2024-001—Preparation of the Schedule of Expenditures of Federal Awards and Federal Grants Monitoring Type of Finding (E) Material Weakness in Internal Control Over Compliance of Federal Awards (H) Instance of Material Non-compliance related to Federal Awards Funding Agency U.S. Department of Agriculture (“USDA”) Major Programs Affected Beginning Farmer and Rancher Development Program; Award: BFRDP-2023-49400-40894 (AL 10.311); Period: 09/15/2023-09/14/2026 Partnerships for Climate-Smart Commodities; Award: USDA/NR243A750004G005 (AL 10.937); Period: 11/02/2023 -11/01/2028 Questioned Costs The Questioned Cost are undetermined. Management has estimated the amount for Beginning Farmer and Rancher Development Program; Award: BFRDP-2023-49400-40894 (AL 10.311) to be $42,027 and for Partnerships for Climate-Smart Commodities; USDA/NR243A750004G005 (AL 10.937) to be $33,453. Statement of Condition Quivira implemented a software system (Harvest) to track personnel time spent and expenses for federal programs for the year ended December 31, 2024, but time tracking was not at a level of detail considered sufficient for a properly functioning system of financial reporting. The billing system is not reconciled to the accounting system (QuickBooks) to ensure that all allowable costs are properly tracked, invoiced and reported. This finding appears to be a systemic issue. Also, the Schedule of Federal Awards (“SEFA”) was prepared initially by the Auditor based on revenue rather than expenses due to inconsistencies in recording in the accounting system, which appeared to be a reasonable methodology. Criteria An auditee must prepare a SEFA from its books, including required elements (Assistance Listing, award number, period, pass-through, subrecipient amounts) and maintain financial management systems that allow accurate, timely, and supported reporting (2 CFR 200.510(b); 200.302). Award financial reports (SF-425) must reconcile to the general ledger per award terms. Each grant should have its own general ledger in the accounting system, and the grants billing system should be reconciled regularly with the accounting system. Policies and procedures should be updated to ensure proper reconciliations is done. Cause Quivira has not implemented an effective monthly reconciliation of allowable costs control activity between Harvest and QuickBooks. Effect Quivira was unable to provide a SEFA and a reconciliation to the general ledger. During the audit the billing system was reconciled to the accounting system and multiple errors were discovered. A risk exists that improper tracking and documentation over federal grant awards can lead to instances of noncompliance with grant requirements and inaccurate financial information, which would be used by management, Board of Directors and grantors. Recommendation Quivira should develop and implement a consistent federal grant monitoring process and monthly reconciliation between Harvest and QuickBooks for each federal award. Also, Quivira should improve their policies and procedures by including monthly reconciliations, clearly define the allowable cost under federal rules. Revise budget, if necessary, to reallocate cost, if necessary. Quivira staff should be kept informed about all rules updates under Uniform Guidance. Views of responsible officials and planned corrective actions Quivira Coalition has made efforts to fully comply with federal allowable cost rules, including implementing a compliant time and expense system, implementing a compliant accounting system, consulting with federal program officers, and requesting budget revisions when necessary. However, management agrees that despite its efforts it did not correctly attribute allowable non-personnel and personnel costs to the grants, resulting in errors on the Schedule of Expenditures of Federal Awards (SEFA). Management has analyzed the errors and determined the root causes. Management agrees that the root cause of finding 2024-001 is the discrepancy between the accounting system and time and expenses software system, and that this is material to grant management. After reconciling these discrepancies, as discussed below, management believes the estimated amount for Beginning Farmer and Rancher Development Program; Award: BFRDP - 2023 - 49400 - 40894 (AL 10.311) to be $7,002 and for Partnerships for Climate-Smart Commodities; Award: USDA/NR243A750004G005 (AL 10.937) to be $10,169. Non-Personnel Costs Discrepancies in non-personnel costs were primarily caused by human errors. Management conducted a post-audit reconciliation between the expense tracking system (Harvest) and the general ledger (QuickBooks) which identified the 2024 discrepancies, and Quivira has corrected them. Personnel Costs Discrepancies in labor costs were due to three factors: 1) Quivira Coalition personnel are paid for holidays and paid time off (PTO) and therefore personnel costs include PTO and holiday costs in QuickBooks. However, Quivira’s timekeeping system (Harvest) does not burden federal award personnel costs with PTO and holiday costs making it difficult to reconcile. 2) To allocate personnel costs to a grant, Quivira used the Harvest system. This system calculates a fixed cost rate for each person based on their total annual compensation and expected work capacity and then multiplies this fixed cost rate by the number of hours worked on each grant (as recorded in the Harvest System). However, using fixed cost rates can result in misallocation in situations where personnel work over capacity (e.g. overtime) or under capacity. The appropriate cost allocation approach for salaried employees is to allocate actual personnel costs for a task based on the percentage of total hours worked. 3) Quivira calculated personnel fringe costs based on an estimated hourly fringe rate rather than identifying and allocating actual fringe expenses from QuickBooks. To correct for this material weakness, Quivira Coalition will: Action Step Detail Date Responsible Party Develop a new, compliant method to allocate personnel costs for federal billing and reporting. Stop using the timekeeping system (Harvest) for allocation. The new method must properly reflect actual paid salaries, paid fringe, and actual time spent. 12/31/2025 Accounting Firm Update reporting process to reconcile all costs reported on the SF-425 to the general ledger (instead of the timekeeping system) using the new federal grants billing process. Keep detailed records of the reconciliation. 12/31/2025 Accounting Firm Implement a monthly reconciliation process between the time and expense system (Harvest) and the QuickBooks general ledger to reconcile all non-personnel expenses. 1/31/2026 Operations Director Document the grant management process, including new reporting processes, required reconciliations, monitoring policies, and allowable cost management to ensure consistency across the organization. 2/28/2026 Operations Director Update policies and procedures to require that expenses reported on the SEFA form come directly from the accounting system to ensure this continues. 1/31/2026 Operations Director Update policies and procedures to require an annual reconciliation between the SF-425 and SEFA reports to ensure this continues. This occurs before submitting the SEFA report. 1/31/2026 Operations Director Reconcile all grant programs active in 2024 and 2025 using updated processes and resolve any discrepancies with federal reports or billing. 2/28/2026 Initial Review - Operations Director & Grants Manager Secondary Review & Corrections (if needed) - Accounting Firm Develop a plan to ensure regular and sufficient training on Uniform Guidance tracking regulatory changes, and how to implement changes. Update policies and procedures. 11/30/2025 Operations Director & Executive Director Update policies and procedures to require an additional level of review and approval for SF-425 and SEFA reports and reconciliations for accuracy and completeness before they are submitted. 12/31/2025 Operations Director with final approval from the Executive Director