Finding Text
Finding 2025-001 Federal Program Habitat Conservation Assistance Listing Number 11.463 Federal Agency U.S. Department of Commerce Finding Type Significant Deficiency in Internal Control Over Compliance Compliance 1. Compliance Requirements Allowable Costs/Cost Principles — Uniform Guidance requires written procedures for determining allowability of costs, tied to 2 CFR 200.302(b)(7). 2. Cash Management — 2 CFR 200.302(b)(6) requires written procedures to implement the cash management requirements in 2 CFR 200.305. 3. Procurement and Suspension and Debarment — 2 CFR 200.318–200.327 require documented procurement procedures, and 2 CFR 200.318(c) requires written standards of conduct for employees involved in contractor selection, award, and administration. Questioned Costs None Criteria Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) requires non-federal entities to establish and maintain effective internal control over federal awards that provides reasonable assurance that the entity is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. In addition, the Uniform Guidance includes certain written policy requirements applicable to non-federal entities, which may include, as applicable, written procedures for determining the allowability of costs, written cash management procedures, written procurement procedures, standards of conduct covering conflicts of interest, and other written policies or procedures required by the specific compliance requirements applicable to the federal program. Condition During our audit, we noted that the Organization did not have a comprehensive set of written policies and procedures addressing key Uniform Guidance requirements applicable to the administration of federal awards. Cause Management indicated that the Organization has historically relied on informal practices, institutional knowledge, and existing general written accounting policies to administer federal awards. However, these policies had not been formally updated to incorporate the specific written policy and procedural requirements of the Uniform Guidance. Repeat Finding? No Effect/Potential Effect Without formal written policies and procedures that address Uniform Guidance requirements, the Organization is at increased risk that compliance with federal awards may not be maintained if laws and regulations change, if knowledgeable staff turnover occurs, and that the Organization may be required to repay federal awards if costs are questioned or disallowed. Recommendation We recommend that management review the Uniform Guidance requirements applicable to the Organization’s federal award programs and update its written policies and procedures to specifically address all required written policy areas. At a minimum, the updated policies should address the written policy and procedure requirements applicable to the Organization’s federal programs, such as: • Procedures for determining the allowability of costs charged to federal awards; • Cash management procedures, if applicable; • Procurement standards and written procurement procedures, if applicable; • Standards of conduct addressing conflicts of interest related to procurement and federal award administration; • Subrecipient monitoring procedures, if applicable; • Procedures for maintaining supporting documentation and demonstrating compliance with federal award requirements; and • Any additional written policy requirements included in the federal award terms and conditions or applicable compliance supplement. Management should ensure that the updated policies are formally approved, communicated to appropriate personnel, and reviewed periodically for continued compliance with current Uniform Guidance requirements and federal award terms and conditions. Views of Responsible Officials and Correct Action Plan Management agrees with the finding. The Organization acknowledges that it does not currently have written policies and procedures addressing certain required Uniform Guidance compliance areas. Management will develop, approve, and implement written policies and procedures designed to comply with applicable Uniform Guidance requirements, including policies over allowable costs/cost principles, cash management, and procurement, including suspension and debarment. Management will also communicate the new policies to relevant personnel and provide training as needed to support consistent implementation