Alpha OneNon-Profit

2025-001 Internal Controls over Approval of Expenditures Charged to Federal Award for U.S. DHHS 93.432 ACL Centers for Independent Living #2401MEICL-00 (Significant Deficiency in Internal Controls over Compliance) Criteria: Management is responsible for implementing controls to ensure that disbursements are properly authorized before payment. Condition and Context: Through audit procedures testing internal controls over cash disbursements charged to major federal award programs, three invoices were paid before receiving documented approval. Management indicated that, in practice, this typically occurs when invoices are processed automatically through a portal or when verbal approval is given prior to the email confirmation. Cause: The Organization’s prior approval process relied on email chains and verbal communications, which could allow invoices to be paid before formal documentation of approval. Effect: Payments made prior to documented approval increase the risk of errors or unauthorized disbursements occurring, representing a significant deficiency in internal control. Recommendation: We recommend continuing to enforce the use of QuickBooks Online and Bill.com for invoice approval to ensure that all payments are reviewed and approved prior to disbursement. Views of Responsible Officials and Planned Corrective Actions: Management agrees with this finding. Upon identification of the issue, we initiated immediate corrective actions to reinforce our internal control environment and ensure full compliance with our cash disbursement approval policy. We have completed re-training for all accounting staff to reaffirm the requirements of our payment approval policy and to emphasize the importance of verifying documented approval prior to processing any invoice, regardless of the payment method (check, automated withdrawals, or portals). Additionally, management has implemented a system upgrade, transitioning from a manual approval workflow to an automated approval process. This upgraded system is designed to require approval before an invoice can proceed to payment, thereby preventing invoices from being disbursed without documented written authorization. We expect this automated control to significantly reduce the risk of future exceptions and strengthen overall compliance. Management will continue to monitor disbursement activity to ensure ongoing adherence to policy and the effectiveness of the new control measures.

2025-002 Internal Controls over Expenditures Charged to Federal Award for U.S. DHHS 93.432 ACL Centers for Independent Living #2401MEICL-00 (Significant Deficiency in Internal Controls over Compliance and Noncompliance) Criteria: Management is responsible for the design and implementation of internal controls over expenditures charged to federal award programs. Condition and Context: Through audit procedures testing internal controls over cash disbursements charged to major federal award programs, one expense lacked readily available support beyond a credit card statement. Eventually, receipts for all but one of the purchases were retained, but it required reaching out to the purchaser to obtain and retain some of those receipts. Cause: The missing receipts appeared to have resulted from insufficient controls over the collection and retention of supporting documentation prior to posting the monthly meals journal entry by relying on the credit card statement. Effect: The absence of adequate supporting documentation increases the risk of noncompliance with Federal cost principles and could result in disallowed costs. Question Costs: Known questioned costs related to our testing totaled $161. Recommendation: We recommend that management strengthen internal controls over documentation for meals and expenses by ensuring that all receipts are properly retained and reviewed prior to recording the monthly journal entry. Views of Responsible Officials and Planned Corrective Actions: Management concurs with this finding. Maintaining complete and accurate receipt documentation is essential for ensuring proper expense coding, supporting auditability, and maintaining compliance with organizational policies and funding requirements. Upon identification of this exception, management initiated corrective actions to reinforce our internal controls over receipt retention and documentation. Accounting staff have been re-trained on our receipt tracking procedures, with an emphasis on the requirement that receipts must be obtained and retained for all meal expenses. We will continue to monitor compliance with these updated procedures to ensure their effectiveness.

2025-003 Allowable Costs/Cost Principles for U.S. DHHS 94.432 ACL Centers for Independent Living #2401MEICL-00 (Significant Deficiency in Internal Controls over Compliance and Noncompliance) Criteria: Management is responsible for ethe design and implementation of internal controls to prevent or detect and correct unallowable costs from being charged to a federal award program. Condition and Context: Through audit procedures testing internal controls over cash disbursements charged to major federal award programs, we noted that the Organization purchased alcohol beverages totaling $100 and included this cost in allocation of expenses towards the the Federal program. Cause: There is a lack of understanding allowable cost/cost principles and a lack of oversight on expenses being charged to federal award programs. Effect: Charging unallowable costs to a Federal program results in noncompliance with the Uniform Guidance and increases the risk of disallowed costs. Questioned Costs: Known questioned costs related to our testing totaled $100. Recommendation: We recommend that management enhance review and approval procedures to ensure all costs charged to Federal programs are allowable under Uniform Guidance and the related grant agreements. Additionally, management should reclassify the unallowable costs to a non-Federal funding source. Training should be sought for individuals involved in recording expenditures to federal award programs on allowable costs/cost principles. Views of Responsible Offices and Planned Corrective Actions: Management concurs in part and disagrees in part with this finding. Management has always understood that alcohol purchases may not be charged to a Federal program and are unallowable under Uniform Guidance, and we are committed to ensuring full compliance with federal cost principles. Upon identification of this exception, management initiated corrective measures to reinforce internal controls surrounding expense review and documentation. The accounting staff member did not have the itemized receipt at the time the expense was initially allocated. Had the receipt been available, the unallowable cost would have been identified, and the expense would not have been allocated to program costs. Once the receipt was reviewed, the alcohol purchase was identified as unallowable under Federal programs and allocated correctly to administration costs. To prevent similar issues moving forward, accounting staff have been re-trained on expense documentation and receipt tracking requirements, with emphasis on ensuring that itemized receipts are obtained and reviewed prior to allocation, reimbursement, or payment. Staff have also been reminded of the importance of validating expenditures against Uniform Guidance allowability requirements as part of their routine review procedures. Management will continue to monitor expense activity to ensure the effectiveness of these reinforced controls.

2024-002 Internal Controls over Expenditures Charged to Federal Award for U.S. DHHS 93.432 ACL Centers for Independent Living #2201MEILCL-00 (Significant Deficiency in Internal Controls over Compliance and Noncompliance) Criteria: Management is responsible for the design and implementation of internal controls over expenditures charged to federal award programs. Condition and Context: Through audit procedures testing internal controls over cash disbursements charged to major federal award programs, one expense lacked readily available support and 2 expenses did not have documented approval. Cause: There is shortage of staffing in the finance department and lack of sufficiently documenting procedures to save employees’ time. Effect: Total expenditures charged to the federal award program were inaccurate. Questioned Costs: Expenses charged to major federal award programs for which there was not readily available support or approval of expenditures was not documented totaled $558. Recommendation: Procedures should be implemented requiring documentation be maintained to support every expense charged to federal programs including documentation of approval of expenditures. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the audit findings and has already taken immediate corrective action by re-training accounting staff on the importance of maintaining all supporting documentation and obtaining the necessary approvals before processing any cash disbursements. To further strengthen internal controls, management is exploring the implementation of a system upgrade that would automate the documentation and approval process for expenditures charged to federal award programs.

2024-003 Internal Controls over Preparation of the Schedule of Expenditures of Federal Awards (Material Weakness in Internal Controls over Compliance)—All Awards) Criteria: 2 CFR 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, £200.508 (b) The auditee must prepare appropriate statements including an accurate Schedule of Expenditures of Federal Awards (SEFA) in accordance with £200.510, Financial Statements. Condition and Context: The following errors were noted and corrected as a result of auditing procedures on the SEFA: • CRA program federal expenditures (CFDA #14.228) were understated by $23,893. • ACL Independent Living State Grants federal expenditures (CFDA #93.369) were overstated by $21,856 due to errors in SEFA preparation. • Several presentational errors including incorrect identifying numbers listed, incorrect award terms listed, and incorrect CFDA #’s listed for multiple awards. Cause: Insufficient internal controls over the preparation, review, and documentation process for the SEFA and supporting documents. Effect: Errors on reporting can lead to issues in reconciling and tracking of awards earned and recognized in the financial statements. The above corrections, if not made, would have led to the SEFA being materially misstated. They could also lead to findings and corrective action with funders. Questioned Costs: None Recommendation: Management should continue to seek additional training for the fiscal department on preparation of the SEFA and reporting standards. In addition, review processes over the SEFA and supporting reports should be strengthened. Both the preparer and reviewer should have a clear understanding of the required minimum elements and instructions. As part of the review, all required minimum elements should be vouched to original source documents including copies of awards, grant reporting, and the trial balance profit and loss reports. Steps should be taken to prevent further adjustment of supporting profit and loss reports once reconciled without the express review and approval of the Fiscal Director. Review of the standards for supporting grant reports should be strengthened to prevent errors in reporting leading to errors on the SEFA. Any inconsistencies should be resolved before beginning the audit. Management has taken steps to identify and seek training in areas they have identified as needing improvement. Views of Responsible Officials and Planned Corrective Actions: Management acknowledges the audit findings and the material weakness related to the preparation of the Schedule of Expenditures of Federal Awards (SEFA). The errors identified stemmed from insufficient internal controls over the preparation and review process. Additionally, there were inconsistencies in how the SEFA was prepared in previous years, compounded by a quick turnover to a new controller at year-end, which disrupted continuity and contributed to the lack of clear guidance in the SEFA preparation process. To address these challenges, management has implemented immediate corrective actions, including enhanced training for all staff involved in the SEFA preparation to ensure a thorough understanding of federal reporting standards and the required minimum elements. Furthermore, all SEFA components will be reconciled with original source documents, such as grant awards and trial balances, prior to submission for audit. Management believes that, with the new internal control measures and training in place, these errors are not expected to occur in future years.

2023-002 Allowable Costs/Cost Principles for U.S. DHHS 94.432 ACL Centers for Independent Living #2001MEILC3-00 (Material Weakness in Internal Controls over Compliance and Noncompliance) Criteria: Management is responsible for the design and implementation of internal controls to prevent, or detect and correct unallowable costs from being charged to a federal award program. Condition and Context: Audit procedures noted two instances of expenses charged to the 2001MEILC3-00 grant that were estimated future expenses and that were not incurred or obligated. Cause: There is a lack of understanding allowable cost/cost principles and a lack of oversight on expenses being charged to federal award programs. Effect: Total expenditures charged to the 2001MEILC3-00 grant were inaccurate. Questioned Costs: Known questioned costs related to our testing totaled $115,821. An additional $15,465 in known questioned costs was also identified as noted below. Recommendation: Procedures should be implemented to better monitor expenditures charged to federal award programs by adding a review every month of expenditures charged to federal grants and training should be sought for individuals involved in recording expenditures to federal award programs on allowable costs/cost principles. In addition, Alpha One should contact the Centers for Independent Living regarding this issue and return these funds. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the findings and has already contacted the Centers for Independent Living to inform them of the issue, and are working through whether return of the funds is necessary.

2023-003 Period of Performance for U.S. DHHS 94.432 ACL Centers for Independent Living #2001MEILC3-00 (Material Weakness in Internal Controls over Compliance and Noncompliance) Criteria: Management is responsible for the design and implementation of internal controls over compliance with period of performance to prevent, or detect and correct costs charged to the incorrect accounting period. Condition and Context: Audit procedures noted several expenses charged to the federal award program that had not been expended or obligated by September 30, 2022, the end of the grant, and liquidated within the 120-day limit if obligated by September 30, 2022. Cause: There is a lack of understanding period of performance rules and regulations. Effect: Total expenditures charged to the federal award program were inaccurate. Questioned Costs: Known questioned costs related to our testing totaled $131,286. $115,821 in known questioned costs were already identified as noted above. Recommendation: Procedures should be implemented to better monitor grant expenditures and timelines and consider adding a review every month of expenditures charged to federal grants, so that expenditures are recorded in the appropriate period. In addition, Alpha One should contact the Centers for Independent Living regarding this issue and return these funds. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the findings and has already contacted the Centers for Independent Living to inform them of the issue, and are working through whether return of the funds is necessary.

2023-004 Reporting for U.S. DHHS 94.432 ACL Centers for Independent Living (Material Weakness in Internal Controls over Compliance and Noncompliance) Criteria: Centers for Independent Living reporting standards require the filing of annual Federal Financial Report (SF-425) under grant 2101MEILCL-00 for year ended September 29, 2022 by January 28, 2023, annual Federal Financial Report (SF-425) under grant 2001MEILC3-00 for year ended September 30, 2022 by October 30, 2022, and final Federal Financial Report (SF- 425) under grant 2001MEILC3-00 for year ended September 30, 2022 by December 29, 2022. In addition, reporting standards require that these reports be accurately completed Condition and Context: Audit procedures noted that all three of these reports were filed late. In addition, the 2001MEILC3-00 grant reports were completed inaccurately as they showed all $931,640 of the grant funds as fully expended with no cash on hand, when there was $393,081 of cash on hand, $376,286 of unliquidated obligations, and total expenditures and obligations were only $800,354. Cause: There is limited staffing in the finance department, there is a lack of understanding the instructions for the SF-425 Report, and lack of understanding of allowable costs and appropriate period of performance for the 2001MEILC3-00 grant. Effect: The reports were filed 30 days late, 120 days late, and 60 days late. In addition, the awarding agency was not fully informed of the activity on these grants. Recommendation: Management should strengthen their controls for the tracking of required report filings and their due dates. It should implement additional controls to ensure all are filed on time. The controls should account for the possible loss of key personnel responsible for filing and have a process to mitigate this risk. In addition, management should consider training for staff tasked with completing, reviewing, and filing these reports. Views of Responsible Officials and Planned Corrective Actions: Management will add a process to ensure all report deadlines are tracked in calendars for individuals responsible, with multiple reminders regarding deadlines. In addition, management will consider sending key reporting staff to training on the Federal Financial Report (SF-425).

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