsible for resolving crosscutting findings. If a subrecipient has a current Single Audit report posted in the Federal Audit Clearinghouse and has not otherwise been excluded from receipt of Federal funding (e.g., has been debarred or suspended), the pass-through entity may rely on the subrecipient?s cognizant audit agency or cognizant oversight agency to perform audit follow-up and make management decisions related to cross-cutting findings in accordance with section ? 200.513(a)(3)(vii). Such reliance does not eliminate the responsibility of the pass-through entity to issue subawards that conform to agency and award-specific requirements, to manage risk through ongoing subaward monitoring, and to monitor the status of the findings that are specifically related to the subaward. (f) Verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the subrecipient?s Federal awards expended during the respective fiscal year equaled or exceeded the threshold set for the in ?200.501 Audit requirements. Section 200.339 Remedies for noncompliance, states: If a non-Federal entity fails to comply with the U.S. Constitution, Federal statutes, regulations or the terms and conditions of a Federal award, the Federal awarding agency or pass-through entity may impose additional conditions, as described in ? 200.208. If the Federal awarding agency or pass-through entity determines that noncompliance cannot be remedied by imposing additional conditions, the Federal awarding agency or pass-through entity may take one or more of the following actions, as appropriate in the circumstances: (a) Temporarily withhold cash payments pending correction of the deficiency by the non-Federal entity or more severe enforcement action by the Federal awarding agency or pass-through entity. (b) Disallow (that is, deny both use of funds and any applicable matching credit for) all or part of the cost of the activity or action not in compliance. (c) Wholly or partly suspend or terminate the Federal award. (d) Initiate suspension or debarment proceedings as authorized under 2 CFR part 180 and Federal awarding agency regulations (or in the case of a pass-through entity, recommend such a proceeding be initiated by a Federal awarding agency). (e) Withhold further Federal awards for the project or program. (f) Take other remedies that may be legally available. Section 200.501 Audit requirements, states in part: (a) Audit required. A non-Federal entity that expends $750,000 or more during the non-Federal entity?s fiscal year in Federal awards must have a single or program-specific audit conducted for that year in accordance with the provisions of this part. (b) Single audit. A non-Federal entity that expends $750,000 or more during the non-Federal entity?s fiscal year in Federal awards must have a single audit conducted in accordance with ? 200.514 except when it elects to have a program-specific audit conducted in accordance with paragraph (c) of this section. Section 200.521 Management decision, states in part: (a) General. The management decision must clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action. If the auditee has not completed corrective action, a timetable for follow-up should be given. Prior to issuing the management decision, the Federal agency or pass-through entity may request additional information or documentation from the auditee, including a request for auditor assurance related to the documentation, as a way of mitigating disallowed costs. The management decision should describe any appeal process available to the auditee. While not required, the Federal agency or pass-through entity may also issue a management decision on findings relating to the financial statements which are required to be reported in accordance with GAGAS. (c) Pass-through entity. As provided in ? 200.332(d), the pass-through entity must be responsible for issuing a management decision for audit findings that relate to Federal awards it makes to subrecipients. (d) Time requirements. The Federal awarding agency or pass-through entity responsible for issuing a management decision must do so within six months of acceptance of the audit report by the FAC. The auditee must initiate and proceed with corrective action as rapidly as possible and corrective action should begin no later than upon receipt of the audit report. (e) Reference numbers. Management decisions must include the reference numbers the auditor assigned to each audit finding in accordance with ? 200.516(c). The University of Washington?s Policies, Procedures and Guidance (UW Research), GIM 8 ? Subrecipient Monitoring, states in part: Background Additionally, per the Federal Uniform Guidance, UW must evaluate each subrecipients? risk of noncompliance with federal regulations, include specific terms and conditions in the subaward as necessary, and monitor the activities of the subrecipient through various mechanisms. These mechanisms include: Training and technical assistance to subrecipients, on-site reviews, review of audit results, increased reporting requirements and enforcement action, if necessary. University Policy UW reviews each subrecipient entity according to an entity level comprehensive risk assessment prior to the issuance of a subaward. This risk assessment includes an entity level review of their fiscal systems, past audit activity, and if required, financial statements of the entity as well as the project specific activity proposed and that the required compliance approvals are obtained. When necessary, UW imposes limitations and requirements on the subrecipient through subaward terms and conditions per Federal Uniform Guidance, Section 200.521, prior to the issuance or renewal of a subaward. UW?s subrecipient monitoring requirements are comprised, at a minimum, of the following: ? Completion of the UW?s entity level comprehensive risk assessment (Certs & Reps, Annual Audit Certification) Subrecipient Monitoring ? Entity Level Entity level monitoring consists of a combination of the following: ? Initial Subrecipient Certification Form completion and assurance by subrecipient?s authorized official ? Annual audit assurance through an annual audit certification form ? Maintenance of a subrecipient profile list, which includes information on the entity?s past audit information and certifications ? Risk assessment carried out at each annual renewal of a subaward
2022-031 The Department of Health did not have adequate internal controls over and did not comply with requirements to ensure payments to providers were allowable, met cost principles, and were within the period of performance for the Immunization Cooperative Agreements program. Assistance Listing Number and Title: 93.268 Immunization Cooperative Agreements 93.268 COVID-19 Immunization Cooperative Agreements Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: 5 NH23IP922619-03-00; 6 NH23IP922619-03-01; 6 NH23IP922619-03-02; 6 NH23IP922619-02-01; 6 NH23IP922619-02-02; 6 NH23IP922619-02-03; 6 NH23IP922619-02-04; 6 NH23IP922619-02-06 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs / Cost Principles Period of Performance Known Questioned Cost Amount: $4,287,159 Background The Department of Health administers the Immunization Cooperative Agreements program, which aims to reduce and ultimately eliminate vaccine-preventable diseases by increasing and maintaining high immunization coverage. Emphasis is placed on populations at highest risk for underimmunization and disease, including children eligible under the Vaccines for Children program. In fiscal year 2022, the Department spent more than $44.2 million in federal program funds, about $14.2 million of which it disbursed to subrecipients. The Department also received more than $94.5 million in non-cash assistance from the federal grantor in the form of vaccines. To help carry out the program?s objectives, the Department issues consolidated contracts to Local Health Jurisdictions that are classified as subrecipients. A consolidated contract is for one subrecipient that combines funding for multiple federal programs. Subrecipients are awarded federal funds on a reimbursement basis only. The Department assigns each subrecipient a risk level based on standardized criteria, and it maintains a matrix that specifies the documentation that subrecipients at each risk level are required to submit with every reimbursement. There are varying requirements among low, moderate and high-risk subrecipients for each of the following expense categories: ? Salaries and benefits ? Equipment ($5,000 or more) ? Materials, supplies, and other ? Travel (in-state and out-of-state) ? Contracts and sub-subrecipients ? Administrative/indirect costs The Department?s Fiscal Monitoring Unit (FMU) also conducts fiscal reviews of each subrecipient to review source documentation to ensure payments are for allowable activities and within the period of performance. During the audit period, subrecipients submitted invoices to the Department?s accounting unit where staff, on a weekly basis, compiled a list of all consolidated contract invoices into one email. The emails were sent to Department program staff requesting review to ensure the payment was allowable and within the period of performance. The emails consisted of 30 to 50 invoice requests with hundreds of pages of supporting documentation. Each invoice listed in the email would be considered approved if program staff did not respond. To address concerns about an invoice, program staff were required to email the accounting unit within 10 business days to withhold payment until the items in question were resolved. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Department did not have adequate internal controls over and did not comply with requirements to ensure payments to providers were allowable, met cost principles, and were within the program?s period of performance. Department program staff used the documentation matrix when reviewing subrecipient payments to ensure they were for allowable activities, met cost principles, were within the period of performance, and included required supporting documentation. However, program staff did not document their review or approval, so we were unable to determine if the proper reviews occurred. During the audit period, the FMU conducted a fiscal monitoring review for four subrecipients that received program funds. We reviewed the fiscal monitoring activity for all four subrecipients and determined none of the four reviews included a detailed transaction review of program payments to ensure they had adequate supporting documentation. We used a statistical sampling method to randomly select and review 55 out of 432 provider payments. Additionally, we judgmentally reviewed two individually significant payments that exceeded $1.2 million each. In total, we examined more than $9.3 million in provider payments as part of the audit. Of the 57 payments examined, we identified 27 payments that did not have the required supporting documentation for the subrecipients? assigned risk level. This included one of the individually significant payments. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition The Department?s established procedures allowed for paying providers without ensuring program staff reviewed and determined the payment was allowable, within the grant?s period of performance, and adequately supported. Furthermore, program management did not ensure staff followed the existing review procedures. In addition, management had not established guidance for how many transactions a fiscal reviewer needed to review to source documentation in order to have assurance the program funds were spent in accordance with grant requirements. Management also did not ensure transactions selected for review by the FMU represented all subawards issued to the subrecipient. Effect of Condition and Questioned Costs Without establishing adequate internal controls, the Department cannot reasonably ensure it is using federal funds for allowable purposes. By not ensuring subrecipients submitted required supporting documentation, staff could not adequately verify the reimbursement claims, and the Department could not ensure its subrecipients complied with the subaward?s terms and conditions. The 27 payments for which the Department did not have required supporting documentation from subrecipients totaled $4,287,159 in known questioned costs. Based on these results, we estimate that the total amount of likely improper payments using federal funds to be $5,503,611. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflects this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). To ensure a representative sample, we stratified the population by dollar amount. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Department: ? Improve internal controls to ensure that it obtains adequate supporting documentation from subrecipients before reimbursing them ? Improve internal controls to ensure program staff review and approve expenditures to verify they are for allowable activities and within the period of performance prior to payment ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Department?s Response We appreciate the State Auditor?s Office (SAO) audit of the Immunization Cooperative Agreement. The Department is committed to ensuring our programs comply with federal regulations and understand that it is SAO?s point of view that we did not have adequate controls over provider payments to ensure allowability in meeting cost principles and meeting period of performance. The Department partially agrees with SAO?s findings. The Department does agree and has already taken steps to improve internal controls over ensuring payments to providers contain support in line with our A-19 matrix and risk assessed of our subrecipients. Immunization staff who review invoices have been provided additional training and tracking sheets have been developed which enables staff to record details from backup documentation reviews. This ensures the proper level of review is completed and aligns with the agency?s A-19 documentation matrix. We will also be addressing the control weakness identified with the consolidated contract payment process and documenting our review and approval by program staff to ensure allowability and that funds were spent within the period of performance. It should be noted that the current process over provider payments at the Department of Health has been in place for well over a decade and has been through several annual audits by the State Auditor?s Office and separate federal reviews by our federal funders without issue. The defined process of consolidated contract payments was in response to issues arising with timely payment of funds to our local government partners. The consolidated contracts are an essential tool in providing such funding on a large scale. This process balances many needs in tracking payments, providing documentation to the programs for review as well as allowing for timely distribution of funding to the local health jurisdictions (LHJs) for state and federal programs in order to serve the residents of the State of Washington. It also simplifies the invoicing and payment process as well as reconciliation between DOH and the LHJs. We would also note that for the exceptions identified with the Fiscal Monitoring Unit (FMU) visits, for all four reviews the totality of costs charged to Immunizations during the scope of those reviews were for staffing costs. FMU test staffing as a centralized function to determine if appropriate internal controls are being utilized to ensure costs are reasonable, necessary, allowable, and allocable. During review of these agencies, FMU did not find any instances of unallowable salary costs for time keeping samples that were tested. We would respectfully disagree with the number of exceptions and questioned costs identified. While the level of support did not meet our internal policies, which are held to a higher standard than federal requirements, the level of documentation received from the subrecipient accounting system gave us assurance that the transactions/costs questioned met federal cost principles for allowability and period of performance. This, along with the following additional overall internal monitoring and policy processes support our overall assurance of the allowability of payments: ? Program staff maintain detailed budget information for each subrecipient by project area, and as A-19s are submitted, program and accounting staff update budget spreadsheets. When reviewing the support provided by the subrecipient, they ensure amounts submitted by project are reasonable and are in alignment with expectations for the budget period submitted. ? The immunization program refers to the federal Immunization Program Operations Manual (IPOM) to determine allowable costs, purchase, and procurement procedures. This information is available to all subrecipients. ? FMU provides technical assistance and training, not only to program staff, but to the subrecipients while onsite and at the request of the entities receiving funding. ? Program staff provide technical assistance, policies, and training to Immunization subrecipients related to both allowability and compliance as it relates to programmatic processes. As a compensating control, each subrecipient of federal funds receive a monitoring visit from our Fiscal Monitoring Unit (FMU) once every two years. During the course of these visits monitoring staff perform walk-throughs and assessments of the internal controls surrounding the A19 payment process. They select the most recent three A19?s submitted for funding and review all charges to appropriate source documentation to ensure allowability using cost principles as a basis. Auditor?s Remarks Department management has implemented procedures to ensure adequate documentation is reviewed to support reimbursement requests from subrecipients receiving federal funds. Our testing was based on these documentation requirements, but we do not agree that these requirements are higher than the Uniform Guidance requires. We found that payments were made without the required level of support to ensure they were allowable and met cost principles. The Department asserts that the fiscal monitoring performed every two years compensates for the lack of adequate documentation. However, we found the fiscal monitoring transaction level review for payroll and vendor reimbursement requests did not include a review of any Immunization program payments and therefore gave no assurance that grant funds were spent on allowable activities and were adequately supported. We reaffirm our finding and will follow up on the status of the Department?s corrective action during our next audit period. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 2 CFR Part 200, Uniform Guidance, section 403, Factors affecting allowability of costs, describes the general criteria in order for a cost to be allowable under federal awards, including being adequately documented. Washington State Department of Health A-19 Documentation Matrix Approved by FMU 11/30/20 This is the backup documentation required based on the determined risk level. Please ensure the detailed GL expenditure report clearly aligns with the A19 form. More supporting documentation may be requested by programs at any time due to programmatic requirements regardless of risk category. Expenditure Category Low-Risk Moderate-Risk High-Risk Salaries and Benefits A-19 and a detailed GL expenditure report for all employees who are charged to the grant for the period with the following information: ? Salaries & Wages ? Employee name ? Employee rates of pay ? Hours worked Note: Salaries and benefits must be broken out as separate line items. A-19 and a detailed GL expenditure report for all employees who are charged to the grant for the period with the following information: ? Salaries & Wages ? Employee name ? Employee rates of pay ? Hours worked Note: Salaries and benefits must be broken out as separate line items. A-19 and a detailed GL expenditure report for all employees who are charged to the grant for the period with the following information: ? Salaries & Wages ? Employee name ? Employee rates of pay ? Hours worked AND ? Time Sheets for all staff direct charging to the award Note: Salaries and benefits must be broken out as separate line items. Equipment ($5,000 or more) A-19 and a detailed GL expenditure report that provides vendor name and amount Note: Pre-approval documentation must be provided A-19 and a detailed GL expenditure report that provides vendor name, amount AND ? Item Description Note: Pre-approval documentation must be provided A-19 and a detailed GL expenditure report that provides vendor name, amount, item description AND ? Invoice ? Supporting documentation reflecting authorizing official?s approval. Materials, Supplies, and Other A-19 and a detailed GL expenditure report that provides: ? Vendor Name ? Item description ? Cost of item Note: If the entity has a petty cash fund, they must supply 100% of the supporting documentation. A-19 and a detailed GL expenditure report that provides: ? Vendor Name ? Item description ? Cost of item AND Invoices for transactions over $1,000 Note: If the entity has a petty cash fund, they must supply 100% of the supporting documentation. A-19 and detailed GL expenditure report that provides: ? Vendor Name ? Item description ? Cost of item AND Invoices for transactions over $200. Note: If the entity has a petty cash fund, they must supply 100% of the supporting documentation Travel A-19 and a detailed GL expenditure report that provides: ? Employee name Note: Pre-approval documentation from DOH for any out of state travel must be provided. A-19 and a detailed GL expenditure report that provides: ? Employee name AND ? Travel expense form* ? All itemized receipts * Travel expense form should include employee signature, supervisor approval and purpose. Note: Pre-approval documentation from DOH for any out of state travel must be provided. A-19 and a detailed GL expenditure report that provides: ? Employee name ? Travel expense form* ? All itemized receipts AND Pre-approval required for any flights and overnight stays. *Travel expense form should include employee signature, supervisor approval and purpose. Note: Pre-approval documentation from DOH for any out of state travel must be provided. Contracts and Sub-Subrecipients A-19 and a detailed GL expenditure report that provides: ? Contractor/ Subrecipient Name A-19 and a detailed GL expenditure report that provides: ? Contractor/ Subrecipient Name AND ? Invoices for individual transactions over $1,000.00 A-19 and a detailed GL expenditure report that provides: ? Contractor/ Subrecipient Name AND ? Invoices for individual transactions over $200.00. NOTE: Indirect costs included on A19s must include verification of the following: ? Indirect plan is current and on file with DOH ? Indirect rate is being applied accurately to allowable expenditures ? If the indirect cost rate plan has expired, no indirect costs can be charged
2022-031 The Department of Health did not have adequate internal controls over and did not comply with requirements to ensure payments to providers were allowable, met cost principles, and were within the period of performance for the Immunization Cooperative Agreements program. Assistance Listing Number and Title: 93.268 Immunization Cooperative Agreements 93.268 COVID-19 Immunization Cooperative Agreements Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: 5 NH23IP922619-03-00; 6 NH23IP922619-03-01; 6 NH23IP922619-03-02; 6 NH23IP922619-02-01; 6 NH23IP922619-02-02; 6 NH23IP922619-02-03; 6 NH23IP922619-02-04; 6 NH23IP922619-02-06 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs / Cost Principles Period of Performance Known Questioned Cost Amount: $4,287,159 Background The Department of Health administers the Immunization Cooperative Agreements program, which aims to reduce and ultimately eliminate vaccine-preventable diseases by increasing and maintaining high immunization coverage. Emphasis is placed on populations at highest risk for underimmunization and disease, including children eligible under the Vaccines for Children program. In fiscal year 2022, the Department spent more than $44.2 million in federal program funds, about $14.2 million of which it disbursed to subrecipients. The Department also received more than $94.5 million in non-cash assistance from the federal grantor in the form of vaccines. To help carry out the program?s objectives, the Department issues consolidated contracts to Local Health Jurisdictions that are classified as subrecipients. A consolidated contract is for one subrecipient that combines funding for multiple federal programs. Subrecipients are awarded federal funds on a reimbursement basis only. The Department assigns each subrecipient a risk level based on standardized criteria, and it maintains a matrix that specifies the documentation that subrecipients at each risk level are required to submit with every reimbursement. There are varying requirements among low, moderate and high-risk subrecipients for each of the following expense categories: ? Salaries and benefits ? Equipment ($5,000 or more) ? Materials, supplies, and other ? Travel (in-state and out-of-state) ? Contracts and sub-subrecipients ? Administrative/indirect costs The Department?s Fiscal Monitoring Unit (FMU) also conducts fiscal reviews of each subrecipient to review source documentation to ensure payments are for allowable activities and within the period of performance. During the audit period, subrecipients submitted invoices to the Department?s accounting unit where staff, on a weekly basis, compiled a list of all consolidated contract invoices into one email. The emails were sent to Department program staff requesting review to ensure the payment was allowable and within the period of performance. The emails consisted of 30 to 50 invoice requests with hundreds of pages of supporting documentation. Each invoice listed in the email would be considered approved if program staff did not respond. To address concerns about an invoice, program staff were required to email the accounting unit within 10 business days to withhold payment until the items in question were resolved. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Department did not have adequate internal controls over and did not comply with requirements to ensure payments to providers were allowable, met cost principles, and were within the program?s period of performance. Department program staff used the documentation matrix when reviewing subrecipient payments to ensure they were for allowable activities, met cost principles, were within the period of performance, and included required supporting documentation. However, program staff did not document their review or approval, so we were unable to determine if the proper reviews occurred. During the audit period, the FMU conducted a fiscal monitoring review for four subrecipients that received program funds. We reviewed the fiscal monitoring activity for all four subrecipients and determined none of the four reviews included a detailed transaction review of program payments to ensure they had adequate supporting documentation. We used a statistical sampling method to randomly select and review 55 out of 432 provider payments. Additionally, we judgmentally reviewed two individually significant payments that exceeded $1.2 million each. In total, we examined more than $9.3 million in provider payments as part of the audit. Of the 57 payments examined, we identified 27 payments that did not have the required supporting documentation for the subrecipients? assigned risk level. This included one of the individually significant payments. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition The Department?s established procedures allowed for paying providers without ensuring program staff reviewed and determined the payment was allowable, within the grant?s period of performance, and adequately supported. Furthermore, program management did not ensure staff followed the existing review procedures. In addition, management had not established guidance for how many transactions a fiscal reviewer needed to review to source documentation in order to have assurance the program funds were spent in accordance with grant requirements. Management also did not ensure transactions selected for review by the FMU represented all subawards issued to the subrecipient. Effect of Condition and Questioned Costs Without establishing adequate internal controls, the Department cannot reasonably ensure it is using federal funds for allowable purposes. By not ensuring subrecipients submitted required supporting documentation, staff could not adequately verify the reimbursement claims, and the Department could not ensure its subrecipients complied with the subaward?s terms and conditions. The 27 payments for which the Department did not have required supporting documentation from subrecipients totaled $4,287,159 in known questioned costs. Based on these results, we estimate that the total amount of likely improper payments using federal funds to be $5,503,611. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflects this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). To ensure a representative sample, we stratified the population by dollar amount. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Department: ? Improve internal controls to ensure that it obtains adequate supporting documentation from subrecipients before reimbursing them ? Improve internal controls to ensure program staff review and approve expenditures to verify they are for allowable activities and within the period of performance prior to payment ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Department?s Response We appreciate the State Auditor?s Office (SAO) audit of the Immunization Cooperative Agreement. The Department is committed to ensuring our programs comply with federal regulations and understand that it is SAO?s point of view that we did not have adequate controls over provider payments to ensure allowability in meeting cost principles and meeting period of performance. The Department partially agrees with SAO?s findings. The Department does agree and has already taken steps to improve internal controls over ensuring payments to providers contain support in line with our A-19 matrix and risk assessed of our subrecipients. Immunization staff who review invoices have been provided additional training and tracking sheets have been developed which enables staff to record details from backup documentation reviews. This ensures the proper level of review is completed and aligns with the agency?s A-19 documentation matrix. We will also be addressing the control weakness identified with the consolidated contract payment process and documenting our review and approval by program staff to ensure allowability and that funds were spent within the period of performance. It should be noted that the current process over provider payments at the Department of Health has been in place for well over a decade and has been through several annual audits by the State Auditor?s Office and separate federal reviews by our federal funders without issue. The defined process of consolidated contract payments was in response to issues arising with timely payment of funds to our local government partners. The consolidated contracts are an essential tool in providing such funding on a large scale. This process balances many needs in tracking payments, providing documentation to the programs for review as well as allowing for timely distribution of funding to the local health jurisdictions (LHJs) for state and federal programs in order to serve the residents of the State of Washington. It also simplifies the invoicing and payment process as well as reconciliation between DOH and the LHJs. We would also note that for the exceptions identified with the Fiscal Monitoring Unit (FMU) visits, for all four reviews the totality of costs charged to Immunizations during the scope of those reviews were for staffing costs. FMU test staffing as a centralized function to determine if appropriate internal controls are being utilized to ensure costs are reasonable, necessary, allowable, and allocable. During review of these agencies, FMU did not find any instances of unallowable salary costs for time keeping samples that were tested. We would respectfully disagree with the number of exceptions and questioned costs identified. While the level of support did not meet our internal policies, which are held to a higher standard than federal requirements, the level of documentation received from the subrecipient accounting system gave us assurance that the transactions/costs questioned met federal cost principles for allowability and period of performance. This, along with the following additional overall internal monitoring and policy processes support our overall assurance of the allowability of payments: ? Program staff maintain detailed budget information for each subrecipient by project area, and as A-19s are submitted, program and accounting staff update budget spreadsheets. When reviewing the support provided by the subrecipient, they ensure amounts submitted by project are reasonable and are in alignment with expectations for the budget period submitted. ? The immunization program refers to the federal Immunization Program Operations Manual (IPOM) to determine allowable costs, purchase, and procurement procedures. This information is available to all subrecipients. ? FMU provides technical assistance and training, not only to program staff, but to the subrecipients while onsite and at the request of the entities receiving funding. ? Program staff provide technical assistance, policies, and training to Immunization subrecipients related to both allowability and compliance as it relates to programmatic processes. As a compensating control, each subrecipient of federal funds receive a monitoring visit from our Fiscal Monitoring Unit (FMU) once every two years. During the course of these visits monitoring staff perform walk-throughs and assessments of the internal controls surrounding the A19 payment process. They select the most recent three A19?s submitted for funding and review all charges to appropriate source documentation to ensure allowability using cost principles as a basis. Auditor?s Remarks Department management has implemented procedures to ensure adequate documentation is reviewed to support reimbursement requests from subrecipients receiving federal funds. Our testing was based on these documentation requirements, but we do not agree that these requirements are higher than the Uniform Guidance requires. We found that payments were made without the required level of support to ensure they were allowable and met cost principles. The Department asserts that the fiscal monitoring performed every two years compensates for the lack of adequate documentation. However, we found the fiscal monitoring transaction level review for payroll and vendor reimbursement requests did not include a review of any Immunization program payments and therefore gave no assurance that grant funds were spent on allowable activities and were adequately supported. We reaffirm our finding and will follow up on the status of the Department?s corrective action during our next audit period. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 2 CFR Part 200, Uniform Guidance, section 403, Factors affecting allowability of costs, describes the general criteria in order for a cost to be allowable under federal awards, including being adequately documented. Washington State Department of Health A-19 Documentation Matrix Approved by FMU 11/30/20 This is the backup documentation required based on the determined risk level. Please ensure the detailed GL expenditure report clearly aligns with the A19 form. More supporting documentation may be requested by programs at any time due to programmatic requirements regardless of risk category. Expenditure Category Low-Risk Moderate-Risk High-Risk Salaries and Benefits A-19 and a detailed GL expenditure report for all employees who are charged to the grant for the period with the following information: ? Salaries & Wages ? Employee name ? Employee rates of pay ? Hours worked Note: Salaries and benefits must be broken out as separate line items. A-19 and a detailed GL expenditure report for all employees who are charged to the grant for the period with the following information: ? Salaries & Wages ? Employee name ? Employee rates of pay ? Hours worked Note: Salaries and benefits must be broken out as separate line items. A-19 and a detailed GL expenditure report for all employees who are charged to the grant for the period with the following information: ? Salaries & Wages ? Employee name ? Employee rates of pay ? Hours worked AND ? Time Sheets for all staff direct charging to the award Note: Salaries and benefits must be broken out as separate line items. Equipment ($5,000 or more) A-19 and a detailed GL expenditure report that provides vendor name and amount Note: Pre-approval documentation must be provided A-19 and a detailed GL expenditure report that provides vendor name, amount AND ? Item Description Note: Pre-approval documentation must be provided A-19 and a detailed GL expenditure report that provides vendor name, amount, item description AND ? Invoice ? Supporting documentation reflecting authorizing official?s approval. Materials, Supplies, and Other A-19 and a detailed GL expenditure report that provides: ? Vendor Name ? Item description ? Cost of item Note: If the entity has a petty cash fund, they must supply 100% of the supporting documentation. A-19 and a detailed GL expenditure report that provides: ? Vendor Name ? Item description ? Cost of item AND Invoices for transactions over $1,000 Note: If the entity has a petty cash fund, they must supply 100% of the supporting documentation. A-19 and detailed GL expenditure report that provides: ? Vendor Name ? Item description ? Cost of item AND Invoices for transactions over $200. Note: If the entity has a petty cash fund, they must supply 100% of the supporting documentation Travel A-19 and a detailed GL expenditure report that provides: ? Employee name Note: Pre-approval documentation from DOH for any out of state travel must be provided. A-19 and a detailed GL expenditure report that provides: ? Employee name AND ? Travel expense form* ? All itemized receipts * Travel expense form should include employee signature, supervisor approval and purpose. Note: Pre-approval documentation from DOH for any out of state travel must be provided. A-19 and a detailed GL expenditure report that provides: ? Employee name ? Travel expense form* ? All itemized receipts AND Pre-approval required for any flights and overnight stays. *Travel expense form should include employee signature, supervisor approval and purpose. Note: Pre-approval documentation from DOH for any out of state travel must be provided. Contracts and Sub-Subrecipients A-19 and a detailed GL expenditure report that provides: ? Contractor/ Subrecipient Name A-19 and a detailed GL expenditure report that provides: ? Contractor/ Subrecipient Name AND ? Invoices for individual transactions over $1,000.00 A-19 and a detailed GL expenditure report that provides: ? Contractor/ Subrecipient Name AND ? Invoices for individual transactions over $200.00. NOTE: Indirect costs included on A19s must include verification of the following: ? Indirect plan is current and on file with DOH ? Indirect rate is being applied accurately to allowable expenditures ? If the indirect cost rate plan has expired, no indirect costs can be charged
2022-031 The Department of Health did not have adequate internal controls over and did not comply with requirements to ensure payments to providers were allowable, met cost principles, and were within the period of performance for the Immunization Cooperative Agreements program. Assistance Listing Number and Title: 93.268 Immunization Cooperative Agreements 93.268 COVID-19 Immunization Cooperative Agreements Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: 5 NH23IP922619-03-00; 6 NH23IP922619-03-01; 6 NH23IP922619-03-02; 6 NH23IP922619-02-01; 6 NH23IP922619-02-02; 6 NH23IP922619-02-03; 6 NH23IP922619-02-04; 6 NH23IP922619-02-06 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs / Cost Principles Period of Performance Known Questioned Cost Amount: $4,287,159 Background The Department of Health administers the Immunization Cooperative Agreements program, which aims to reduce and ultimately eliminate vaccine-preventable diseases by increasing and maintaining high immunization coverage. Emphasis is placed on populations at highest risk for underimmunization and disease, including children eligible under the Vaccines for Children program. In fiscal year 2022, the Department spent more than $44.2 million in federal program funds, about $14.2 million of which it disbursed to subrecipients. The Department also received more than $94.5 million in non-cash assistance from the federal grantor in the form of vaccines. To help carry out the program?s objectives, the Department issues consolidated contracts to Local Health Jurisdictions that are classified as subrecipients. A consolidated contract is for one subrecipient that combines funding for multiple federal programs. Subrecipients are awarded federal funds on a reimbursement basis only. The Department assigns each subrecipient a risk level based on standardized criteria, and it maintains a matrix that specifies the documentation that subrecipients at each risk level are required to submit with every reimbursement. There are varying requirements among low, moderate and high-risk subrecipients for each of the following expense categories: ? Salaries and benefits ? Equipment ($5,000 or more) ? Materials, supplies, and other ? Travel (in-state and out-of-state) ? Contracts and sub-subrecipients ? Administrative/indirect costs The Department?s Fiscal Monitoring Unit (FMU) also conducts fiscal reviews of each subrecipient to review source documentation to ensure payments are for allowable activities and within the period of performance. During the audit period, subrecipients submitted invoices to the Department?s accounting unit where staff, on a weekly basis, compiled a list of all consolidated contract invoices into one email. The emails were sent to Department program staff requesting review to ensure the payment was allowable and within the period of performance. The emails consisted of 30 to 50 invoice requests with hundreds of pages of supporting documentation. Each invoice listed in the email would be considered approved if program staff did not respond. To address concerns about an invoice, program staff were required to email the accounting unit within 10 business days to withhold payment until the items in question were resolved. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Department did not have adequate internal controls over and did not comply with requirements to ensure payments to providers were allowable, met cost principles, and were within the program?s period of performance. Department program staff used the documentation matrix when reviewing subrecipient payments to ensure they were for allowable activities, met cost principles, were within the period of performance, and included required supporting documentation. However, program staff did not document their review or approval, so we were unable to determine if the proper reviews occurred. During the audit period, the FMU conducted a fiscal monitoring review for four subrecipients that received program funds. We reviewed the fiscal monitoring activity for all four subrecipients and determined none of the four reviews included a detailed transaction review of program payments to ensure they had adequate supporting documentation. We used a statistical sampling method to randomly select and review 55 out of 432 provider payments. Additionally, we judgmentally reviewed two individually significant payments that exceeded $1.2 million each. In total, we examined more than $9.3 million in provider payments as part of the audit. Of the 57 payments examined, we identified 27 payments that did not have the required supporting documentation for the subrecipients? assigned risk level. This included one of the individually significant payments. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition The Department?s established procedures allowed for paying providers without ensuring program staff reviewed and determined the payment was allowable, within the grant?s period of performance, and adequately supported. Furthermore, program management did not ensure staff followed the existing review procedures. In addition, management had not established guidance for how many transactions a fiscal reviewer needed to review to source documentation in order to have assurance the program funds were spent in accordance with grant requirements. Management also did not ensure transactions selected for review by the FMU represented all subawards issued to the subrecipient. Effect of Condition and Questioned Costs Without establishing adequate internal controls, the Department cannot reasonably ensure it is using federal funds for allowable purposes. By not ensuring subrecipients submitted required supporting documentation, staff could not adequately verify the reimbursement claims, and the Department could not ensure its subrecipients complied with the subaward?s terms and conditions. The 27 payments for which the Department did not have required supporting documentation from subrecipients totaled $4,287,159 in known questioned costs. Based on these results, we estimate that the total amount of likely improper payments using federal funds to be $5,503,611. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflects this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). To ensure a representative sample, we stratified the population by dollar amount. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Department: ? Improve internal controls to ensure that it obtains adequate supporting documentation from subrecipients before reimbursing them ? Improve internal controls to ensure program staff review and approve expenditures to verify they are for allowable activities and within the period of performance prior to payment ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Department?s Response We appreciate the State Auditor?s Office (SAO) audit of the Immunization Cooperative Agreement. The Department is committed to ensuring our programs comply with federal regulations and understand that it is SAO?s point of view that we did not have adequate controls over provider payments to ensure allowability in meeting cost principles and meeting period of performance. The Department partially agrees with SAO?s findings. The Department does agree and has already taken steps to improve internal controls over ensuring payments to providers contain support in line with our A-19 matrix and risk assessed of our subrecipients. Immunization staff who review invoices have been provided additional training and tracking sheets have been developed which enables staff to record details from backup documentation reviews. This ensures the proper level of review is completed and aligns with the agency?s A-19 documentation matrix. We will also be addressing the control weakness identified with the consolidated contract payment process and documenting our review and approval by program staff to ensure allowability and that funds were spent within the period of performance. It should be noted that the current process over provider payments at the Department of Health has been in place for well over a decade and has been through several annual audits by the State Auditor?s Office and separate federal reviews by our federal funders without issue. The defined process of consolidated contract payments was in response to issues arising with timely payment of funds to our local government partners. The consolidated contracts are an essential tool in providing such funding on a large scale. This process balances many needs in tracking payments, providing documentation to the programs for review as well as allowing for timely distribution of funding to the local health jurisdictions (LHJs) for state and federal programs in order to serve the residents of the State of Washington. It also simplifies the invoicing and payment process as well as reconciliation between DOH and the LHJs. We would also note that for the exceptions identified with the Fiscal Monitoring Unit (FMU) visits, for all four reviews the totality of costs charged to Immunizations during the scope of those reviews were for staffing costs. FMU test staffing as a centralized function to determine if appropriate internal controls are being utilized to ensure costs are reasonable, necessary, allowable, and allocable. During review of these agencies, FMU did not find any instances of unallowable salary costs for time keeping samples that were tested. We would respectfully disagree with the number of exceptions and questioned costs identified. While the level of support did not meet our internal policies, which are held to a higher standard than federal requirements, the level of documentation received from the subrecipient accounting system gave us assurance that the transactions/costs questioned met federal cost principles for allowability and period of performance. This, along with the following additional overall internal monitoring and policy processes support our overall assurance of the allowability of payments: ? Program staff maintain detailed budget information for each subrecipient by project area, and as A-19s are submitted, program and accounting staff update budget spreadsheets. When reviewing the support provided by the subrecipient, they ensure amounts submitted by project are reasonable and are in alignment with expectations for the budget period submitted. ? The immunization program refers to the federal Immunization Program Operations Manual (IPOM) to determine allowable costs, purchase, and procurement procedures. This information is available to all subrecipients. ? FMU provides technical assistance and training, not only to program staff, but to the subrecipients while onsite and at the request of the entities receiving funding. ? Program staff provide technical assistance, policies, and training to Immunization subrecipients related to both allowability and compliance as it relates to programmatic processes. As a compensating control, each subrecipient of federal funds receive a monitoring visit from our Fiscal Monitoring Unit (FMU) once every two years. During the course of these visits monitoring staff perform walk-throughs and assessments of the internal controls surrounding the A19 payment process. They select the most recent three A19?s submitted for funding and review all charges to appropriate source documentation to ensure allowability using cost principles as a basis. Auditor?s Remarks Department management has implemented procedures to ensure adequate documentation is reviewed to support reimbursement requests from subrecipients receiving federal funds. Our testing was based on these documentation requirements, but we do not agree that these requirements are higher than the Uniform Guidance requires. We found that payments were made without the required level of support to ensure they were allowable and met cost principles. The Department asserts that the fiscal monitoring performed every two years compensates for the lack of adequate documentation. However, we found the fiscal monitoring transaction level review for payroll and vendor reimbursement requests did not include a review of any Immunization program payments and therefore gave no assurance that grant funds were spent on allowable activities and were adequately supported. We reaffirm our finding and will follow up on the status of the Department?s corrective action during our next audit period. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 2 CFR Part 200, Uniform Guidance, section 403, Factors affecting allowability of costs, describes the general criteria in order for a cost to be allowable under federal awards, including being adequately documented. Washington State Department of Health A-19 Documentation Matrix Approved by FMU 11/30/20 This is the backup documentation required based on the determined risk level. Please ensure the detailed GL expenditure report clearly aligns with the A19 form. More supporting documentation may be requested by programs at any time due to programmatic requirements regardless of risk category. Expenditure Category Low-Risk Moderate-Risk High-Risk Salaries and Benefits A-19 and a detailed GL expenditure report for all employees who are charged to the grant for the period with the following information: ? Salaries & Wages ? Employee name ? Employee rates of pay ? Hours worked Note: Salaries and benefits must be broken out as separate line items. A-19 and a detailed GL expenditure report for all employees who are charged to the grant for the period with the following information: ? Salaries & Wages ? Employee name ? Employee rates of pay ? Hours worked Note: Salaries and benefits must be broken out as separate line items. A-19 and a detailed GL expenditure report for all employees who are charged to the grant for the period with the following information: ? Salaries & Wages ? Employee name ? Employee rates of pay ? Hours worked AND ? Time Sheets for all staff direct charging to the award Note: Salaries and benefits must be broken out as separate line items. Equipment ($5,000 or more) A-19 and a detailed GL expenditure report that provides vendor name and amount Note: Pre-approval documentation must be provided A-19 and a detailed GL expenditure report that provides vendor name, amount AND ? Item Description Note: Pre-approval documentation must be provided A-19 and a detailed GL expenditure report that provides vendor name, amount, item description AND ? Invoice ? Supporting documentation reflecting authorizing official?s approval. Materials, Supplies, and Other A-19 and a detailed GL expenditure report that provides: ? Vendor Name ? Item description ? Cost of item Note: If the entity has a petty cash fund, they must supply 100% of the supporting documentation. A-19 and a detailed GL expenditure report that provides: ? Vendor Name ? Item description ? Cost of item AND Invoices for transactions over $1,000 Note: If the entity has a petty cash fund, they must supply 100% of the supporting documentation. A-19 and detailed GL expenditure report that provides: ? Vendor Name ? Item description ? Cost of item AND Invoices for transactions over $200. Note: If the entity has a petty cash fund, they must supply 100% of the supporting documentation Travel A-19 and a detailed GL expenditure report that provides: ? Employee name Note: Pre-approval documentation from DOH for any out of state travel must be provided. A-19 and a detailed GL expenditure report that provides: ? Employee name AND ? Travel expense form* ? All itemized receipts * Travel expense form should include employee signature, supervisor approval and purpose. Note: Pre-approval documentation from DOH for any out of state travel must be provided. A-19 and a detailed GL expenditure report that provides: ? Employee name ? Travel expense form* ? All itemized receipts AND Pre-approval required for any flights and overnight stays. *Travel expense form should include employee signature, supervisor approval and purpose. Note: Pre-approval documentation from DOH for any out of state travel must be provided. Contracts and Sub-Subrecipients A-19 and a detailed GL expenditure report that provides: ? Contractor/ Subrecipient Name A-19 and a detailed GL expenditure report that provides: ? Contractor/ Subrecipient Name AND ? Invoices for individual transactions over $1,000.00 A-19 and a detailed GL expenditure report that provides: ? Contractor/ Subrecipient Name AND ? Invoices for individual transactions over $200.00. NOTE: Indirect costs included on A19s must include verification of the following: ? Indirect plan is current and on file with DOH ? Indirect rate is being applied accurately to allowable expenditures ? If the indirect cost rate plan has expired, no indirect costs can be charged
2022-033 The Department of Health did not have adequate internal controls over and did not comply with fiscal monitoring requirements to ensure subrecipients of the Epidemiology and Laboratory Capacity for Infectious Diseases program only used funds for allowable activities and met cost principles. Assistance Listing Number and Title: 93.323 Epidemiology and Laboratory Capacity for Infectious Diseases 93.323 COVID-19 Epidemiology and Laboratory Capacity for Infectious Diseases Federal Grantor Name: U.S. Department of Health and Human Services Federal Award Number: NU50CK000515-01-00; NU50CK000515-01-06; NU50CK000515-01-07; NU50CK000515-01-08; NU50CK000515-01-09; NU50CK000515-02-00; NU50CK000515-02-01; NU50CK000515-02-03; NU50CK000515-02-04; NU50CK000515-02-06; NU50CK000515-02-07; NU50CK000515-02-09; NU50CK000515-03-00; NU50CK000515-03-01; NU50CK000515-03-03 Pass-through Entity: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs / Cost Principles Subrecipient Monitoring Known Questioned Cost Amount: $1,644,873 Background The Department of Health administers the Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) program. The goal of the program is to support state, local, and territories? public health efforts to reduce morbidity and associated deaths caused by a wide range of infectious disease threats. ELC provides annual funding, strategic direction, and technical assistance to domestic jurisdictions for strengthening core capacities in epidemiology, laboratory, and health information systems activities. In addition to strengthening core infectious disease capacities nationwide, the program also supports several specific infectious disease programs and projects and provides special appropriations in response to infectious disease emergencies. The Department spent almost $330 million in federal grant funds in fiscal year 2022, about $103 million of which it disbursed to subrecipients. To help carry out the program?s objectives, the Department issues consolidated contracts to Local Health Jurisdictions that are classified as subrecipients. A consolidated contract is for one subrecipient that combines funding for multiple federal programs. Subrecipients are awarded federal funds on a reimbursement basis only. The Department assigns each subrecipient a risk level based on standardized criteria, and it maintains a matrix that specifies the documentation that subrecipients at each risk level are required to submit with every reimbursement. There are varying requirements among low, moderate and high-risk subrecipients for each of the following expense categories: ? Salaries and benefits ? Equipment ($5,000 or more) ? Materials, supplies, and other ? Travel (in-state and out-of-state) ? Contracts and sub-subrecipients ? Administrative/indirect costs The Department?s Fiscal Monitoring Unit (FMU) also conducts fiscal reviews of each subrecipient every two years to review source documentation to ensure payments are for allowable activities. A fiscal reviewer completes a standardized template to document what federal programs and reimbursement payment samples are reviewed. The fiscal reviewer judgmentally determines how many samples to test. During the audit period, subrecipients submitted invoices to the Department?s accounting unit where staff, on a weekly basis, compiled a list of all consolidated contract invoices into one email. The emails were sent to Department program staff requesting review to ensure the payment was allowable. The emails consisted of 30 to 50 invoice requests with hundreds of pages of supporting documentation. Each invoice listed in the email would be considered approved if program staff did not respond. To address concerns about an invoice, program staff were required to email the accounting unit within 10 business days to withhold payment until the items in question were resolved. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Department did not have adequate internal controls over and did not comply with requirements to ensure payments to providers were allowable and met cost principles. Department program staff were required to use the documentation matrix when reviewing subrecipient payments to ensure they were for allowable activities, met cost principles, and included required supporting documentation. However, program staff did not document their review or approval to the accounting unit that issues payment, so we were unable to determine if the proper reviews occurred. We used a statistical sampling method to randomly select and review 57 out of 880 provider payments. Additionally, we judgmentally reviewed three individually significant payments that exceeded $5.5 million each. In total, we examined more than $75.4 million in provider payments as part of the audit. Of the 57 randomly selected payments examined, we identified four payments (7 percent) that did not have the required supporting documentation for the subrecipients? assigned risk level. For fiscal monitoring, we used a nonstatistical sampling method to randomly select and examine five out of a total of eight subrecipients that received a review during the audit period. We found that none of the detailed transactions reviewed were noted as being for the ELC program. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition The Department?s established procedures allowed for paying providers without ensuring program staff reviewed and determined the payment was allowable and adequately supported. Furthermore, program management did not ensure staff followed the existing review procedures. In addition, management had not established guidance for how many transactions a fiscal reviewer needed to review to source documentation in order to have assurance the program funds were spent in accordance with grant requirements. Management also decided that all pandemic-related programs would be documented as ?COVID? on the detailed testing section of the standardized template. Therefore, it was not possible to determine if any ELC transactions were reviewed. Effect of Condition and Questioned Costs Without establishing adequate internal controls, the Department cannot reasonably ensure it is using federal funds for allowable purposes. By not ensuring subrecipients submitted required supporting documentation, staff could not adequately verify the reimbursement claims, and the Department could not ensure its subrecipients complied with the subaward?s terms and conditions. Allowing staff to select samples without adequate guidance from management does not provide the Department with reasonable assurance that subrecipients spent program funds in accordance with grant requirements and federal regulations. Additionally, because the reviewers do not document which specific pandemic-related federal program is being covered in the transaction-level testing, management cannot perform sufficient oversight to ensure the Department has met federal requirements. The four payments for which the Department did not have required supporting documentation from subrecipients totaled $1,644,873 in known questioned costs. Based on these results, we estimate that the total amount of likely improper payments using federal funds to be $2,905,694. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). To ensure a representative sample, we stratified the population by dollar amount (if applicable). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Department: ? Improve internal controls to ensure that it obtains adequate supporting documentation from subrecipients before reimbursing them ? Improve internal controls to ensure program staff review and approve expenditures to verify they are for allowable activities prior to payment ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Department?s Response We appreciate the State Auditor?s Office (SAO) audit of the Epidemiology and Laboratory Capacity (ELC) for Infectious Diseases program. The Department of Health (DOH) is committed to ensuring our programs comply with federal regulations and would like to thank SAO for their work over the activities allowed and subrecipient monitoring requirements on the audit. The Department partially agrees with the finding. DOH would like to note that during the timeframe of this audit the Department and ELC program was in full COVID pandemic response mode. DOH was the leading agency charged with implementing a statewide response to an unprecedented pandemic. During this audit period, DOH?s ELC Grants, and fiscal teams managed 27 newly awarded ELC grants totaling close to one billion dollars, which included applications, planning, restructuring, and monitoring. There were many emergency declarations that were also in place as well, creating new processes that staff were not familiar with, which created an environment where many of the normal day-to-day operations were pushed to their limits as well as the staff performing them. The COVID pandemic has shown us where we may have gaps in our processes, and we are diligently working to not only fill those gaps but to be better prepared for the next emergency response. The Department does agree and is taking steps to improve internal controls over ensuring payments to providers contain support in line with our A19 matrix and risk assessed of our subrecipients. ELC staff who review invoices will be provided additional training and tracking sheets have been developed which enables staff to record details from backup documentation reviews. This ensures the proper level of review is completed and aligns with the agency?s A-19 documentation matrix. Moving forward we?ve updated our A19 matrix to be more in line with federal guidance and the identified risk levels. The Department partially agrees with SAO?s assessment of a material weakness in internal controls over Subrecipient Monitoring. DOH agrees that the detailed transactions reviewed identified as being for ?COVID? should have been specified to the specific revenue source and will do so in future monitoring visits. However, the Department would disagree that this is a material weakness over the subrecipient monitoring process. While the specific revenue source was not identified in testing allowability, monitoring staff document key control systems such as payroll and disbursements when conducting a fiscal monitoring site visit. When testing, this ensures those controls are operating effectively and provide assurance that amounts reported for reimbursement are allowable and accurate. Thus, not all transactions for that period may be tested. The Department respectfully disagrees with SAO?s assessment of a material weakness in internal controls over the consolidated contract provider payment process to ensure allowability in meeting cost principles with our ELC program. When accounting staff send the A19 consolidated contract invoices to the applicable programs ELC program staff review invoice support for allowability and period of performance and keep a spreadsheet with a breakdown of the total payment requested for ELC. If the payment has no issues or concerns, the total payment is logged in the spreadsheet and staff save the spreadsheet to denote no issues and evidence of review and that full payment can be made. If there is a question on allowable cost, period of performance, a need for additional backup documentation or an error, program ELC staff will update spreadsheet with the amounts in question and communicate with the Local Health Jurisdiction, document the correspondence, and contact the accounting consolidated contract payment desk to withhold the specific amount of payment until the issue is resolved. Once resolved staff update the spreadsheet to denote the issue has been resolved and email accounting to release the payment amount in question. It should be noted that the current process over provider payments at the Department of Health has been in place for well over a decade and has been through several annual audits by the State Auditor?s Office and separate federal reviews by our federal funders without issue. The defined process of consolidated contract payments was in response to issues arising with timely payment of funds to our local government partners. The consolidated contracts are an essential tool in providing such funding on a large scale. This process balances many needs in tracking payments, providing documentation to the programs for review as well as allowing for timely distribution of funding to the local health jurisdictions (LHJs) for state and federal programs in order to serve the residents of the State of Washington. It also simplifies the invoicing and payment process as well as reconciliation between DOH and the LHJs. We would also respectfully disagree with the number of exceptions and questioned costs identified. While the level of support did not meet our internal policies, which are held to a higher standard than federal requirements, the level of documentation received from the subrecipient accounting system gave us assurance that the transactions/costs questioned met federal cost principles for allowability and period of performance. This, along with the following additional overall internal monitoring and policy processes support our overall assurance of the allowability of payments: ? Detailed ELC budgets were originally submitted by the subrecipient, reviewed and approved by Program staff so that they can ensure costs will be reasonable and are in alignment with expectations for the budget period submitted over time. No payment is made to an entity without that approved budget. ? The ELC program has allowable cost guidance documents that are provided to the subrecipients initially, on their SOWs, and after any changes. ? The ELC program/contract managers meet with subrecipients routinely (monthly or bi-monthly) to monitor progress of the work, resources, capacity, and budget management are discussed as well. ? Program staff provide technical assistance and policies to subrecipients related to both allowability and compliance as it relates to programmatic processes. Auditor?s Remarks Department management has implemented procedures to ensure adequate documentation is reviewed to support reimbursement requests from subrecipients receiving federal funds. Our testing was based on these documentation requirements, but we do not agree that these requirements are higher than the Uniform Guidance requires. We found that payments were made without the required level of support to ensure they were allowable and met cost principles. The Department asserts that the fiscal monitoring performed every two years compensates for the lack of adequate documentation. However, we found the fiscal monitoring transaction level review for payroll and vendor reimbursement requests did not specifically include a review of any ELC payments and therefore gave no assurance that grant funds were spent on allowable activities and were adequately supported. We reaffirm our finding and will follow up on the status of the Department?s corrective action during our next audit period. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Washington State Department of Health A-19 Documentation Matrix Approved by FMU 11/30/20 This is the backup documentation required based on the determined risk level. Please ensure the detailed GL expenditure report clearly aligns with the A19 form. More supporting documentation may be requested by programs at any time due to programmatic requirements regardless of risk category. Expenditure Category Low-Risk Moderate-Risk High-Risk Salaries and Benefits A-19 and a detailed GL expenditure report for all employees who are charged to the grant for the period with the following information: ? Salaries & Wages ? Employee name ? Employee rates of pay ? Hours worked Note: Salaries and benefits must be broken out as separate line items. A-19 and a detailed GL expenditure report for all employees who are charged to the grant for the period with the following information: ? Salaries & Wages ? Employee name ? Employee rates of pay ? Hours worked Note: Salaries and benefits must be broken out as separate line items. A-19 and a detailed GL expenditure report for all employees who are charged to the grant for the period with the following information: ? Salaries & Wages ? Employee name ? Employee rates of pay ? Hours worked AND ? Time Sheets for all staff direct charging to the award Note: Salaries and benefits must be broken out as separate line items. Equipment ($5,000 or more) A-19 and a detailed GL expenditure report that provides vendor name and amount Note: Pre-approval documentation must be provided A-19 and a detailed GL expenditure report that provides vendor name, amount AND ? Item Description Note: Pre-approval documentation must be provided A-19 and a detailed GL expenditure report that provides vendor name, amount, item description AND ? Invoice ? Supporting documentation reflecting authorizing official?s approval. Materials, Supplies, and Other A-19 and a detailed GL expenditure report that provides: ? Vendor Name ? Item description ? Cost of item Note: If the entity has a petty cash fund, they must supply 100% of the supporting documentation. A-19 and a detailed GL expenditure report that provides: ? Vendor Name ? Item description ? Cost of item AND Invoices for transactions over $1,000 Note: If the entity has a petty cash fund, they must supply 100% of the supporting documentation. A-19 and detailed GL expenditure report that provides: ? Vendor Name ? Item description ? Cost of item AND Invoices for transactions over $200. Note: If the entity has a petty cash fund, they must supply 100% of the supporting documentation Travel A-19 and a detailed GL expenditure report that provides: ? Employee name Note: Pre-approval documentation from DOH for any out of state travel must be provided. A-19 and a detailed GL expenditure report that provides: ? Employee name AND ? Travel expense form* ? All itemized receipts * Travel expense form should include employee signature, supervisor approval and purpose. Note: Pre-approval documentation from DOH for any out of state travel must be provided. A-19 and a detailed GL expenditure report that provides: ? Employee name ? Travel expense form* ? All itemized receipts AND Pre-approval required for any flights and overnight stays. *Travel expense form should include employee signature, supervisor approval and purpose. Note: Pre-approval documentation from DOH for any out of state travel must be provided. Contracts and Sub-Subrecipients A-19 and a detailed GL expenditure report that provides: ? Contractor/ Subrecipient Name A-19 and a detailed GL expenditure report that provides: ? Contractor/ Subrecipient Name AND ? Invoices for individual transactions over $1,000.00 A-19 and a detailed GL expenditure report that provides: ? Contractor/ Subrecipient Name AND ? Invoices for individual transactions over $200.00. NOTE: Indirect costs included on A19s must include verification of the following: ? Indirect plan is current and on file with DOH ? Indirect rate is being applied accurately to allowable expenditures ? If the indirect cost rate plan has expired, no indirect costs can be charged
2022-033 The Department of Health did not have adequate internal controls over and did not comply with fiscal monitoring requirements to ensure subrecipients of the Epidemiology and Laboratory Capacity for Infectious Diseases program only used funds for allowable activities and met cost principles. Assistance Listing Number and Title: 93.323 Epidemiology and Laboratory Capacity for Infectious Diseases 93.323 COVID-19 Epidemiology and Laboratory Capacity for Infectious Diseases Federal Grantor Name: U.S. Department of Health and Human Services Federal Award Number: NU50CK000515-01-00; NU50CK000515-01-06; NU50CK000515-01-07; NU50CK000515-01-08; NU50CK000515-01-09; NU50CK000515-02-00; NU50CK000515-02-01; NU50CK000515-02-03; NU50CK000515-02-04; NU50CK000515-02-06; NU50CK000515-02-07; NU50CK000515-02-09; NU50CK000515-03-00; NU50CK000515-03-01; NU50CK000515-03-03 Pass-through Entity: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs / Cost Principles Subrecipient Monitoring Known Questioned Cost Amount: $1,644,873 Background The Department of Health administers the Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) program. The goal of the program is to support state, local, and territories? public health efforts to reduce morbidity and associated deaths caused by a wide range of infectious disease threats. ELC provides annual funding, strategic direction, and technical assistance to domestic jurisdictions for strengthening core capacities in epidemiology, laboratory, and health information systems activities. In addition to strengthening core infectious disease capacities nationwide, the program also supports several specific infectious disease programs and projects and provides special appropriations in response to infectious disease emergencies. The Department spent almost $330 million in federal grant funds in fiscal year 2022, about $103 million of which it disbursed to subrecipients. To help carry out the program?s objectives, the Department issues consolidated contracts to Local Health Jurisdictions that are classified as subrecipients. A consolidated contract is for one subrecipient that combines funding for multiple federal programs. Subrecipients are awarded federal funds on a reimbursement basis only. The Department assigns each subrecipient a risk level based on standardized criteria, and it maintains a matrix that specifies the documentation that subrecipients at each risk level are required to submit with every reimbursement. There are varying requirements among low, moderate and high-risk subrecipients for each of the following expense categories: ? Salaries and benefits ? Equipment ($5,000 or more) ? Materials, supplies, and other ? Travel (in-state and out-of-state) ? Contracts and sub-subrecipients ? Administrative/indirect costs The Department?s Fiscal Monitoring Unit (FMU) also conducts fiscal reviews of each subrecipient every two years to review source documentation to ensure payments are for allowable activities. A fiscal reviewer completes a standardized template to document what federal programs and reimbursement payment samples are reviewed. The fiscal reviewer judgmentally determines how many samples to test. During the audit period, subrecipients submitted invoices to the Department?s accounting unit where staff, on a weekly basis, compiled a list of all consolidated contract invoices into one email. The emails were sent to Department program staff requesting review to ensure the payment was allowable. The emails consisted of 30 to 50 invoice requests with hundreds of pages of supporting documentation. Each invoice listed in the email would be considered approved if program staff did not respond. To address concerns about an invoice, program staff were required to email the accounting unit within 10 business days to withhold payment until the items in question were resolved. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Department did not have adequate internal controls over and did not comply with requirements to ensure payments to providers were allowable and met cost principles. Department program staff were required to use the documentation matrix when reviewing subrecipient payments to ensure they were for allowable activities, met cost principles, and included required supporting documentation. However, program staff did not document their review or approval to the accounting unit that issues payment, so we were unable to determine if the proper reviews occurred. We used a statistical sampling method to randomly select and review 57 out of 880 provider payments. Additionally, we judgmentally reviewed three individually significant payments that exceeded $5.5 million each. In total, we examined more than $75.4 million in provider payments as part of the audit. Of the 57 randomly selected payments examined, we identified four payments (7 percent) that did not have the required supporting documentation for the subrecipients? assigned risk level. For fiscal monitoring, we used a nonstatistical sampling method to randomly select and examine five out of a total of eight subrecipients that received a review during the audit period. We found that none of the detailed transactions reviewed were noted as being for the ELC program. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition The Department?s established procedures allowed for paying providers without ensuring program staff reviewed and determined the payment was allowable and adequately supported. Furthermore, program management did not ensure staff followed the existing review procedures. In addition, management had not established guidance for how many transactions a fiscal reviewer needed to review to source documentation in order to have assurance the program funds were spent in accordance with grant requirements. Management also decided that all pandemic-related programs would be documented as ?COVID? on the detailed testing section of the standardized template. Therefore, it was not possible to determine if any ELC transactions were reviewed. Effect of Condition and Questioned Costs Without establishing adequate internal controls, the Department cannot reasonably ensure it is using federal funds for allowable purposes. By not ensuring subrecipients submitted required supporting documentation, staff could not adequately verify the reimbursement claims, and the Department could not ensure its subrecipients complied with the subaward?s terms and conditions. Allowing staff to select samples without adequate guidance from management does not provide the Department with reasonable assurance that subrecipients spent program funds in accordance with grant requirements and federal regulations. Additionally, because the reviewers do not document which specific pandemic-related federal program is being covered in the transaction-level testing, management cannot perform sufficient oversight to ensure the Department has met federal requirements. The four payments for which the Department did not have required supporting documentation from subrecipients totaled $1,644,873 in known questioned costs. Based on these results, we estimate that the total amount of likely improper payments using federal funds to be $2,905,694. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflect this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). To ensure a representative sample, we stratified the population by dollar amount (if applicable). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Department: ? Improve internal controls to ensure that it obtains adequate supporting documentation from subrecipients before reimbursing them ? Improve internal controls to ensure program staff review and approve expenditures to verify they are for allowable activities prior to payment ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Department?s Response We appreciate the State Auditor?s Office (SAO) audit of the Epidemiology and Laboratory Capacity (ELC) for Infectious Diseases program. The Department of Health (DOH) is committed to ensuring our programs comply with federal regulations and would like to thank SAO for their work over the activities allowed and subrecipient monitoring requirements on the audit. The Department partially agrees with the finding. DOH would like to note that during the timeframe of this audit the Department and ELC program was in full COVID pandemic response mode. DOH was the leading agency charged with implementing a statewide response to an unprecedented pandemic. During this audit period, DOH?s ELC Grants, and fiscal teams managed 27 newly awarded ELC grants totaling close to one billion dollars, which included applications, planning, restructuring, and monitoring. There were many emergency declarations that were also in place as well, creating new processes that staff were not familiar with, which created an environment where many of the normal day-to-day operations were pushed to their limits as well as the staff performing them. The COVID pandemic has shown us where we may have gaps in our processes, and we are diligently working to not only fill those gaps but to be better prepared for the next emergency response. The Department does agree and is taking steps to improve internal controls over ensuring payments to providers contain support in line with our A19 matrix and risk assessed of our subrecipients. ELC staff who review invoices will be provided additional training and tracking sheets have been developed which enables staff to record details from backup documentation reviews. This ensures the proper level of review is completed and aligns with the agency?s A-19 documentation matrix. Moving forward we?ve updated our A19 matrix to be more in line with federal guidance and the identified risk levels. The Department partially agrees with SAO?s assessment of a material weakness in internal controls over Subrecipient Monitoring. DOH agrees that the detailed transactions reviewed identified as being for ?COVID? should have been specified to the specific revenue source and will do so in future monitoring visits. However, the Department would disagree that this is a material weakness over the subrecipient monitoring process. While the specific revenue source was not identified in testing allowability, monitoring staff document key control systems such as payroll and disbursements when conducting a fiscal monitoring site visit. When testing, this ensures those controls are operating effectively and provide assurance that amounts reported for reimbursement are allowable and accurate. Thus, not all transactions for that period may be tested. The Department respectfully disagrees with SAO?s assessment of a material weakness in internal controls over the consolidated contract provider payment process to ensure allowability in meeting cost principles with our ELC program. When accounting staff send the A19 consolidated contract invoices to the applicable programs ELC program staff review invoice support for allowability and period of performance and keep a spreadsheet with a breakdown of the total payment requested for ELC. If the payment has no issues or concerns, the total payment is logged in the spreadsheet and staff save the spreadsheet to denote no issues and evidence of review and that full payment can be made. If there is a question on allowable cost, period of performance, a need for additional backup documentation or an error, program ELC staff will update spreadsheet with the amounts in question and communicate with the Local Health Jurisdiction, document the correspondence, and contact the accounting consolidated contract payment desk to withhold the specific amount of payment until the issue is resolved. Once resolved staff update the spreadsheet to denote the issue has been resolved and email accounting to release the payment amount in question. It should be noted that the current process over provider payments at the Department of Health has been in place for well over a decade and has been through several annual audits by the State Auditor?s Office and separate federal reviews by our federal funders without issue. The defined process of consolidated contract payments was in response to issues arising with timely payment of funds to our local government partners. The consolidated contracts are an essential tool in providing such funding on a large scale. This process balances many needs in tracking payments, providing documentation to the programs for review as well as allowing for timely distribution of funding to the local health jurisdictions (LHJs) for state and federal programs in order to serve the residents of the State of Washington. It also simplifies the invoicing and payment process as well as reconciliation between DOH and the LHJs. We would also respectfully disagree with the number of exceptions and questioned costs identified. While the level of support did not meet our internal policies, which are held to a higher standard than federal requirements, the level of documentation received from the subrecipient accounting system gave us assurance that the transactions/costs questioned met federal cost principles for allowability and period of performance. This, along with the following additional overall internal monitoring and policy processes support our overall assurance of the allowability of payments: ? Detailed ELC budgets were originally submitted by the subrecipient, reviewed and approved by Program staff so that they can ensure costs will be reasonable and are in alignment with expectations for the budget period submitted over time. No payment is made to an entity without that approved budget. ? The ELC program has allowable cost guidance documents that are provided to the subrecipients initially, on their SOWs, and after any changes. ? The ELC program/contract managers meet with subrecipients routinely (monthly or bi-monthly) to monitor progress of the work, resources, capacity, and budget management are discussed as well. ? Program staff provide technical assistance and policies to subrecipients related to both allowability and compliance as it relates to programmatic processes. Auditor?s Remarks Department management has implemented procedures to ensure adequate documentation is reviewed to support reimbursement requests from subrecipients receiving federal funds. Our testing was based on these documentation requirements, but we do not agree that these requirements are higher than the Uniform Guidance requires. We found that payments were made without the required level of support to ensure they were allowable and met cost principles. The Department asserts that the fiscal monitoring performed every two years compensates for the lack of adequate documentation. However, we found the fiscal monitoring transaction level review for payroll and vendor reimbursement requests did not specifically include a review of any ELC payments and therefore gave no assurance that grant funds were spent on allowable activities and were adequately supported. We reaffirm our finding and will follow up on the status of the Department?s corrective action during our next audit period. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Washington State Department of Health A-19 Documentation Matrix Approved by FMU 11/30/20 This is the backup documentation required based on the determined risk level. Please ensure the detailed GL expenditure report clearly aligns with the A19 form. More supporting documentation may be requested by programs at any time due to programmatic requirements regardless of risk category. Expenditure Category Low-Risk Moderate-Risk High-Risk Salaries and Benefits A-19 and a detailed GL expenditure report for all employees who are charged to the grant for the period with the following information: ? Salaries & Wages ? Employee name ? Employee rates of pay ? Hours worked Note: Salaries and benefits must be broken out as separate line items. A-19 and a detailed GL expenditure report for all employees who are charged to the grant for the period with the following information: ? Salaries & Wages ? Employee name ? Employee rates of pay ? Hours worked Note: Salaries and benefits must be broken out as separate line items. A-19 and a detailed GL expenditure report for all employees who are charged to the grant for the period with the following information: ? Salaries & Wages ? Employee name ? Employee rates of pay ? Hours worked AND ? Time Sheets for all staff direct charging to the award Note: Salaries and benefits must be broken out as separate line items. Equipment ($5,000 or more) A-19 and a detailed GL expenditure report that provides vendor name and amount Note: Pre-approval documentation must be provided A-19 and a detailed GL expenditure report that provides vendor name, amount AND ? Item Description Note: Pre-approval documentation must be provided A-19 and a detailed GL expenditure report that provides vendor name, amount, item description AND ? Invoice ? Supporting documentation reflecting authorizing official?s approval. Materials, Supplies, and Other A-19 and a detailed GL expenditure report that provides: ? Vendor Name ? Item description ? Cost of item Note: If the entity has a petty cash fund, they must supply 100% of the supporting documentation. A-19 and a detailed GL expenditure report that provides: ? Vendor Name ? Item description ? Cost of item AND Invoices for transactions over $1,000 Note: If the entity has a petty cash fund, they must supply 100% of the supporting documentation. A-19 and detailed GL expenditure report that provides: ? Vendor Name ? Item description ? Cost of item AND Invoices for transactions over $200. Note: If the entity has a petty cash fund, they must supply 100% of the supporting documentation Travel A-19 and a detailed GL expenditure report that provides: ? Employee name Note: Pre-approval documentation from DOH for any out of state travel must be provided. A-19 and a detailed GL expenditure report that provides: ? Employee name AND ? Travel expense form* ? All itemized receipts * Travel expense form should include employee signature, supervisor approval and purpose. Note: Pre-approval documentation from DOH for any out of state travel must be provided. A-19 and a detailed GL expenditure report that provides: ? Employee name ? Travel expense form* ? All itemized receipts AND Pre-approval required for any flights and overnight stays. *Travel expense form should include employee signature, supervisor approval and purpose. Note: Pre-approval documentation from DOH for any out of state travel must be provided. Contracts and Sub-Subrecipients A-19 and a detailed GL expenditure report that provides: ? Contractor/ Subrecipient Name A-19 and a detailed GL expenditure report that provides: ? Contractor/ Subrecipient Name AND ? Invoices for individual transactions over $1,000.00 A-19 and a detailed GL expenditure report that provides: ? Contractor/ Subrecipient Name AND ? Invoices for individual transactions over $200.00. NOTE: Indirect costs included on A19s must include verification of the following: ? Indirect plan is current and on file with DOH ? Indirect rate is being applied accurately to allowable expenditures ? If the indirect cost rate plan has expired, no indirect costs can be charged
2022-036 The Department of Children, Youth, and Families did not have adequate internal controls over and did not comply with client eligibility requirements for child care services paid with the Child Care and Development Fund and Temporary Assistance for Needy Families funds. Assistance Listing Number and Title: 93.558, Temporary Assistance for Needy Families 93.575, Child Care and Development Block Grant 93.575, COVID-19 Child Care and Development Block Grant 93.596, Child Care Mandatory and Matching Funds of the Child Care and Development Fund Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: 2003WACCDF; 2103WACCDF; 2203WACCDF; 2003WACCC3; 2103WACDC6; 2103WACSC6; 2103WACCC5; 2103WACCDD; 2203WACCDD; 2101WATANF; 2201WATANF Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Eligibility Known Questioned Cost Amount: Temporary Assistance for Needy Families ? $5,689 Child Care and Development Fund ? $5,078 Background The Department of Children, Youth, and Families administers the federal Child Care and Development Fund (CCDF) grant to help eligible working families pay for child care. In fiscal year 2022, the Department spent $668.6 million in CCDF federal funding. The Department of Social and Health Services (DSHS) administers the Temporary Assistance for Needy Families (TANF) grant. To meet one of the program?s primary purposes of helping clients obtain employment, TANF grant funds may be used to pay clients? child care costs. If a client obtains employment and is no longer eligible for the program, TANF funds may still be used to pay child care costs to help the client maintain employment. In fiscal year 2022, the Department spent more than $260.5 million in CCDF and $67.7 million in TANF federal grant funds on child care subsidy payments to providers. Some payments made for child care are paid for by both the CCDF and TANF grants. While the two federal programs are separate, the requirements and policies in Washington for child care payments are consolidated under the Working Connections Child Care program. As of July 1, 2019, the responsibility for making and documenting child care eligibility determinations under the CCDF and TANF grants was transferred from DSHS to the Department. For a family to be eligible for child care assistance, state and federal rules require that at the time of application or reapplication, children must: ? Reside in Washington and be a citizen or legal resident of the United States; ? Be younger than 13 years, or if for verified special needs, be younger than 19 years; ? Reside with a parent(s) or guardian whose countable income does not exceed 200 percent of the federal poverty level at application or 220 percent at reapplication for July, August and September 2021 but in October 2021 changed to 60 percent of the state median income at application or 65 percent of the state median income at reapplication; ? Reside with a parent(s) or guardian who works or attends a job-training or education program, or needs to be receiving protective services. State rules describe the information clients must provide to the Department to verify their eligibility. The information must be accurate, complete, consistent and from a reliable source. This information includes, but is not limited to, employer and hourly wage information, proof of an approved activity under TANF, and family household size and composition. Once determined to be eligible for the program, a client is eligible for one year unless a change in income causes the client to exceed 85 percent of the state?s median income The Department requires that clients self-report such income changes. A written notice communicates the recipients? reporting requirement and the specific dollar threshold applicable to the household?s annual income. Once the client?s income exceeds this cutoff level, the Department terminates services. The Department has access to systems that contain wage and household benefit and composition data for some, but not all, child care recipients. The Department uses this information in part to determine program eligibility, benefit level, including client copayment, and the amount of child care the family is eligible to receive. If an ineligible client receives assistance, the payment made to the child care provider is not allowable and the client must repay the ineligible amount. The Department also uses household income to determine the amount families must contribute for their monthly copay to providers. Beginning July 1, 2021, monthly copayments were calculated using an updated schedule described in Washington Administrative Code 110-15-0075. Federal regulations require the Department to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the past 10 audits, we reported findings related to eligibility for the Working Connections Child Care program. In these prior audits, we reported the Department did not have adequate internal controls over the eligibility process for child care subsidy recipients. These were reported as finding numbers 2021-035, 2020-039, 2019-032, 2018-030, 2017-026, 2016-023, 2015-026, 2014-026, 2013-017 and 2012-30. Description of Condition The Department did not have adequate internal controls over and did not comply with client eligibility requirements for CCDF and TANF. During the audit period the Department determined 69,815 children were eligible for child care. We used a statistical sampling method to randomly select and examine 59 of these determinations. In four instances (6.8 percent), we found the Department made eligibility determinations improperly, did not obtain required documentation, incorrectly assessed copayment, or did not verify information before authorizing services. Specifically, we found: ? Two cases (3.4 percent) where the Department had incorrectly determined household composition and did not obtain sufficient data for all parents in the household to make an accurate eligibility determination. ? One case (1.7 percent) where the Department did not follow procedure for verifying employment, which led to an incorrect household income calculation. ? One case (1.7 percent) where the copay was incorrectly assessed, which resulted in an underpayment due to a system error. Though the Department has established internal controls, they were insufficient for ensuring material compliance with client eligibility requirements. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. Cause of Condition Department staff made eligibility determinations without obtaining sufficient supporting documentation to ensure households were eligible to receive assistance. This deviated from the standard policies and procedures the Department has established, and management did not monitor sufficiently to ensure staff made proper eligibility determinations. Further, the incorrect copay calculation was due to system error. Effect of Condition and Questioned Costs By not implementing adequate internal controls, the Department is at higher risk of paying providers for child care services when clients are ineligible. Of the four client eligibility determinations that had errors, three resulted in $10,767 of federal overpayments to providers. The Department used $5,078 in CCDF grant funds and $5,689 in TANF grant funds for these payments. Because we used a statistical sampling method to randomly select the payments examined in the audit, we estimate the amount of likely improper payments to be $6,008,693 for the CCDF grant and $6,731,953 for the TANF grant. Although we identified known and likely questioned costs, we do not have reasonable assurance that the payments in question are appropriately represented in the Department?s accounting records because of the grant management practice issue reported in findings 2022-035 and 2022-041. Additionally, the payments in question are duplicative of the costs already questioned in the aforementioned provider payment findings. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflects this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Department improve its internal controls over determining client eligibility to ensure it: ? Reviews eligibility determinations sufficiently to detect improper eligibility determinations ? Reviews sufficient support for clients? income and household composition information for accuracy We also recommend the Department consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid. Department`s Response The Department appreciates, acknowledges, and supports SAO?s mission, which is to hold state and local government accountable for the use of public resources. Further, we appreciate SAO?s work with us over the past year to strengthen the auditing process. Due to recent changes to CCSP directed by the Legislature, the Department anticipates continued reduction in eligibility determination errors. The Fair Start for Kids Act (FSKA) required the Department to make several changes that expanded eligibility during SFY 2022. The FSKA increased the State Median Income (SMI) threshold, allowing more two parent households to be eligible for child care subsidy. The FSKA also capped copayments to $115 for applicants and $215 for reapplicants, greatly reducing the copay amounts for typical two parent households. These changes are disincentives for fraud as struggling families receive needed benefits and are more likely to provide accurate and complete information. This is supported by the overall reduction in investigation requests submitted to the Office of Fraud and Accountability. In the federal fiscal year prior to the implementation of the FSKA, the Department submitted 1,405 requests for investigations. The year following FSKA implementation requests for investigations fell to 912. The Department continues to explore ways to remove the possibility for improper use of CCDF funds. The Department agrees with the SAO that there is a need to review household composition at application and reapplication to improve reliability of eligibility decisions. The Department accesses data across available state systems to confirm information, including household composition provided by clients. Unfortunately, there is no household composition verification system, and information provided to other state agencies is often provided by client self-attestation. The Department continues to balance verification requirements with providing timely benefit decisions to support family access to high quality child care. Eighty-six percent of households receiving child care subsidies are headed by single parents. Supporting these families with child care is essential for their continued participation in work, education, and other social service programs. The Department provides training for eligibility in the specific areas of household composition and income determination and improvements to training are ongoing. The Department recently made changes to the professional development and training process to improve staff skills and accuracy. Staff training is in a continuous improvement cycle and evolves with staff needs and changes in rule. The Department will continue to improve processes and internal controls and create and deliver staff training based on current data trends and patterns. Auditor?s Remarks We thank the Department for its cooperation and assistance throughout the audit. We will review the status of the Department?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Washington Administrative Code (WAC) 110-15-0015 ? Determining family size, states in part: (1) DCYF determines a consumer?s family size as follows: (a) For a single parent, including a minor parent living independently, DCYF counts the consumer and the consumer?s children; (b) For unmarried parents who have at least one mutual child, DCYF counts both parents and all of their children living in the household; (c) Unmarried parents who have no mutual children are counted as separate WCCC households, the unmarried parents and their respective children living in the household; (d) For married parents, DCYF counts both parents and all of their children living in the household; (e) For parents who are undocumented aliens as defined in WAC 388-424-0001, DCYF counts the parents and children, documented and undocumented, and all other family rules in this section apply. Children needing care must meet citizenship requirements described in WAC 110-15-0005; (f) For a legal guardian verified by a legal or court document, adult sibling or step-sibling, nephew, niece, aunt, uncle, grandparent, any of these relatives with the prefix ?great,? such as a ?great-nephew,? or an in loco parentis custodian who is not related to the child as described in WAC 110-15-0005, DCYF counts only the children and only the children?s income is counted; (g) For a parent who is out of the household because of employer requirements, such as training or military service, and expected to return to the household, DCYF counts the consumer, the absent parent, and the children; (h) For a parent who is voluntarily out of the household for reasons other than requirements of the employer, such as unapproved schooling and visiting family members, and is expected to return to the household, DCYF counts the consumer, the absent parent, and the children. WAC 110-15-0020 and all other family and household rules in this section apply; (i) For a parent who is out of the country and waiting for legal reentry in to the United States, DCYF counts only the consumer and children residing in the United States and all other family and household rules in this section apply; (j) An incarcerated parent is not part of the household count for determining income and eligibility. DCYF counts the remaining household members using all other family rules in this section; and (k) For a parent incarcerated at a Washington state correctional facility whose child lives with them at the facility, DCYF counts the parent and child as their own household. (2) When the household consists of the consumer?s own child and another child identified in subsection (1)(f) of this section, the household may be combined into one household or kept as distinct households for the benefit of the consumer. WAC 110-15-0065 ? Calculation of income, states in part: DSHS uses a consumer?s countable income when determining income eligibility and copayment. A consumer?s countable income is the sum of all income listed in WAC 110-15-0060 minus any child support paid out through a court order, division of child support administrative order, or tribal government order. (1) To determine a consumer?s income, DSHS either: (a) Calculates an average monthly income by: (i) Determining the number of months, weeks or pay periods it took the consumer?s WCCC household to earn the income; and dividing the income by the same number of months, weeks or pay periods. (ii) If the past wages are no longer reflective of the current income, DSHS may accept the employer?s statement of current, anticipated wages for future income determination. (b) When the consumer begins new employment and has less than three months of wages, DSHS uses the best available estimate of the consumer?s WCCC household?s current income: (i) As verified by the consumer?s employer; or (ii) As provided by the consumer through a verbal or written statement documenting the new employment at the time of application, reapplication or change reporting, and wage verification within sixty days of DSHS request. (2) If a consumer receives a lump sum payment (such as money from the sale of property or back child support payment) in the month of application or during the consumer?s WCCC eligibility: (a) DSHS calculates a monthly amount by dividing the lump sum payment by twelve; (b) DSHS adds the monthly amount to the consumer?s expected average monthly income: (i) For the month it was received; and (ii) For the remaining months of the current eligibility period; and (c) To remain eligible for WCCC the consumer must meet WCCC income guidelines after the lump sum payment is applied. WAC 110-15-0075 ? Determining income eligibility and copayment amounts, states (effective prior to October 1, 2021): (1) DCYF takes the following steps to determine a consumer?s eligibility and copayment, whether care is provided under a WCCC voucher or contract: (a) Determine the consumer?s family size (under WAC 110-15-0015); (b) Determine the consumer?s countable income (under WAC 110-15-0065). (2) DCYF calculates the consumer?s copayment as follows: If a consumer?s income is: Then the consumer?s copayment is: (a) At or below 82% of the federal poverty guidelines (FPG). $15 (b) Above 82% of the FPG up to 137.5% of the FPG. $65 (c) Above 137.5% of the FPG through 200% of the FPG. The dollar amount equal to subtracting 137.5% of the FPG from countable income, multiplying by 50%, then adding $65, up to a maximum of $115. (3) DCYF does not prorate the copayment when a consumer uses care for part of a month. (4) The FPG is updated every year. The WCCC eligibility level is updated at the same time every year to remain current with the FPG. WAC 110-15-0075 ? Determining income eligibility and copayment amounts, states (effective beginning October 1, 2021): (1) DCYF takes the following steps to determine consumers? eligibility and copayments, when care is provided under a WCCC voucher or contract: (a) Determine their family size as described in WAC 110-15-0015; and (b) Determine their countable income as described in WAC 110-15-0065. (2) DCYF calculates consumers? copayments as follows: If the household?s income is: Then the household?s maximum monthly copayment is: At or below 20 percent of the SMI Waived Above 20 percent and at or below 36 percent of the SMI $65 Above 36 percent and at or below 50 percent of the SMI $90 Above 50 percent and at or below 60 percent of the SMI $115 At reapplication, above 60 percent and at or below 65 percent of the SMI $215 (3) DCYF does not prorate copayments when consumers use care for only part of a month. (4) For parents age 21 years or younger who attend high school or are working towards completing a high school equivalency certificate, copayments are not required.
2022-036 The Department of Children, Youth, and Families did not have adequate internal controls over and did not comply with client eligibility requirements for child care services paid with the Child Care and Development Fund and Temporary Assistance for Needy Families funds. Assistance Listing Number and Title: 93.558, Temporary Assistance for Needy Families 93.575, Child Care and Development Block Grant 93.575, COVID-19 Child Care and Development Block Grant 93.596, Child Care Mandatory and Matching Funds of the Child Care and Development Fund Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: 2003WACCDF; 2103WACCDF; 2203WACCDF; 2003WACCC3; 2103WACDC6; 2103WACSC6; 2103WACCC5; 2103WACCDD; 2203WACCDD; 2101WATANF; 2201WATANF Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Eligibility Known Questioned Cost Amount: Temporary Assistance for Needy Families ? $5,689 Child Care and Development Fund ? $5,078 Background The Department of Children, Youth, and Families administers the federal Child Care and Development Fund (CCDF) grant to help eligible working families pay for child care. In fiscal year 2022, the Department spent $668.6 million in CCDF federal funding. The Department of Social and Health Services (DSHS) administers the Temporary Assistance for Needy Families (TANF) grant. To meet one of the program?s primary purposes of helping clients obtain employment, TANF grant funds may be used to pay clients? child care costs. If a client obtains employment and is no longer eligible for the program, TANF funds may still be used to pay child care costs to help the client maintain employment. In fiscal year 2022, the Department spent more than $260.5 million in CCDF and $67.7 million in TANF federal grant funds on child care subsidy payments to providers. Some payments made for child care are paid for by both the CCDF and TANF grants. While the two federal programs are separate, the requirements and policies in Washington for child care payments are consolidated under the Working Connections Child Care program. As of July 1, 2019, the responsibility for making and documenting child care eligibility determinations under the CCDF and TANF grants was transferred from DSHS to the Department. For a family to be eligible for child care assistance, state and federal rules require that at the time of application or reapplication, children must: ? Reside in Washington and be a citizen or legal resident of the United States; ? Be younger than 13 years, or if for verified special needs, be younger than 19 years; ? Reside with a parent(s) or guardian whose countable income does not exceed 200 percent of the federal poverty level at application or 220 percent at reapplication for July, August and September 2021 but in October 2021 changed to 60 percent of the state median income at application or 65 percent of the state median income at reapplication; ? Reside with a parent(s) or guardian who works or attends a job-training or education program, or needs to be receiving protective services. State rules describe the information clients must provide to the Department to verify their eligibility. The information must be accurate, complete, consistent and from a reliable source. This information includes, but is not limited to, employer and hourly wage information, proof of an approved activity under TANF, and family household size and composition. Once determined to be eligible for the program, a client is eligible for one year unless a change in income causes the client to exceed 85 percent of the state?s median income The Department requires that clients self-report such income changes. A written notice communicates the recipients? reporting requirement and the specific dollar threshold applicable to the household?s annual income. Once the client?s income exceeds this cutoff level, the Department terminates services. The Department has access to systems that contain wage and household benefit and composition data for some, but not all, child care recipients. The Department uses this information in part to determine program eligibility, benefit level, including client copayment, and the amount of child care the family is eligible to receive. If an ineligible client receives assistance, the payment made to the child care provider is not allowable and the client must repay the ineligible amount. The Department also uses household income to determine the amount families must contribute for their monthly copay to providers. Beginning July 1, 2021, monthly copayments were calculated using an updated schedule described in Washington Administrative Code 110-15-0075. Federal regulations require the Department to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the past 10 audits, we reported findings related to eligibility for the Working Connections Child Care program. In these prior audits, we reported the Department did not have adequate internal controls over the eligibility process for child care subsidy recipients. These were reported as finding numbers 2021-035, 2020-039, 2019-032, 2018-030, 2017-026, 2016-023, 2015-026, 2014-026, 2013-017 and 2012-30. Description of Condition The Department did not have adequate internal controls over and did not comply with client eligibility requirements for CCDF and TANF. During the audit period the Department determined 69,815 children were eligible for child care. We used a statistical sampling method to randomly select and examine 59 of these determinations. In four instances (6.8 percent), we found the Department made eligibility determinations improperly, did not obtain required documentation, incorrectly assessed copayment, or did not verify information before authorizing services. Specifically, we found: ? Two cases (3.4 percent) where the Department had incorrectly determined household composition and did not obtain sufficient data for all parents in the household to make an accurate eligibility determination. ? One case (1.7 percent) where the Department did not follow procedure for verifying employment, which led to an incorrect household income calculation. ? One case (1.7 percent) where the copay was incorrectly assessed, which resulted in an underpayment due to a system error. Though the Department has established internal controls, they were insufficient for ensuring material compliance with client eligibility requirements. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. Cause of Condition Department staff made eligibility determinations without obtaining sufficient supporting documentation to ensure households were eligible to receive assistance. This deviated from the standard policies and procedures the Department has established, and management did not monitor sufficiently to ensure staff made proper eligibility determinations. Further, the incorrect copay calculation was due to system error. Effect of Condition and Questioned Costs By not implementing adequate internal controls, the Department is at higher risk of paying providers for child care services when clients are ineligible. Of the four client eligibility determinations that had errors, three resulted in $10,767 of federal overpayments to providers. The Department used $5,078 in CCDF grant funds and $5,689 in TANF grant funds for these payments. Because we used a statistical sampling method to randomly select the payments examined in the audit, we estimate the amount of likely improper payments to be $6,008,693 for the CCDF grant and $6,731,953 for the TANF grant. Although we identified known and likely questioned costs, we do not have reasonable assurance that the payments in question are appropriately represented in the Department?s accounting records because of the grant management practice issue reported in findings 2022-035 and 2022-041. Additionally, the payments in question are duplicative of the costs already questioned in the aforementioned provider payment findings. Our sampling methodology meets statistical sampling criteria under generally accepted auditing standards in AU-C 530.05. It is important to note that the sampling technique we used is intended to support our audit conclusions by determining if expenditures complied with program requirements in all material respects. Accordingly, we used an acceptance sampling formula designed to provide a high level of assurance, with a 95 percent confidence of whether exceptions exceeded our materiality threshold. Our audit report and finding reflects this conclusion. However, the likely improper payment projections are a point estimate and only represent our ?best estimate of total questioned costs,? as required by 2 CFR ? 200.516(3). We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Department improve its internal controls over determining client eligibility to ensure it: ? Reviews eligibility determinations sufficiently to detect improper eligibility determinations ? Reviews sufficient support for clients? income and household composition information for accuracy We also recommend the Department consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid. Department`s Response The Department appreciates, acknowledges, and supports SAO?s mission, which is to hold state and local government accountable for the use of public resources. Further, we appreciate SAO?s work with us over the past year to strengthen the auditing process. Due to recent changes to CCSP directed by the Legislature, the Department anticipates continued reduction in eligibility determination errors. The Fair Start for Kids Act (FSKA) required the Department to make several changes that expanded eligibility during SFY 2022. The FSKA increased the State Median Income (SMI) threshold, allowing more two parent households to be eligible for child care subsidy. The FSKA also capped copayments to $115 for applicants and $215 for reapplicants, greatly reducing the copay amounts for typical two parent households. These changes are disincentives for fraud as struggling families receive needed benefits and are more likely to provide accurate and complete information. This is supported by the overall reduction in investigation requests submitted to the Office of Fraud and Accountability. In the federal fiscal year prior to the implementation of the FSKA, the Department submitted 1,405 requests for investigations. The year following FSKA implementation requests for investigations fell to 912. The Department continues to explore ways to remove the possibility for improper use of CCDF funds. The Department agrees with the SAO that there is a need to review household composition at application and reapplication to improve reliability of eligibility decisions. The Department accesses data across available state systems to confirm information, including household composition provided by clients. Unfortunately, there is no household composition verification system, and information provided to other state agencies is often provided by client self-attestation. The Department continues to balance verification requirements with providing timely benefit decisions to support family access to high quality child care. Eighty-six percent of households receiving child care subsidies are headed by single parents. Supporting these families with child care is essential for their continued participation in work, education, and other social service programs. The Department provides training for eligibility in the specific areas of household composition and income determination and improvements to training are ongoing. The Department recently made changes to the professional development and training process to improve staff skills and accuracy. Staff training is in a continuous improvement cycle and evolves with staff needs and changes in rule. The Department will continue to improve processes and internal controls and create and deliver staff training based on current data trends and patterns. Auditor?s Remarks We thank the Department for its cooperation and assistance throughout the audit. We will review the status of the Department?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Washington Administrative Code (WAC) 110-15-0015 ? Determining family size, states in part: (1) DCYF determines a consumer?s family size as follows: (a) For a single parent, including a minor parent living independently, DCYF counts the consumer and the consumer?s children; (b) For unmarried parents who have at least one mutual child, DCYF counts both parents and all of their children living in the household; (c) Unmarried parents who have no mutual children are counted as separate WCCC households, the unmarried parents and their respective children living in the household; (d) For married parents, DCYF counts both parents and all of their children living in the household; (e) For parents who are undocumented aliens as defined in WAC 388-424-0001, DCYF counts the parents and children, documented and undocumented, and all other family rules in this section apply. Children needing care must meet citizenship requirements described in WAC 110-15-0005; (f) For a legal guardian verified by a legal or court document, adult sibling or step-sibling, nephew, niece, aunt, uncle, grandparent, any of these relatives with the prefix ?great,? such as a ?great-nephew,? or an in loco parentis custodian who is not related to the child as described in WAC 110-15-0005, DCYF counts only the children and only the children?s income is counted; (g) For a parent who is out of the household because of employer requirements, such as training or military service, and expected to return to the household, DCYF counts the consumer, the absent parent, and the children; (h) For a parent who is voluntarily out of the household for reasons other than requirements of the employer, such as unapproved schooling and visiting family members, and is expected to return to the household, DCYF counts the consumer, the absent parent, and the children. WAC 110-15-0020 and all other family and household rules in this section apply; (i) For a parent who is out of the country and waiting for legal reentry in to the United States, DCYF counts only the consumer and children residing in the United States and all other family and household rules in this section apply; (j) An incarcerated parent is not part of the household count for determining income and eligibility. DCYF counts the remaining household members using all other family rules in this section; and (k) For a parent incarcerated at a Washington state correctional facility whose child lives with them at the facility, DCYF counts the parent and child as their own household. (2) When the household consists of the consumer?s own child and another child identified in subsection (1)(f) of this section, the household may be combined into one household or kept as distinct households for the benefit of the consumer. WAC 110-15-0065 ? Calculation of income, states in part: DSHS uses a consumer?s countable income when determining income eligibility and copayment. A consumer?s countable income is the sum of all income listed in WAC 110-15-0060 minus any child support paid out through a court order, division of child support administrative order, or tribal government order. (1) To determine a consumer?s income, DSHS either: (a) Calculates an average monthly income by: (i) Determining the number of months, weeks or pay periods it took the consumer?s WCCC household to earn the income; and dividing the income by the same number of months, weeks or pay periods. (ii) If the past wages are no longer reflective of the current income, DSHS may accept the employer?s statement of current, anticipated wages for future income determination. (b) When the consumer begins new employment and has less than three months of wages, DSHS uses the best available estimate of the consumer?s WCCC household?s current income: (i) As verified by the consumer?s employer; or (ii) As provided by the consumer through a verbal or written statement documenting the new employment at the time of application, reapplication or change reporting, and wage verification within sixty days of DSHS request. (2) If a consumer receives a lump sum payment (such as money from the sale of property or back child support payment) in the month of application or during the consumer?s WCCC eligibility: (a) DSHS calculates a monthly amount by dividing the lump sum payment by twelve; (b) DSHS adds the monthly amount to the consumer?s expected average monthly income: (i) For the month it was received; and (ii) For the remaining months of the current eligibility period; and (c) To remain eligible for WCCC the consumer must meet WCCC income guidelines after the lump sum payment is applied. WAC 110-15-0075 ? Determining income eligibility and copayment amounts, states (effective prior to October 1, 2021): (1) DCYF takes the following steps to determine a consumer?s eligibility and copayment, whether care is provided under a WCCC voucher or contract: (a) Determine the consumer?s family size (under WAC 110-15-0015); (b) Determine the consumer?s countable income (under WAC 110-15-0065). (2) DCYF calculates the consumer?s copayment as follows: If a consumer?s income is: Then the consumer?s copayment is: (a) At or below 82% of the federal poverty guidelines (FPG). $15 (b) Above 82% of the FPG up to 137.5% of the FPG. $65 (c) Above 137.5% of the FPG through 200% of the FPG. The dollar amount equal to subtracting 137.5% of the FPG from countable income, multiplying by 50%, then adding $65, up to a maximum of $115. (3) DCYF does not prorate the copayment when a consumer uses care for part of a month. (4) The FPG is updated every year. The WCCC eligibility level is updated at the same time every year to remain current with the FPG. WAC 110-15-0075 ? Determining income eligibility and copayment amounts, states (effective beginning October 1, 2021): (1) DCYF takes the following steps to determine consumers? eligibility and copayments, when care is provided under a WCCC voucher or contract: (a) Determine their family size as described in WAC 110-15-0015; and (b) Determine their countable income as described in WAC 110-15-0065. (2) DCYF calculates consumers? copayments as follows: If the household?s income is: Then the household?s maximum monthly copayment is: At or below 20 percent of the SMI Waived Above 20 percent and at or below 36 percent of the SMI $65 Above 36 percent and at or below 50 percent of the SMI $90 Above 50 percent and at or below 60 percent of the SMI $115 At reapplication, above 60 percent and at or below 65 percent of the SMI $215 (3) DCYF does not prorate copayments when consumers use care for only part of a month. (4) For parents age 21 years or younger who attend high school or are working towards completing a high school equivalency certificate, copayments are not required.
2022-040 The Department of Commerce did not have adequate internal controls over and did not comply with requirements to issue management decisions for audit findings to subrecipients of the Low-Income Home Energy Assistance Program. Assistance Listing Number and Title: 93.568, Low-Income Home Energy Assistance Program 93.568, COVID-19 Low-Income Home Energy Assistance Program Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: 2201WALIEA; 2101WALIEA; 2201WALIEI; 2101WALWC5; 2101WEA5C6; 2102WALWC6 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Subrecipient Monitoring Known Questioned Cost Amount: None Background The Department of Commerce (Department) administers the Low-Income Home Energy Assistance Program, which provides financial assistance to low-income households to meet their home energy needs. The Department makes subawards to community-based organizations to provide this assistance. In fiscal year 2022, the Department spent more than $102 million in federal program funds, approximately $98 million of which it paid to subrecipients. Federal regulations require the Department to monitor its subrecipients? activities. This includes verifying that subrecipients that spend $750,000 or more in federal awards during a fiscal year obtain a single audit. The audit must be completed and submitted to the Federal Audit Clearinghouse within 30 days after receiving the auditor?s report or nine months after the end of the subrecipient?s audit period, whichever is earlier. Additionally, for the awards it passes on to subrecipients, the Department must follow up and ensure its subrecipients take timely and appropriate corrective action on all deficiencies identified through audits, onsite reviews and other means. When a subrecipient receives an audit finding for a Department-funded program, federal law requires the Department to issue a management decision to the subrecipient within six months of acceptance of the audit report by Federal Audit Clearinghouse. The management decision must clearly state whether the audit finding is sustained, the reasons for the decision, and the actions the subrecipient is expected to take, such as repaying unallowable costs or making financial adjustments. These requirements help ensure subrecipients use federal program funds for authorized purposes and within the provisions of contracts or grant agreements. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Department did not have adequate internal controls over and did not comply with requirements to issue management decisions for audit findings to the program?s subrecipients. The Department had a process in place to monitor that program subrecipients received single audits. However, for the first half of the audit period, it did not have a process in place to issue, communicate and follow up on management decisions to its subrecipients when program findings were issued. During the audit period, the Department had 26 subrecipients that were required to submit a single audit. One subrecipient received a finding for which the Department was required to issue a management decision. We found the Department did not issue a management decision for this subrecipient. We consider this internal control deficiency to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition Management did not establish sufficient internal controls or monitoring procedures to ensure the Department issued the required management decisions. The Department also lacks written policies over issuing management decisions to its federal program subrecipients. Effect of Condition Without establishing adequate internal controls, the Department cannot ensure it is following up on subrecipient single audit findings and communicating required management decisions to subrecipients. By failing to ensure subrecipients establish corrective actions and management monitor them for effectiveness, the Department cannot determine whether subrecipients have sufficiently corrected issues identified in audit findings. Recommendations We recommend the Department: ? Establish effective internal controls to ensure it issues management decisions by the due date and follows up on all subrecipient audit findings related to the program ? Ensure subrecipients develop and perform acceptable corrective actions to adequately address all audit recommendations Department?s Response The Department of Commerce concurs with the finding. The Department hired an Internal Control Officer in November 2021 assigned to complete the required verification of Federal Audit Clearinghouse (FAC) submissions. This process was completed for all recipients who expended $750,000 or more in federal funds passed through the Department. One subrecipients submission selected for testing was verified, however, a formal management decision was not issued. The audit report submitted to the FAC included various errors which included no identification of the pass through entity (the Department of Commerce) as part of the finding and the Schedule of Expenditure of Federal Awards (SEFA) reported the wrong state agency?s acronym. The Department of Corrections was listed, not Commerce as required. The accurate reporting of the pass through entity in the audit report is imperative for Commerce to identify who they are required to issue a management decision for. A comprehensive spreadsheet of the Department?s management decision was maintained, however, the subrecipient selected for testing was omitted. The Department currently has a robust and comprehensive process to identify required reporters, verify their submission to the FAC, document late or non-reporters, and document communication requests for information related to submissions. The Department has also created a method to formally communicate the management decision to our subrecipients who have received Commerce funded audit findings. Our prior process included verbally discussing the finding, corrective action plans and Commerce requests with the subrecipient. Internal controls for the monitoring of federal reporting and issuing of management decisions have been in place since March 2022. Commerce management will continue to monitor the process and implement efficiencies to ensure continued compliance with all respects of the code of federal regulations. We appreciate the State Auditor?s Office thorough review of this process and recommendations. We anticipate all future audits will find the Department has employed strong internal controls supporting compliance with all requirements. Auditor?s Remarks We thank the Department for its cooperation and assistance throughout the audit. We will review the status of the Department?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) establishes the following applicable requirements: Section 200.332 Requirements for pass-through entities, states in part: All pass-through entities must: (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. (3) Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by ? 200.521. (4) The pass-through entity is responsible for resolving audit findings specifically related to the subaward and not responsible for resolving crosscutting findings. If a subrecipient has a current Single Audit report posted in the Federal Audit Clearinghouse and has not otherwise been excluded from receipt of Federal funding (e.g., has been debarred or suspended), the pass-through entity may rely on the subrecipient's cognizant audit agency or cognizant oversight agency to perform audit follow-up and make management decisions related to cross-cutting findings in accordance with section ? 200.513(a)(3)(vii). Such reliance does not eliminate the responsibility of the pass-through entity to issue subawards that conform to agency and award-specific requirements, to manage risk through ongoing subaward monitoring, and to monitor the status of the findings that are specifically related to the subaward. Section 200.339 Remedies for noncompliance, states: If a non-Federal entity fails to comply with the U.S. Constitution, Federal statutes, regulations or the terms and conditions of a Federal award, the Federal awarding agency or pass-through entity may impose additional conditions, as described in ? 200.208. If the Federal awarding agency or pass-through entity determines that noncompliance cannot be remedied by imposing additional conditions, the Federal awarding agency or pass-through entity may take one or more of the following actions, as appropriate in the circumstances: (a) Temporarily withhold cash payments pending correction of the deficiency by the non-Federal entity or more severe enforcement action by the Federal awarding agency or pass-through entity. (b) Disallow (that is, deny both use of funds and any applicable matching credit for) all or part of the cost of the activity or action not in compliance. (c) Wholly or partly suspend or terminate the Federal award. (d) Initiate suspension or debarment proceedings as authorized under 2 CFR part 180 and Federal awarding agency regulations (or in the case of a pass-through entity, recommend such a proceeding be initiated by a Federal awarding agency). (e) Withhold further Federal awards for the project or program. (f) Take other remedies that may be legally available. Section 200.501 Audit requirements, states in part: (a) Audit required. A non-Federal entity that expends $750,000 or more during the non-Federal entity's fiscal year in Federal awards must have a single or program-specific audit conducted for that year in accordance with the provisions of this part. (b) Single audit. A non-Federal entity that expends $750,000 or more during the non-Federal entity's fiscal year in Federal awards must have a single audit conducted in accordance with ? 200.514 except when it elects to have a program-specific audit conducted in accordance with paragraph (c) of this section. Section 200.521 Management decision, states in part: (a) General. The management decision must clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action. If the auditee has not completed corrective action, a timetable for follow-up should be given. Prior to issuing the management decision, the Federal agency or pass-through entity may request additional information or documentation from the auditee, including a request for auditor assurance related to the documentation, as a way of mitigating disallowed costs. The management decision should describe any appeal process available to the auditee. While not required, the Federal agency or pass-through entity may also issue a management decision on findings relating to the financial statements which are required to be reported in accordance with GAGAS. (c) Pass-through entity. As provided in ? 200.332(d), the pass-through entity must be responsible for issuing a management decision for audit findings that relate to Federal awards it makes to subrecipients. (d) Time requirements. The Federal awarding agency or pass-through entity responsible for issuing a management decision must do so within six months of acceptance of the audit report by the FAC. The auditee must initiate and proceed with corrective action as rapidly as possible and corrective action should begin no later than upon receipt of the audit report. (e) Reference numbers. Management decisions must include the reference numbers the auditor assigned to each audit finding in accordance with ? 200.516(c).
2022-040 The Department of Commerce did not have adequate internal controls over and did not comply with requirements to issue management decisions for audit findings to subrecipients of the Low-Income Home Energy Assistance Program. Assistance Listing Number and Title: 93.568, Low-Income Home Energy Assistance Program 93.568, COVID-19 Low-Income Home Energy Assistance Program Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: 2201WALIEA; 2101WALIEA; 2201WALIEI; 2101WALWC5; 2101WEA5C6; 2102WALWC6 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Subrecipient Monitoring Known Questioned Cost Amount: None Background The Department of Commerce (Department) administers the Low-Income Home Energy Assistance Program, which provides financial assistance to low-income households to meet their home energy needs. The Department makes subawards to community-based organizations to provide this assistance. In fiscal year 2022, the Department spent more than $102 million in federal program funds, approximately $98 million of which it paid to subrecipients. Federal regulations require the Department to monitor its subrecipients? activities. This includes verifying that subrecipients that spend $750,000 or more in federal awards during a fiscal year obtain a single audit. The audit must be completed and submitted to the Federal Audit Clearinghouse within 30 days after receiving the auditor?s report or nine months after the end of the subrecipient?s audit period, whichever is earlier. Additionally, for the awards it passes on to subrecipients, the Department must follow up and ensure its subrecipients take timely and appropriate corrective action on all deficiencies identified through audits, onsite reviews and other means. When a subrecipient receives an audit finding for a Department-funded program, federal law requires the Department to issue a management decision to the subrecipient within six months of acceptance of the audit report by Federal Audit Clearinghouse. The management decision must clearly state whether the audit finding is sustained, the reasons for the decision, and the actions the subrecipient is expected to take, such as repaying unallowable costs or making financial adjustments. These requirements help ensure subrecipients use federal program funds for authorized purposes and within the provisions of contracts or grant agreements. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Department did not have adequate internal controls over and did not comply with requirements to issue management decisions for audit findings to the program?s subrecipients. The Department had a process in place to monitor that program subrecipients received single audits. However, for the first half of the audit period, it did not have a process in place to issue, communicate and follow up on management decisions to its subrecipients when program findings were issued. During the audit period, the Department had 26 subrecipients that were required to submit a single audit. One subrecipient received a finding for which the Department was required to issue a management decision. We found the Department did not issue a management decision for this subrecipient. We consider this internal control deficiency to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition Management did not establish sufficient internal controls or monitoring procedures to ensure the Department issued the required management decisions. The Department also lacks written policies over issuing management decisions to its federal program subrecipients. Effect of Condition Without establishing adequate internal controls, the Department cannot ensure it is following up on subrecipient single audit findings and communicating required management decisions to subrecipients. By failing to ensure subrecipients establish corrective actions and management monitor them for effectiveness, the Department cannot determine whether subrecipients have sufficiently corrected issues identified in audit findings. Recommendations We recommend the Department: ? Establish effective internal controls to ensure it issues management decisions by the due date and follows up on all subrecipient audit findings related to the program ? Ensure subrecipients develop and perform acceptable corrective actions to adequately address all audit recommendations Department?s Response The Department of Commerce concurs with the finding. The Department hired an Internal Control Officer in November 2021 assigned to complete the required verification of Federal Audit Clearinghouse (FAC) submissions. This process was completed for all recipients who expended $750,000 or more in federal funds passed through the Department. One subrecipients submission selected for testing was verified, however, a formal management decision was not issued. The audit report submitted to the FAC included various errors which included no identification of the pass through entity (the Department of Commerce) as part of the finding and the Schedule of Expenditure of Federal Awards (SEFA) reported the wrong state agency?s acronym. The Department of Corrections was listed, not Commerce as required. The accurate reporting of the pass through entity in the audit report is imperative for Commerce to identify who they are required to issue a management decision for. A comprehensive spreadsheet of the Department?s management decision was maintained, however, the subrecipient selected for testing was omitted. The Department currently has a robust and comprehensive process to identify required reporters, verify their submission to the FAC, document late or non-reporters, and document communication requests for information related to submissions. The Department has also created a method to formally communicate the management decision to our subrecipients who have received Commerce funded audit findings. Our prior process included verbally discussing the finding, corrective action plans and Commerce requests with the subrecipient. Internal controls for the monitoring of federal reporting and issuing of management decisions have been in place since March 2022. Commerce management will continue to monitor the process and implement efficiencies to ensure continued compliance with all respects of the code of federal regulations. We appreciate the State Auditor?s Office thorough review of this process and recommendations. We anticipate all future audits will find the Department has employed strong internal controls supporting compliance with all requirements. Auditor?s Remarks We thank the Department for its cooperation and assistance throughout the audit. We will review the status of the Department?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) establishes the following applicable requirements: Section 200.332 Requirements for pass-through entities, states in part: All pass-through entities must: (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. (3) Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by ? 200.521. (4) The pass-through entity is responsible for resolving audit findings specifically related to the subaward and not responsible for resolving crosscutting findings. If a subrecipient has a current Single Audit report posted in the Federal Audit Clearinghouse and has not otherwise been excluded from receipt of Federal funding (e.g., has been debarred or suspended), the pass-through entity may rely on the subrecipient's cognizant audit agency or cognizant oversight agency to perform audit follow-up and make management decisions related to cross-cutting findings in accordance with section ? 200.513(a)(3)(vii). Such reliance does not eliminate the responsibility of the pass-through entity to issue subawards that conform to agency and award-specific requirements, to manage risk through ongoing subaward monitoring, and to monitor the status of the findings that are specifically related to the subaward. Section 200.339 Remedies for noncompliance, states: If a non-Federal entity fails to comply with the U.S. Constitution, Federal statutes, regulations or the terms and conditions of a Federal award, the Federal awarding agency or pass-through entity may impose additional conditions, as described in ? 200.208. If the Federal awarding agency or pass-through entity determines that noncompliance cannot be remedied by imposing additional conditions, the Federal awarding agency or pass-through entity may take one or more of the following actions, as appropriate in the circumstances: (a) Temporarily withhold cash payments pending correction of the deficiency by the non-Federal entity or more severe enforcement action by the Federal awarding agency or pass-through entity. (b) Disallow (that is, deny both use of funds and any applicable matching credit for) all or part of the cost of the activity or action not in compliance. (c) Wholly or partly suspend or terminate the Federal award. (d) Initiate suspension or debarment proceedings as authorized under 2 CFR part 180 and Federal awarding agency regulations (or in the case of a pass-through entity, recommend such a proceeding be initiated by a Federal awarding agency). (e) Withhold further Federal awards for the project or program. (f) Take other remedies that may be legally available. Section 200.501 Audit requirements, states in part: (a) Audit required. A non-Federal entity that expends $750,000 or more during the non-Federal entity's fiscal year in Federal awards must have a single or program-specific audit conducted for that year in accordance with the provisions of this part. (b) Single audit. A non-Federal entity that expends $750,000 or more during the non-Federal entity's fiscal year in Federal awards must have a single audit conducted in accordance with ? 200.514 except when it elects to have a program-specific audit conducted in accordance with paragraph (c) of this section. Section 200.521 Management decision, states in part: (a) General. The management decision must clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action. If the auditee has not completed corrective action, a timetable for follow-up should be given. Prior to issuing the management decision, the Federal agency or pass-through entity may request additional information or documentation from the auditee, including a request for auditor assurance related to the documentation, as a way of mitigating disallowed costs. The management decision should describe any appeal process available to the auditee. While not required, the Federal agency or pass-through entity may also issue a management decision on findings relating to the financial statements which are required to be reported in accordance with GAGAS. (c) Pass-through entity. As provided in ? 200.332(d), the pass-through entity must be responsible for issuing a management decision for audit findings that relate to Federal awards it makes to subrecipients. (d) Time requirements. The Federal awarding agency or pass-through entity responsible for issuing a management decision must do so within six months of acceptance of the audit report by the FAC. The auditee must initiate and proceed with corrective action as rapidly as possible and corrective action should begin no later than upon receipt of the audit report. (e) Reference numbers. Management decisions must include the reference numbers the auditor assigned to each audit finding in accordance with ? 200.516(c).