Finding 972250 (2023-001)

Criteria: In accordance with 20 CFR section 641.873, The amount of federal funds expended for enrollee wages and fringe benefits shall be no less than 75 percent of the grant except in those instances in which a grantee has requested, and DOL has approved such request, to use not less than 65 percent of the grant funds to pay for participant wage and fringe benefits so as to use up to an additional 10 percent of grant funds for participant training and supportive services. Condition and Effect: For the Foundation’s grant number AD38312PH0 for the grant year ended June 30, 2023, federal funds expended for enrollee wages and benefits totaled $34,551,921, or approximately 74% of total federal funds expended of $46,649,614. As such, the Foundation did not meet the earmarking requirement under 20 CFR section 641.873 for this award. Context: In January 2024, the Foundation was notified by the U.S. Department of Labor that the entity had not met the earmarking requirement for grant number AD38312PH0 for the grant year ended June 30, 2023. During our audit, we tested compliance with earmarking requirements for 8 of 14 additional awards within ALN 17.235 that ended during the Foundation’s fiscal year ended December 31, 2023. No additional exceptions were noted. Cause: The Foundation has policies and procedures in place to monitor compliance with earmarking requirements. In 2023, there was a breakdown in the operation of these controls, whereby SCSEP staff responsible for monitoring the earmarking requirement did not communicate noncompliance to those responsible for reporting. Consequently, no action was taken to address noncompliance with 20 CFR section 641.873 for grant number AD38312PH0 prior to notification of noncompliance being received from the U.S. Department of Labor. Questioned Costs: $435,289 Recommendation: We recommend that the Foundation strengthen its internal controls over compliance with earmarking requirements to ensure timely identification of and corrective action over unmet enrollee wages and fringe benefits expenditures. Views of Responsible Officials: The Foundation concurs with this finding. Also refer to the Corrective Action Plan.