The Arc of the United StatesNon-Profit

Finding 2023-001: Subrecipient Pre-award Risk Assessment Information on the Federal Programs: All Programs Criteria or Specific Requirement: CFR § 200.332, "Requirements for pass-through entities", requires pass-through entities to evaluate each subrecipient's risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring. Condition: During our testing of subawards, we were unable to verify that pre-award risk assessment procedures were performed. We additionally noted that these requirements were not incorporated into the Organizations' current policies and procedures. Cause: The Organizations do not have a formal internal policy with respect to performing subaward risk assessments as required by Federal regulation at the execution of the subaward agreements or on a regular basis. Effect or Potential Effect: The Organizations may have inadvertently failed to perform monitoring procedures appropriate for a subrecipient’s assessed level of risk. Questioned Costs: N/A Context: The Organizations execute subaward agreements under US Federal grants. Therefore, the Organizations are subject to CFR § 200.332 "Requirements for pass-through entities". Our audit procedures consisted of testwork completed on subawards and individual expenditures charged to the Federal awards. The report in which samples were selected was generated directly from the Organizations' general ledger (accounting system). We consider our sample to be representative of the population. Identification as a Repeat Finding: N/A Recommendation: We recommend the Organizations develop a subaward policy to ensure the risk assessment procedures over its subrecipients are performed and documented prior to engagement. Based on these risk assessments, the Organizations should assign a risk level to each, and then determine the monitoring tools to apply based on these risk levels. We also recommend the Organizations require its subrecipients to submit financial reports demonstrating use of each advance before advancing more funds, to ensure subrecipients are expending funds appropriately. Recommended factors to consider when developing a policy are as follows: Refer to 2 CFR 200.331 part (a) for complete listing of data elements that are required to be included in every subaward, and incorporate this listing into the updated policies and procedures. Establish criteria to be used in the evaluation of the risk of noncompliance associated with the intended subrecipient for the purpose of determining the expected level of oversight during the period of performance. This evaluation should include a scaling system, such as high, medium or low risk (for example), and the monitoring tools and procedures to be performed at each of these levels (additional training, on-site reviews, types of and frequency of reporting, etc.).

Finding 2023-002: Suspension and Debarment and U.S. Government Regulations on Terrorism Information on the Federal Programs: All Programs Criteria or Specific Requirement: CFR 200.213 "Reporting a determination that a non-Federal entity is not qualified for a Federal award" states that non-Federal entities are subject to the non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, 2 CFR part 180. These regulations restrict awards, subawards, and contracts with certain parties that are debarred, suspended, or otherwise excluded from or ineligible for participation in Federal assistance programs or activities. The non-Federal entity must verify that the person with whom you intend to do business is not excluded or disqualified, by (a) checking SAM Exclusions; (b) collecting a certification from that person; (c) adding a clause or condition to the covered transaction with that person. Condition: During our testing over Suspension and Debarment, we determined that the Organizations did not maintain documentation of screenings on potential or current vendors, suppliers or contractors that were paid with Federal funds. Cause: The Organizations do not have a formal internal policy with respect to screening vendors, suppliers, contractors and employees in order to adhere to compliance over suspension and debarment. Effect or Potential Effect: The Organizations could make payments to an entity or individual that has been debarred or suspended by the US Government; such costs would be disallowed, and the Organizations could face consequences for lack of compliance. Questioned Costs: N/A Context: Our audit procedures consisted of testwork completed on subawards and individual expenditures charged to the Federal awards. The report in which samples were selected was generated directly from the Organizations' general ledger (accounting system). We consider our sample to be representative of the population. Identification as a Repeat Finding: N/A Recommendation: We recommend that management develop and implement a formal policy on suspension and debarment. This policy should include a threshold for when vendors, suppliers, contractors and employees should be screened. All screenings should be conducted prior to signing a contract or issuing payment. We recommend that the Organizations notify all employees of this policy and ensure that it is enforced during the upcoming fiscal year.

Finding 2023-003: Approval of Federal Financial and Programmatic Reports Information on the Federal Programs: All Programs Criteria: The U.S. Department of Labor requires that the Organizations submit a quarterly Federal Financial Report (FFR), SF-425, in accordance with the quarterly schedule indicated in its grant agreement, within 30 days following the end of each calendar quarter. Condition: The Organizations filed its FFRs and required programmatic reports for the fiscal year by the required due dates. We noted that there was no formal review and approval of the FFRs and required programmatic reports. Cause: Management did not have established internal controls in place to formally review and approve the FFRs and required programmatic reports to ensure accurate preparation and timely submission. Effect: Without established controls over reporting and reimbursement requests, there is a reasonable possibility that the Organizations would not detect noncompliance in the normal course of performing duties and correct them in a timely manner. Questioned Costs: N/A Context: Our audit procedures consisted of testwork performed over cash receipts, draw down requests from the Federal Government and programmatic reports. We consider our sample to be representative of the population. The condition appears to be systemic in nature. Identification as a Repeat Finding: Not applicable. Recommendation: We recommend The Organizations establish formal policies and procedures with respect to the review and approval process over FFRs and required programmatic reports.