Finding 968604 (2022-003)

2022-003 Finding – Federal Award Type: Cash Management (Invoices) – Material Weakness in Internal Control over Compliance. Reporting (Federal Form 425 & FSRS) – Material Non-Compliance and Weakness in Internal Control over Compliance. Identification of Federal Program: Research and Development Cluster: AL Number: 81.086 Conservation Research and Development Program Criteria / Requirement: The 2 CFR section 200.303 requires that non-federal entities receiving federal awards establish and maintain internal control over the federal awards that provides reasonable assurance that the non-federal entity is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Under the requirements of the Federal Funding Accountability and Transparency Act (Pub. L. No. 109-282), as amended by Section 6202 of Pub. L. No. 110-252, that are codified in 2 CFR Part 170, recipients (i.e., direct recipients) of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). The subawards meeting the above definition are to be reported no later than the last day of the month following the month in which the subaward/subaward amendment obligation was made or the subcontract award/subcontract modification was made. Condition / Context: It was noted during the audit that there were insufficient internal controls over invoices submitted for cost reimbursement related to federal grants as invoices were created and approved by one individual. While the internal controls were insufficient, our sample of invoices did not contain errors or undocumented amounts. It was noted during the audit that there were insufficient internal controls over required federal financial reports as federal financial reports were created and approved by the one individual. While the internal controls were insufficient, our sample of federal financial reports did not contain errors or undocumented amounts. It was also noted that there were three first-tier subawards entered into during 2022 greater than $30,000 that were not reported to the Federal Funding Accountability and Transparency Act Subaward Reporting System. Cause: Procedures are not in place to ensure that Forth is maintaining adequate internal controls over compliance in regards to federal financial reporting and cash management requirements. Key duties and functions are not segregated among organization personnel and internal control policies and procedures are inadequate to properly define the roles and responsibilities of accounting personnel performing key functions. Procedures are not in place to track and report first-tier subawards. Effect: Failure to maintain sufficient internal controls over federal financial reporting and invoices submitted for cost reimbursement related to federal grants may result in the wrongful use of federal funds and/or non-compliance with the provisions of applicable requirements. Failure to maintain sufficient internal controls and proper procedures, including tracking over reporting first-tier subawards may result in wrongful use of federal funds and non-compliance with federal awards. Questioned Costs: none.