Finding 1228719 (2023-001)

Material Weakness Repeat Finding

Requirement

Questioned Costs

Year

2023

Accepted

2026-09-03

Audit: 410398

Organization: Activate Work Inc. (CO)

Auditor: JDS PROFESSIONAL GROUP

AI Summary

Core Issue: The Organization used estimated costs instead of actual costs for the grant, violating compliance requirements.
Impacted Requirements: Failure to maintain proper records and documentation as per Uniform Guidance led to $124,895 in questioned costs.
Recommended Follow-Up: Implement stronger internal controls, ensure costs are documented, and train staff on grant financial reporting.

Finding Text

Finding 2023-001: 10.561 - State Administrative Matching Grants for the Supplemental Nutrition Assistance Program - Material Weakness Compliance Requirement: Allowable Costs/Cost Principles Criteria: Uniform Guidance requires non-Federal entities to maintain records that adequately identify the source and application of funds for federally funded activities. Specifically, 2 CFR §200.302(b)(3) requires accounting records to be supported by source documentation. In addition, 2 CFR §200.403(a) and §200.403(g) require that costs charged to a Federal award be allowable, adequately documented, and in accordance with generally accepted accounting principles. Condition: The Organization did not record or track actual direct costs to the grant. Instead, estimated costs were used to allocate expenses to the program. The Organization could not provide support of the underlying source documentation demonstrating that the costs were incurred, allowable, and directly attributable to the grant. Effect: Because costs charged to the program were based on estimates rather than actual expenditures supported by source documentation, the Organization was unable to demonstrate compliance with Uniform Guidance requirements. As a result, the entire program cost of $124,895 was determined to be a questioned cost. Questioned Cost: $124,895 Cause: The Organization adequate procedures and internal controls to ensure that actual, supportable direct costs were charged to the grant. Recommendation: We recommend that the Organization implement policies and procedures to ensure that actual, allowable, and properly documented direct costs are charged to Federal awards. This should include strengthening internal controls over grant accounting, ensuring costs are supported by source documentation, and providing training to personnel responsible for grant financial reporting. The Organization should also work with the grantor to determine the allowability of the questioned costs and take corrective action as required. Response: There is no disagreement with the audit finding.

Corrective Action Plan

Action Taken in Response to Finding: In 2023, invoices were submitted using a format aligned with initial guidance from the Colorado Department of Human Services (CDHS), reflecting a per-learner, activity-based approach. Beginning in October 2024, updated guidance required invoices to be based on actual costs incurred, supported by documentation such as timesheets and receipts. As of October 2025, CDHS no longer required supporting documentation at the time of submission; however, supporting documentation continues to be maintained and is provided upon request for monitoring or audit purposes. Standardized Excel-based tools provided by CDHS are utilized for reimbursement submission (Invoice and Ledger). Transaction-level cost tracking was implemented to ensure allowable and eligible costs are recorded and supported. Financial and grant-related policies were standardized and incorporated into Financial Policies and Procedures in May 2024, with a comprehensive grant management framework implemented in May 2026. Control Enhancement: Beginning in 2025, all grant-related expenditures are recorded and tracked at the transaction level within the accounting system. Each transaction must include appropriate supporting documentation and be coded to the correct funding source. A standardized payroll-to-invoice reconciliation process has been implemented to ensure that all costs charged to federal awards are allowable, allocable, and properly supported. Monitoring & Review: • Costs are reviewed by the Senior Accountant prior to inclusion in reimbursement requests • A secondary monthly review is performed by the Director of Finance & Operations to validate allowability, completeness, and alignment with funding requirements • Exceptions are documented and resolved prior to submission Testing & Validation: • Beginning in June 2026, quarterly internal reviews will be conducted to test a sample of transactions for compliance with documentation and allowability requirements • Results will be documented and tracked, and any identified deficiencies will require corrective action Documentation & Evidence: • Supporting documentation is maintained in Microsoft Teams / SharePoint • Review and approval are evidenced via email approval and retained as part of the audit record Control Owner(s): • Director of Finance & Operations • Finance Team Responsible Party: Helen Young Hayes, Founder / Chief Executive Officer, in coordination with the Finance Staff Anticipated Completion Date: All corrective actions will be implemented as of June 30, 2026. Ongoing monitoring, quarterly testing, and policy updates will continue.

Other Findings in this Audit

1228720 2023-004

Material Weakness Repeat
1228721 2023-004

Material Weakness Repeat
1228722 2023-004

Material Weakness Repeat
1228723 2023-005

Material Weakness Repeat
1228724 2023-006

Material Weakness Repeat
1228725 2023-002

Material Weakness Repeat
1228726 2023-004

Material Weakness Repeat
1228727 2023-003

Material Weakness Repeat
1228728 2023-005

Material Weakness Repeat
1228729 2023-006

Material Weakness Repeat
1228730 2023-003

Material Weakness Repeat
1228731 2023-004

Material Weakness Repeat
1228732 2023-006

Material Weakness Repeat
1228733 2023-003

Material Weakness Repeat
1228734 2023-004

Material Weakness Repeat
1228735 2023-005

Material Weakness Repeat

Programs in Audit

ALN	Program Name	Expenditures
11.307	ECONOMIC ADJUSTMENT ASSISTANCE	$314,592
17.268	H-1B JOB TRAINING GRANTS	$247,672
10.561	STATE ADMINISTRATIVE MATCHING GRANTS FOR THE SUPPLEMENTAL NUTRITION ASSISTANCE PROGRAM	$124,895
21.027	CORONAVIRUS STATE AND LOCAL FISCAL RECOVERY FUNDS	$28,349