Finding Text
Finding No.: 2024-009 - Reporting Identification of the federal program: Federal Agency: U.S. Department of the Interior AL No. and Title: 15.875 Economic, Social and Political Development of the Territories Federal Award No.: Compact of Free Association Program, As Amended Criteria or specific requirement (including statutory, regulatory or other citation): Under the terms of the sub-awards administered by the RepMar under the Compact of Free Association, As Amended grant award, the College is required to submit a duly accomplished standard Form SG2 - Performance and Financial Evaluation Report. Further, the College shall maintain an acceptable financial management system during the term of the sub-award agreement, such that it will permit: a. The preparation of reports by the RepMar as required by the Public Financial Management Act (PFMA); b. The tracing of the funds to a level of expenditure is adequate to establish that such funds have been used in compliance with the provisions of the grant and applicable agreements. Such a system shall provide: i. Accurate, current and complete disclosure of the financial activity of the allocated funds; ii. Separate accounts for the grant funds appropriated; iii. Effective control over and accountability for all funds, property and other assets; iv. Comparison of actual outlays with budgeted amount pertaining to the funds appropriated; v. Consistency with all financial administration, program monitoring, performance reporting and enforcement provisions of the PFMA; and vi. Accounting records supported by source documentation. Furthermore, 2 CFR 200.303(a) states that the 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). Condition #1: The College did not submit the required Form SG2 – Performance and Financial Evaluation final reports. Condition #2: The underlying accounting records or supporting worksheets of tested reports could not be provided. Condition #3: Expenditures reported per the Form SG2-Performance and Financial Evaluation report did not agree to quarterly expenditures reported in SEFA. Cause: The College lacks adequate internal controls over the accurate preparation and review of required reports as stipulated in the sub-award agreements. Furthermore, the College lacks adequate internal controls regarding retaining sufficient documentation to support all reported transactions. Effect or potential effect: The College is in noncompliance with applicable reporting requirements. Questioned costs: Not applicable. No questioned cost is presented as the non-compliance was related to reporting requirements. Context #1: We identified 16 Form SG2 – Performance and Financial Evaluation reports required to be submitted during the year. We tested 8 reports. The samples were statistically valid. For 3 (or 38%) reports tested, the College did not submit the required Form SG2 – Performance and Financial Evaluation final reports. Details of samples with noncompliance are as follows: Context #2: We identified 16 Form SG2 – Performance and Financial Evaluation reports required to be submitted during the year. We tested 8 reports. The samples were statistically valid. For all 8 (or 100%) reports tested, underlying accounting records or supporting worksheets could not be provided. Context #3: We identified 16 Form SG2 – Performance and Financial Evaluation reports required to be submitted during the year. We tested 8 reports. The samples were statistically valid. For 2 (or 25%) reports tested, expenditures reported did not agree to the quarterly expenditures reported in SEFA as follows: a. Compact Capital Fund - 1st to 3rd Quarter ended June 30, 2024 b. Compact Designated - 1st to 3rd Quarter ended June 30, 2024 Identification as a repeat finding, if applicable: This is not a repeat finding. Recommendation: College management should strengthen controls so that required reports are accurately prepared and reviewed to provide evidence of compliance with the applicable reporting requirements and retain sufficient documentation to support all reported transactions. Views of responsible officials: The College agrees with the finding and provides details in its Corrective Action Plan.