Fresh Farm markets INC.

Criterial or Specific Requirement: Nonfederal entities other than states, including those operating federal programs as subrecipients of states, must follow the procurement standards set out at 2 CFR sections 200.318 through 200.326. They must use their own documented procurement procedures, which reflect applicable state and local laws and regulations, provided that the procurements conform to applicable federal statutes and the procurement requirements identified in 2 CFR Part 200. Condition: The organization did not document procurements consistent with the standards of 2 CFR sections 200.318, 200.319, and 200.320. Cause: There are no formally approved written policies and procedures for procurement. Effect or Potential Effect: The cost of the procurements may be disallowed. Recommendation: The organization should become familiar with the procurement standards set out at 2 CFR sections 200.318 through 200.326 and establish written policies and procedures for procurement. Views of Responsible Officials: Management agrees with the finding and is in the process of finalizing written policies and procedures for procurement.

Criteria or Specific Requirement: Non-federal entities other than states, including those operating federal programs as subrecipients of states, must follow the procurement standards set out at Title 2 U.S. Code of Federal Regulations (CFR) sections 200.318 through 200.236. 2 CFR section 200.318(a) indicates the non-federal entity's documented procurement procedures must conform to the procurement standards identified in these sections. The general requirements are that the Organization maintain written standards of conduct, full and open competition, and methods of procurement to be followed including formal and informal procurement processes based on a defined threshold. Condition: The Organization lacks a documented procurement policy, therefore the procurement standards required may not be implemented. Cause: FRESHFARM Markets, Inc. does not have a process for reviewing its accounting and organizational policies on a regular basis. Effect or potential effect: Costs for purchases subject to the procurement standards could be disallowed if appropriate procedures are not followed. Repeat Finding: No. Recommendation: The Organization should design and implement a procurement policy. This policy should be reviewed annually, or more frequently, if necessary, to ensure any changes in laws and regulations are reflected in internal procedures.

Criteria or Specific Requirement: 2 CFR 200.303(c) requires the non-Federal entity to evaluate and monitor the non-Federal entity's compliance with statutes, regulations, and the terms and conditions of Federal awards. Condition: Effective internal controls over reporting requirements were not established for review of Form 425. Cause: The lack of effective internal controls over reporting caused errors in the initial preparation of Form 425. Effect or Potential Effect: Improper reporting could result in the federal agency exercising additional scrutiny over activities and possible loss of funding. Repeat Finding: Yes. Recommendation: The Organization should implement controls to monitor compliance with the reporting requirements of federal awards.

Federal Program: Department of Agriculture 10.561 SNAP Cluster, passed through District of Columbia Department of Health Condition and Context: Indirect costs charged to the federal grant were not supported by an appropriate and consistently applied methodology. General overhead costs exceed the amounts charged to the grant, however, allocations of indirect costs were not tracked. Criteria: 2 CFR Subpart E requires the organization to conform to allowability of cost provisions, and 2 CFR 200.303 requires the organization to establish and maintain effective controls over internal controls. Cause: The organization does not utilize a formal mechanism to allocate indirect costs charged to grants. Effect: Indirect costs could be charged improperly and could be charged to multiple grants. Recommendation: The organization should track overhead costs in a pool and perform an ongoing calculation to reclassify allowable amounts to each grant. Repeat Finding? No

Federal Program: Department of Health and Human Services, Improving the Health of Americans through Prevention and Management of Diabetes and Heart Disease and Stroke; 93.426, passed through District of Columbia Department of Health Condition and Context: Indirect costs charged to the federal grant were not supported by an appropriate and consistently applied methodology. General overhead costs exceed the amounts charged to the grant, however, allocations of indirect costs not tracked. Criteria: 2 CFR Subpart E requires the organization to conform to allowability of cost provisions, and 2 CFR 200.303 requires the organization to establish and maintain effective controls over internal controls. Cause: The organization does not utilize a formal mechanism to allocate indirect costs charged to grants. Effect: Indirect costs could be charged improperly and could be charged to multiple grants. Recommendation: The organization should track overhead costs in a pool and perform an ongoing calculation to reclassify allowable amounts to each grant. Repeat Finding? No

Federal Program: Department of Agriculture, Farmers Market and Local Food Promotion Program 10.175 Condition and Context: Indirect costs charged to the federal grant were not supported by an appropriate and consistently applied methodology. General overhead costs exceed the amounts charged to the grant, however, allocations of indirect costs were not tracked. Criteria: 2 CFR Subpart E requires the organization to conform to allowability of cost provisions, and 2 CFR 200.303 requires the organization to establish and maintain effective controls over internal controls. Cause: The organization does not utilize a formal mechanism to allocate indirect costs charged to grants. Effect: Indirect costs could be charged improperly and could be charged to multiple grants. Recommendation: The organization should track overhead costs in a pool and perform an ongoing calculation to reclassify allowable amounts to each grant. Repeat Finding? No

Federal Program: Department of Agriculture 10.561 SNAP Cluster, passed through District of Columbia Department of Health Condition and Context: Indirect costs charged to the grant exceeded the approved indirect cost rate. The approved grant budget specified an indirect cost rate which was not used by the organization. Criteria: 2 CFR Subpart E requires the organization to conform to allowability of cost provisions. Cause: The organization reported indirect costs of 10% based on the de minimis rate and the grant agreement specified an indirect rate of 9.5%. Effect: Indirect costs charged to the grant differ from approved rates. Recommendation: The organization should ensure in its reimbursement requests that amounts requested for indirect costs are consistent with approved rates from the grant budget. Repeat Finding? No

Federal Program: Department of Agriculture, 10.175, Farmers Market and Local Food Promotion Program Condition: The annual report, Form 425, provided to the grantor contained errors when initially filed. Errors were noted in dollar amounts reported in federal cash receipts, federal cash disbursements, and federal share of unliquidated obligations; and the form omitted a required narrative. Subsequent to filing the form, the grantor agency contacted the organization seeking the omitted narrative. The organization prepared the revision, corrected the errors, and added the narrative. Criteria: 2 CFR 200.329 requires monitoring over program performance with annual reporting requirements. Cause: The lack of familiarity with preparing the form allowed the information to be submitted incorrectly. The agency then requested the organization to revise the report, which the organization complied with. Effect: Improper reporting could result in the federal agency exercising additional scrutiny over activities and possible loss in funding. Recommendation: The organization should become familiar with the reporting requirements and ensure all members of the team administering this grant are aware of the requirements. Repeat Finding? No