Finding Text
Type of Finding: Significant Deficiency in Compliance and Internal Control over Compliance
Federal Agency: U.S. Department of Defense
Federal Program Name: Conservation and Rehabilitation of Natural Resources on Military Installations
Assistance Listing Number: 12.005
Federal Award Identification Number and Year: H79TI083313 - 2020
Award Period: September 28, 2020, through September 27, 2025
Criteria or specific requirement: 2 CFR 200.303(a) states that a non-Federal entity must "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)." In addition, 2 CFR 200.329(c)(1) states that “the non-federal entity must submit performance reports at the interval required by the Federal awarding agency or pass-through entity to best inform improvements in program outcomes and productivity”. Per the award agreement for contract W912DW-20-2-0003, "Recipient shall submit to the Agreement Administrator (see paragraph 1.2.1) progress reports on a quarterly basis utilizing the form included in Attachment B of this agreement. Reports are due no later than 30 days following the end of each reporting period. A final performance progress report shall be submitted within 90 days after the expiration date of the award."
Condition: During testing it was noted that 3 of the 6 financial reports tested did not include documentary evidence of Executive Director review and approval. In addition, 2 of the 2 performance reports tested were filed after the filing deadline.
Questioned costs: None.
Context: A sample of 6 was made from a population of 17 financial reports, and a sample of 2 was made from a population of 4 performance reports. Of the 6 financial reports sampled, 3 did not have documentary evidence of Executive Director review and approval. Of the 2 performance reports sampled, both were filed after the submission deadline date.
Cause: Late filing is due to a lack of adherence to the due dates as defined within the contract terms. The Organization does not have adequate controls in place to document the Executive Director's review and approval of the Federal Financial Reports (SF-425).
Effect: Not filing reports on a timely basis can present risks, such as outdated and unreliable information or the inability to detect potential fraud or irregularities. In addition, delayed reports can impede regulatory authorities' ability to monitor compliance, detect patterns or trends, and assess risks in a timely manner. Without adequate documentary evidence around the review of financial reports, there is an increased risk of errors and fraud in the reporting process, which could result in inaccurate financial reporting and misappropriation of funds.
Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2022-004.
Recommendation: CLA recommends for the Organization to place emphasis on stronger controls around the timely filing of required reports, such as retaining a monthly checklist of required reconciliations and reports. CLA also recommends implementing a procedure that documents the Executive Director's review and approval of the Federal Financial Reports (SF-425s), whether that be via an email chain or retaining a copy that also includes the Executive Director's signature on the report.
Views of responsible officials: There is no disagreement with the audit finding.