Finding 524393 (2024-002)

Finding 2024-002: Internal control deficiency and noncompliance over Reporting related to performance reports. Identification of the federal program: Assistance Listing Number 11.028 • Connecting Minority Communities Pilot Program • U.S. Department of Commerce • Federal award identification number: 06-09-C13050 • Federal award year: January 15, 2023 through January 14, 2025 Criteria or specific requirement (including statutory, regulatory or other citation): Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.303 – Internal controls. The recipient and subrecipient must: (a) 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). The terms and conditions of the Federal award requires the following: Pursuant to 47 C.F.R. 302.9(b)(1), each award recipient will be required to submit a technical progress report on a semi-annual and annual basis for the periods ending March 31 and September 30 of each year. Semi-annual performance reports will be due within 30 days after the end of the reporting period. Technical progress reports shall contain information as prescribed in 2 C.F.R. § 200.329 and Department of Commerce Financial Assistance Standard Terms and Conditions dated November 12, 2020, Section A.01. Condition: During our testing over the Reporting compliance requirement, we observed management did not have effective internal controls in place to ensure performance reports were submitted by the deadline and completed correctly. Cause: Management did not have effective internal controls in place over the compliance requirement as stated in the criteria or specific requirement section above. Effect or potential effect: Management did not submit the required performance reports by the deadline and certain key line items were not completed correctly. Without effective internal controls, other reports could be submitted after the deadline and/or completed incorrectly in the future. Questioned costs: None. Context: During our testing over Reporting, we obtained a listing of two performance reports and tested both performance reports. We observed the following: • Management did not submit the required performance reports by the deadline. The entity is required to submit a semi-annual performance report with deadlines of April 30 and October 30 of each year. We observed all reports were submitted after the deadline. • The April 30, 2024 performance report key line items related to the budgeted amounts were from the original financial assistance award signed on January 11, 2023 versus the amendment to the financial assistance award signed on June 29, 2023. • The April 30, 2024 performance report key line items related to the personnel and fringe benefits costs were calculated entirely based on the latest fringe benefit rate of 44% versus using the prior year rate of 35% for the time period in effect which resulted in a misclassification between personnel and fringe benefits costs of $6,054. Identification as a repeat finding, if applicable: No. Recommendation: We recommend that management develop and implement effective internal controls to ensure performance reports were submitted by the deadline and completed correctly. Views of responsible officials: Management will meet with the Principal Investigator and provide additional training emphasizing the importance of timely submission and accuracy of grant documentation and reports. In addition, management will monitor submission deadlines and follow-up with the Principal Investigator to ensure timely filing.