Finding 560525 (2024-003)

Finding 2024-003 – Reporting Federal Agency: U.S. Department of Treasury Federal Program Name: COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Assistance Listing No.: No. 21.027 Federal Award Number: ASST_NON_SLFRP0137_2001 Grant Award Period: 9/1/2022 – 8/31/2024 Pass Through Entity: Los Angeles County - Department of Public Health Repeat Finding: No Statistically Valid Sample: The sample was not intended to be, and was not, a statistically valid sample Criteria As set forth in 2 CFR 200.328 and in 31 CFR Section 35.4(c), entities receiving Coronavirus State and Local Fiscal Recovery Funds are required to submit quarterly and annually project and expenditure reports to meet compliance and reporting responsibilities under the program. As the Foundation is a subrecipient to the County of Los Angeles (the County), section 6.2 and section 7.0 of Exhibit A of the Agreement between the County and the Foundation for American Rescue Plan Act Trauma Prevention Partnerships provides the reporting requirements by the Foundation to the County including, among other things, the expenditures reported to date by the Foundation. 2 CFR 200.303 requires the recipient of federal funds 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 the terms and conditions of the federal award. Condition/Context During fiscal the fiscal year ending June 30, 2024, the Foundation overstated expenditures incurred by its two vendors by $203,629 and a corresponding overstatement of $20,363 in indirect costs in the schedule of expenditures of federal awards (SEFA). Additionally, in the June 30, 2024 Quarterly Performance Report to the County, the Foundation overstated the advances to its vendors by $120,000 and understated expenditures incurred by its two vendors by $519,259. Finally, in the June 30, 2024 Quarterly Invoice to the County, the Foundation overstated the amounts advances to its vendors by $120,000 (however the remaining $807,000 of advances were correctly reported.) Management also failed to separately report the actual expenditures incurred by the vendors in the "Contracts" section of the invoice. However, in the total invoiced amount summarized in the invoice for fiscal 2024 approximated the total expenditures on the June 30, 2024 schedule of expenditures of federal awards. Based on our discussion with management, we understand that the Foundation and the County mutually understood that the June 30, 2024 quarterly invoice was preliminary, as it was submitted by CCF prior to the fiscal year-end. Consequently, the Foundation reflected the final expenditures and payments in the September 30, 2024 invoice. In this invoice, the Foundation removed the previously overstated amount of $120,000 of advances to a vendor. Cause The Foundation had reported all of the amounts advanced to its two vendors in the SEFA and in its quarterly reporting to the County with the understanding that those amounts were the actual expenditures incurred by the vendors during the year. Additionally, there were not sufficient controls in place to ensure that the amounts reported in the SEFA and June 30, 2024 quarterly performance report submitted to the County reconciled to the actual expenditures incurred by the Foundation’s vendors for the year ending June 30, 2024. Effect or Potential Effect The expenditures reported in the schedule of expenditures of federal awards for the year ended June 30, 2024 and in quarterly reporting to the County were incorrect. Questioned Costs None noted. Auditors’ Recommendation We recommend that the Foundation strengthen its reconciliation controls between the amounts reported in the SEFA and County invoices to ensure the amounts are accurate and consistently reported. Views of Responsible Officials CCF acknowledges the finding and is implementing corrective measures to strengthen the accuracy and integrity of its financial and programmatic reporting. CCF has enhanced its internal review process and implemented a reconciliation protocol to ensure consistency between internal records and external reports. Finance staff have received additional training, and final reports are now subject to dual validation by both the Compliance and Finance teams prior to submission.