Finding Text
Finding 2025-001 – Significant Deficiency in Internal Control Over Compliance Federal Agency: U.S. Department of Labor Federal Program Name: Registered Apprenticeship Assistance Listing Number: 17.285 Federal Award Identification Number: 24A60AP000078 Award Number: 24A60AP000078-01-00 Major Program: Yes Compliance Requirement: B: Allowability Criteria: In accordance with 2 CFR 200.403, costs must be allocable to the federal award and adequately documented to be allowable. Under these cost principles and standard accrual accounting rules, an expenditure can only be recognized and charged to a federal program during the specific fiscal period in which the underlying services are actively performed or a valid legal obligation is incurred. Condition: During our compliance testing over ALN 17.285, we selected 40 expenditures totaling $225,467 for testing. We identified three exceptions. Two expenditures totaling $17,050 were not properly charged to the federal award because the services had not yet been incurred. In addition, one expenditure totaling $4,000 was charged to the fiscal year under audit but was incurred in the prior fiscal year. As a result all three items totaling $21,050 should not have been reported as federal expenditures on the initial draft Schedule of Expenditures of Federal Awards (SEFA) for this fiscal year. Cause: AACF has established procedures designed to ensure that federal expenditures are recorded and reported in the appropriate fiscal year. However, the year-end review procedures did not identify the specific transactions noted above. Effect: AACF is not in compliance with 2 CFR 200.403. Questioned Costs: Known questioned costs identified from the auditor’s testing totaled $21,050. This amount is below the $25,000 threshold for reporting known questioned costs; however, it is presented here for transparency and to support corrective action and management decision-making. In addition, based on projection/extrapolation of the exceptions identified in the sample to the universe, the auditor estimates likely questioned costs of approximately $37,207. Likely questioned costs are not the same as known questioned costs and represent an estimate of questioned costs that may exist in the population beyond the specific items tested. Repeat Finding: This is not a repeat finding. Recommendation: We recommend management enhance its existing year-end review procedures to ensure that costs are incurred and reported in the appropriate fiscal year and that the SEFA includes only expenditures applicable to the current reporting period. Views of Responsible Officials: AACF concurs with this finding. Within 30 days, AACF leadership and the Board of Directors will assess whether grants accounting staff have the capacity to complete all required year-end review procedures. If additional capacity is needed, AACF will retain external accounting support. Relevant staff will complete professional development training within 90 days, and no later than December 31, 2026. Additional context: AACF’s grants accounting staff, including the Director of Operations, conduct final level of review for each grant at the end of its performance period and during the grant close-out process to verify that all expenditures charged to the grant are allowable under applicable Uniform Guidance requirements and funder-specific restrictions before reporting the final cumulative totals.