Southeast Coastal Ocean Observing Regional AssociationNon-Profit

Federal Program: Program Name: Integrated Ocean Observing System (IOOS) Assistance Listing: 11.012 Criteria: The Federal Funding Accountability and Transparency Act (“FFATA”), as implemented through 2 CFR Part 170, requires prime recipients of federal grants and cooperative agreements to report first-tier subawards of $30,000 or more, including amendments to subawards that increase the total obligated above the $30,000 threshold in a subsequent year, in SAM.gov (previously in the FFATA Subaward Reporting System (“FSRS”) through March 8, 2025) by the end of the month following the month in which the subaward was obligated. Accurate and complete subaward reporting is required to ensure transparency of federal spending. Failure to report timely constitutes noncompliance with the FFATA reporting requirement included in the OMB Compliance Supplement. Condition/Context: During testing of FFATA reporting requirements, we identified that the Association did not report any of the approximately fifty first-tier subawards meeting the reporting threshold under any of the three separate prime awards received under its cooperative agreement with the Integrated Ocean Observing System (“IOOS”) Office within the National Oceanic and Atmospheric Administration (“NOAA”). Cause: The Association was subject to FFATA reporting requirements under its cooperative agreement with the Integrated Ocean Observing System (“IOOS”) Office within the National Oceanic and Atmospheric Administration (“NOAA”). The cause of the FFATA reporting lapses was a requirements-interpretation gap in a cooperative agreement context, and management has agreed to promptly remediate and implement controls. The noncompliance resulted from a good-faith misunderstanding regarding the applicability of FFATA to cooperative agreements and did not stem from intentional misconduct or an overall deficient control environment. Effect: Failure to report subawards in FSRS/SAM.gov may reduce the transparency of federal spending and result in noncompliance with FFATA requirements. Incomplete federal reporting could impair the ability of oversight bodies to effectively track federal funds. NOAA/IOOS maintained visibility and comprehensive oversight through proposals (with subrecipient budgets), quarterly financial reports, semiannual performance reports containing subaward level detail, and annual amendment approvals under the cooperative agreement. These mechanisms provided effective oversight, notwithstanding FFATA lapses, and did not result in obscuring where funds went, impeding oversight, and or failing to provide information that would influence federal decision-making. Questioned Costs: None. FFATA reporting is a compliance requirement related to transparency, and no direct financial impact was identified. Repeat Finding: No Recommendation: We recommend the Association establish written internal controls, including procedures and tracking mechanisms to ensure timely FFATA reporting, as well as provide training to grants management personnel responsible for FFATA submissions to ensure timely and accurate reporting. Further, the Association should complete the FFATA reporting for the subawards promptly at the time a new subaward agreement for $30,000 or more is signed or when an amendment for a previous subaward increases the amount over the $30,000 threshold. Management Response: Management concurs with the finding. The Association acknowledges lapses in timely reporting of first-tier subawards in the FSRS/SAM.gov and gaps in internal controls, including procedure documentation, tracking of subaward obligation dates, and staff training. The Association is in the process of establishing written internal controls, including procedures and tracking mechanisms to ensure timely FFATA reporting, as well as providing training to grants management personnel responsible for FFATA submissions to ensure timely and accurate reporting. The overdue FSRS/SAM.gov reports will be submitted, and NOAA IOOS will be provided with documentation of completion. Management notes that all other financial and performance reporting requirements which included subaward information for the aforementioned subawards were filed timely.

CRITERIA: The acquisition and disposal of the Association?s property and equipment must be recognized in accordance with the Association?s capitalization and fixed asset accounting policies. Initial deposits made on a capital asset acquisition must be capitalized in the year made, regardless of whether payments for the remainder of the acquisition are made in the subsequent fiscal year. The full cost of the equipment acquisition should then be depreciated over the useful life once the equipment is placed into service. The disposal of property and equipment must be recorded in the fiscal year in which the Association determines the capital asset to no longer be in service, whether due to impairment, damage, or retirement. CONDITION: In the fiscal year ended June 30, 2019, the Association erroneously expensed an initial deposit made toward an equipment acquisition, which was not fully paid for until the current year or placed into service until a subsequent fiscal year. Therefore, the full cost of the equipment acquisition is not being capitalized. In addition, the Association did not properly dispose of a piece of equipment during the year ended June 30, 2020, at the time it was determined the equipment was no longer in service due to hurricane damage, and instead, the disposal was recorded during the current fiscal year. CAUSE: The Association initiated an equipment acquisition toward the end of the fiscal year ended June 30, 2019, at which time an initial deposit was made and erroneously expensed. The remainder of the purchase price was paid during the current fiscal year, and the equipment was capitalized at a cost that excluded the initial deposit. The information concerning the damaged asset was received toward the end of the fiscal year ended June 30, 2020, but the disposal of the asset was not recorded until the year ended June 30, 2021. EFFECT OR POTENTIAL EFFECT: The initial deposit on the equipment acquisition was not capitalized, therefore, the total cost of the asset capitalized during the year ended June 30, 2021 was understated by $59,670. The loss on disposal of the damaged equipment in the amount of $62,907 was improperly recorded during the year ended June 30, 2021 (understating income) instead of being recorded during the year ended June 30, 2020. RECOMMENDATIONS: If payments made to acquire a piece of property or equipment are made over multiple fiscal years, the amounts should be capitalized when made and the total acquisition cost should be depreciated over the estimated useful life once the asset is placed into service. Once management receives information that an asset has been damaged, the disposal or impairment of that asset should be recorded in the same period. VIEWS OF RESPONSIBLE OFFICIALS AND CORRECTIVE ACTION PLAN: Management agrees with the finding. Management will ensure that the policies surrounding property and equipment will be applied to future acquisitions and/or disposals. To ensure corrective action for the future, the following plan has been implemented. Management will code invoices to be processed to ensure clarity for either a deposit or purchase of an asset that SECOORA will keep (insure, depreciate), thereby recording to the appropriate balance sheet asset account(s) instead of as an expense. If over $5000, invoice will indicate if a pass thru subaward expense (supply vs equipment), or if an asset that SECOORA will keep. If an equipment deposit (or any deposit that spans into a new fiscal year end) is made, the deposit will be coded and posted to the appropriate asset account, and not to an expense account. The deposit will be appropriately reclassified at such time the purchase is completed or deposit is refunded. If any new SECOORA owned asset is purchased, the coding will indicate if the new asset is a replacement, so that the asset it is replacing can be disposed of, and the removal, gain/loss recorded in the books. If the asset is insured, the disposal will reflect any eligible insurance proceeds received and whether a claim was filed, and how settled. SECOORA will periodically check the equipment list/depreciation schedule during the fiscal year among management and staff for review & update, with an additional review in preparation for year end close. Also, management will prepare an internal use equipment memo for each new fixed asset purchase, and update the equipment memo for disposed assets. The equipment memo will indicate pertinent info including asset details, whether insured, estimated useful life, and placed in service date, and date to begin depreciation.

Section II ? Financial Statements Findings, Findings Related to the Basic Financial Statements Reported in Accordance with Government Auditing Standards. Finding: 2019-001 Condition: All expenses were not recorded in the proper period. Criteria: Expenses should be included in the proper period based on date incurred. Cause: Invoices received subsequent to year end were not reviewed for proper cutoff. Effect or Potential Effect: The accounts payable and expenses, as of and for the year ended June 30, 2019, were understated. Recommendations: Management should review invoices that come in after year end to determine if they should be properly included or excluded so that they are recorded in the proper period. Views of Responsible Officials: Management agrees with the finding. An entry was recorded to correct the financial statements. Management will ensure that they properly include or exclude expenditures in the future by reviewing all subsequent invoices for proper cutoff.