Finding Text
FINDING 2023-005
Information on the federal program:
Federal Agency: Department of Labor
Pass-Through Entity: Indiana Department of Workforce Development
Federal Program: WIOA
Assistance Listing Number: 17.258, 17.259, 17.278
Compliance Requirement: Activities Allowed or Unallowed
Audit Findings: Material Weakness, Qualified Opinion
Criteria: 2 CFR 200.403 establishes principles and standards for determining costs for federal awards carried out through grants, cost reimbursement contracts, and other agreements with state and local governments. To be allowable, under federal awards, cost must meet certain criteria:
a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles.
b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items.
c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity.
d) Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost.
e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part.
f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally financed program in either the current or a prior period.
g) Be adequately documented.
h) Cost must be incurred during the approved budget period.
Additionally, 2 CFR 200.303 indicates that non-Federal Entities receiving Federal awards must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations and terms and conditions of the Federal award.
Condition: For 15 of the 60 samples selected, EmployIndy was unable to provide adequate support for the selection amounts. As a result, we were unable to determine the allowability of these sample selections under the WIOA grant.
Cause: The condition was caused by a lack of internal controls over WIOA subrecipient/service provider claims for accrued expenditures and indirect costs.
Effect: As a result of these matters, expenditures could be inaccurately charged to the federal grant.
Questioned costs: There are $45,619 of known questioned costs as this is the amount of the WIOA expenditures tested that could not be reconciled to source documents.
Context: During our testing procedures over WIOA disbursements for the activities allowed or unallowed compliance requirement, the following were identified:
• For two of our 60 non-payroll selections management was unable to provide adequate supporting documentation for the expenditure. These selections pertained to the subrecipient, Eckerd Connects. Questioned costs of $7,303 were noted.
• For four of our 60 non-payroll selections, management was able to provide a summary listing of charges by category (AER report), however, supporting invoices or other documents for the summary of charges was not provided. Questioned costs of $20,501 were noted.
• For two of our 60 non-payroll selections in which expenditures related to personnel and fringe expenses, we noted the expenses allocated to WIOA Youth, Adult, and Dislocated Worker grants based on a set percentage rather than time actually spent working on grant related projects. Both instances pertain to charges incurred by the subrecipient, Eckerd Connects. No questioned costs were noted.
• For six of our 60 non-payroll selections, we noted indirect costs charged by subrecipients that did not have proper support for the indirect cost rate for the period under audit. Five of the selections were Eckerd Connects and one related to Telamon Corporation. Per inquiry of management, Eckerd and Telamon have a federally approved indirect cost rate. Management provided a signed contract with Eckerd that covers the period January 1, 2020 to June 30, 2021 that lists the federally approved rate. The Telamon contract/application provided covers the period of July 1, 2021 to June 30, 2022. Management was unable to provide support stating the federally approved rate for Eckerd and Telamon for the period under audit. No questioned costs were noted.
• One of our 60 non-payroll selections was for EmployIndy indirect costs of $17,815. Management provided a calculation of the indirect costs, from which we selected specific charges from the cost pool that the indirect cost was calculated from. Management was unable to provide support for any of the selected charges. Questioned costs of $17,815 were noted.
Identification as a repeat finding, if applicable: This is a repeat finding. Appeared as finding 2022-005 in the prior report.
Recommendation: We recommend that management implement a consistent multi-stage review process for expenditures that are to be allocated to the WIOA cluster and that management clearly organize and retain records of purchase to support amounts being listed as expenditures on their SEFA.
Views of responsible officials and planned corrective actions: Management acknowledges the finding. See management’s corrective action plan attached to this audit report.