Finding Text
Reference Number: 2024-002 – Inadequate Documentation for Participant Stipends
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 Department
Federal Award Number and Year: AA211079 Fiscal Year 2023-2024
Category of Finding: Activities Allowed or Unallowed; Allowable Costs/Cost Principles
Type of Finding: Material Weakness in Internal Control over Compliance, Instance of Noncompliance
Criteria
Title 2 Code of Federal Regulations (2 CFR) §200.343(g) states that for costs to be allowable under federal awards, costs be adequately documented.
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 audit of compliance with activities allowed or unallowed and allowable costs/cost principles, we noted that the Organization was unable to provide adequate supporting documentation (attendance sheets and/or sign in sheets with signatures) for thirty-nine (39) direct non payroll costs.
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
Not providing sufficient documentation to auditors to demonstrate compliance with federal compliance results in an audit scope limitation. Failure to adequately document and maintain support for expenditures results in non-compliance with 2 CFR) §200.343(g) and there is a risk that federal funds may be used for unallowable activities and/or costs.
Questioned Costs
Questioned costs were not determinable.
Context
For thirty-nine (39) out of sixty (60) direct nonpayroll costs selected for testing, the Company did not provide adequate supporting documentation (attendance sheets and/or sign in sheets with signatures).
The sample was not a statistically valid sample.
Recommendation
We recommend that the Organization develop and document processes and procedures for participant attendance tracking and participant stipends paid.
Views of Responsible Officials and Planned Corrective Action
Person responsible: Leona Smith Di Faustino, Interim Executive Director
Corrective Action Plan: The organization will strengthen and document a formal process for documenting attendance. This process will include provide training to employees responsible for tracking attendance, implementing a signature sheet to be submitted and reviewed by program managers after each class, and incorporate review of attendance sheets into the payment processes for participant stipend payments ensuring only participants who correctly documented attendance are able to receive the stipend funds.
Anticipated Implementation Date: July 1, 2025