Finding 2024-002 Finding Type: Material noncompliance and material weakness in internal control Federal Department: U.S. Department of Health and Human Services, Centers for Disease Control and Prevention Identification of the Federal Program: Assistance Listing Number 93.988 – Cooperative Agreements for Diabetes Control Programs Award Number: NU58DP007394 Compliance Requirement(s): Activities Allowed or Unallowed, Allowable Costs/Cost Principles Criteria: Per 2 CFR Part 200.303(a), the recipient and subrecipient must establish, document, and maintain effective internal control over the federal award that provides reasonable assurance that the recipient or subrecipient is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should align with the 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). Other than Personnel Services: 2 CFR Part 200.403(g) states that for costs to be allowable under federal awards they must be adequately documented. Indirect Costs: 2 CFR Part 200.403 outlines the factors affecting allowability of costs, including indirect costs charged to federal grants. Specifically, the Year 1 Notice of Award (NOA) for budget period June 30, 2023 through June 29, 2024, did not obligate any funds for indirect costs. In addition, the Year 2 NOA for budget period June 30, 2024 through June 29, 2025, obligated $250,000 for indirect costs. Personnel Services: Under 2 CFR Part 200.430(g) (Standards for Documentation of Personnel Services), charges to federal awards for salaries and wages must be based on records that accurately reflect the actual work performed. Budget estimates (meaning, estimates determined before the services are performed) alone does not qualify as support for charges to federal awards, but may be used for interim accounting purposes. Condition: Other than Personnel Services: During our testing of credit card transactions, we noted that adequate support was not maintained for four selections, which totaled $138. In total, there were 64 transactions charged to the grant in the amount of $6,398. Because supporting documentation was not maintained, we were unable to determine whether the charges were allowable. Indirect Costs: 1. In January 2024, the Imperative received approval for a negotiated indirect cost rate agreement (NICRA) of 28.5%, As part of the NICRA, the Year 1 award agreement (NOA) was to have been amended to apply the rate to the award. However, the Imperative was unable to provide a copy of the amended NOA. The original copy of the Year 1 NOA did not obligate any funds for indirect costs. When Imperative charged $200,000 of indirect costs to the federal program toward the Year 1 award, it was determined that the indirect costs was deemed to be unallowable costs for calendar year 2024. 2. Per the Year 2 NOA, indirect costs of $250,000 were allowed. However, per review of general ledger detail and per discussion with management, the Imperative did not calculate indirect costs as the indirect cost rate times the allowable actual direct costs base when they calculated the monthly indirect costs but instead calculated the monthly indirect costs as one-twelfth of the $250,000 budgeted amount. We recalculated the amount charged for July through December 2024 under the Year 2 award for reasonableness and verified that it would have exceeded the amount the Imperative actually charged using their straight-line method. 3. Overall, per review of the indirect cost journal entries and supporting documentation, we verified that the outside accountant or the EVP of Finance prepared and booked the monthly indirect costs expense with no review and approval performed by someone other than the preparer for calendar year 2024. Personnel Services: The Imperative charged payroll costs to the federal program based on the percentage allocated in the approved grant budget. However, payroll costs should have been charged to the federal program based on the actual time incurred in accordance with 2 CFR Part 200.430. We were unable to determine actual payroll costs incurred because the Imperative did not maintain records of the actual hours incurred (timesheets, etc.) during 2024. In addition, two out of 25 personnel cost transactions tested amounting to $5,724 were charged to the AL #93.988 federal program in error and, therefore, was determined unallowable costs for calendar year 2024. Per review of the personnel cost transactions journal entries and supporting documentation, we verified that there was no review and approval for allowability performed by someone other than the preparer for calendar year 2024. Cause: Other than Personnel Services: Due to oversight, the Imperative did not establish or maintain adequate internal controls and documentation over the credit card purchase process. Indirect Costs: Due to oversight, the Imperative charged $200,000 in indirect costs to the Year 1 award that were not allowed per the Year 1 NOA. The Imperative did not establish or maintain adequate internal controls and documentation over the indirect costs expenditure process. Personnel Services: Due to oversight, the Imperative charged $5,724 of personnel costs to the AL #93.988 federal program that were unallowed. The Imperative did not establish or maintain adequate internal controls and documentation over the personnel costs expenditure process. Effect: Other than Personnel Services: We are unable to determine whether the credit card transactions charged to the grant program were allowable. Indirect Costs: Unallowable costs of $200,000 relating to indirect costs was charged to the grant program. Personnel Services: Unallowable costs of $5,724 relating to personnel costs was charged to the grant program. Questioned Costs: Other than Personnel Services: Questioned costs of $6,398 Indirect Costs: Questioned costs of $200,000 Personnel Services: Questioned costs of $5,724 Repeat Finding: Not applicable. Recommendation: Other than Personnel Services: We recommend that the Imperative implement procedures to establish, document, and maintain adequate internal controls and supporting documentation over the credit card purchase process. Indirect Costs: We recommend that the Imperative implement procedures to establish, document, and maintain adequate internal controls over the indirect costs expenditures process. Personnel Services: We recommend that the Imperative implement procedures to establish, document, and maintain adequate internal controls over the personnel costs expenditures process. View of Responsible Officials: See management’s corrective action plan.