Finding 968920 (2022-002)

Finding 2022–002: Internal Controls over Allowable Costs Federal Department: U.S. Department of Treasury Pass-through Agencies: Cook County, Illinois and Women's Business Development Center COVID-19 - Coronavirus State and Local Fiscal Recovery Funds, Federal Assistance Listing Number 21.027 Criteria 2 CFR Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Subpart D – Post-Federal Award Requirements Standards for Financial and Program Management Section 200.303, Internal controls states “The non-Federal” entity must: (1) 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. Section 200.430 (i) Standards for Documentation of Personnel Expenses states (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities…; (v) Comply with the established accounting policies and practices of the non-Federal entity. Condition During the current audit period, SDA did not maintain adequate controls over allowable costs related to its federally funded program. Cause Based on our discussions with management, this finding occurred due to staff turnovers. This resulted in consistent documentation not maintained to support the approval of invoices and related expenditures charged to the program. Effect The failure to maintain adequate documentation to verify that expenditures are properly reviewed and approved and to maintain adequate supporting documentation to ensure all payroll expenditures are reasonable and properly reviewed is a violation of federal regulations, which could result in unallowed costs being charged to the federally funded program. Questioned Costs We noted total questioned costs of $2,666. Context During our review of 45 expenditures (from a 326 population), we noted seven expenditures had no evidence of invoice approval prior to payment. From our review of these expenditures and related invoices, we did not note any costs that were deemed to be unallowed per the grantor(s) requirements and federal regulations. During our test of payroll, we noted two employees were charged to the grant with expenditures totaling $4,833. For one employee tested, we noted no evidence, such as time and effort reporting, to determine whether the employee worked on this grant and to support the amount of $2,666 charged to the program. Identification of Repeated Findings Repeated (Prior Finding No. 2021-002, 2020-002). Recommendation We recommend that SDA implement procedures to ensure all expenditures are properly reviewed and approved, and supporting documentation maintained in accordance with federal regulations. Views of Responsible Officials and Planned Corrective Action SDA agrees with the finding and recommendation. See SDA’s Corrective Action Plan on pages 40–44.