Finding Text
Reference Number: 2023-004 – Grant Expenditure Coding Changes
Federal Program Title: WIOA Cluster
Federal Assistance Listing Number: 17.258
Federal Agency: Department of Labor (DOL)
Pass-Through Entity: State of California Employment Development Program
Federal Award Number and Year: AA211079, AA311059, 170305366
Category of Finding: Allowable Costs and Cost Principles
Type of Finding: Significant Deficiency in Internal Control over Compliance
Criteria
Title 2 Code of Federal Regulations (2 CFR) §200.303 states that the non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Condition
During our review of check requisitions for selected nonpayroll costs, we noted one (1) requisition where the approved account coding had been changed in QuickBooks after approval with no evidence of approval for that change.
Cause
The Organization has experienced significant turnover in key personnel in the Organization’s finance department and management in past years. Absent robust accounting policies and procedures, when vacancies occur, information can be lost and as individuals are getting up to speed, some processes may not be fully executed if they are manual and not fully embedded into an automated system.
Effect
No documented review processes for changes in grant expenditure general ledger accounts and classes is a deficiency in internal control and could result in unallowable costs.
Questioned Costs
Questioned costs were not identified.
Context
For the sixty (60) non-payroll costs selected for testing, one was coded to a different general ledger account than listed on the approved check requisition.
The sample was not a statistically valid sample.
Recommendation
We recommend that the Organization develop and document processes for changing of grant expenditure general ledger accounts and classes to ensure all changes are approved with evidence of that approval.
Views of Responsible Officials and Planned Corrective Action
Person responsible: Leona Smith Di Faustino, Interim Executive Director
Corrective Action Plan: The approved account coding that was changed in the "condition" section mentioned above was done by the former Fiscal Consultant that was replaced by the current Director of Finance. Knowledge of that change with no documentation was not noticed until it was a selection picked during the audit. The current Director of Finance was not the manager of the Fiscal Consultant, the Executive Director was, and the current Director of Finance was not given any authority over the Fiscal Consultant. Currently the internal control implemented requires that no changes to grant coding are allowed to be done unless the Director of Finance deploys an accounting department team member to make the change by written request, it is then signed by the staff members in the accounting department making the change. If the Director of Finance makes the reclassification it is documented on the original invoice and signed off by the Director of Finance.
Anticipated Implementation Date: June 30, 2024