Southern Illinois Center for Independent LivingNon-Profit

Criteria The Organization is responsible for the design and implementation of internal controls including controls over purchases. Condition The Organization's policy over credit cards is that the financial director or designated cardholder for each location will provide (or check out) cards to staff members for specific purchases as needed upon written request. The cards and all receipts are to be returned to the finance director when purchases are complete. The financial director or designated cardholder has authority to approve purchases up to $100. The executive director must approve any written requests for purchases over $100 up to $5,000. Anything over $5,000 is subject to board approval. Context During the audit, it was noted that the credit card purchasing policy regarding approvals was not being followed. Cause Management did not enforce the policy over credit card purchases as written. Credit card purchases are being made without approval. Recommendation We recommend that the Organization establish a more in depth approval process for all credit card purchases to enhance control over expenditures and reduce the risk of unauthorized or inappropriate purchases. The Organization should also reinforce policy awareness to all employees through training.

Criteria The Organization is responsible for ensuring all grant expense allocations are in accordance with the set cost allocation policy. Condition Instance 1:Allocation of mileage reimbursement to employee did not recalculate per documentation. Instance 2:Allocation does not agree to purchase division spreadsheet. Instance 3: Employee time worked on Your Choice grant allocated to IL ACL. Instance 4: Prior year property addition expenses to IL ACL were reversed in current year. Context Instance 1: Mileage reimbursements are allocated based on the amounts of miles driven by the employee for each grant. Instance 2: Expenses are allocated based on the purchase division spreadsheet that is made up by the cost allocation plan. Instance 3: Payroll and payroll tax is allocated based on employee hours worked on each grant. Some employees do not work on grant specific items so their time is recorded elsewhere. Instance 4: Property and equipment should be allocated to the grant through depreciation expense. Questioned Costs Instance 1: Based on the supporting documentation provided by an employee, mileage was under allocated by 41% with the total allocated to IL ACL Direct being $87.10 and the amounts per expense and mileage report being $156.09 for a total difference of $68.99. The total allocated to all grants was $167.84. Management indicated that the mileage reimbursement was properly allocated based on the employee's travel for training and that the form itself was not corrected to accurately reflect actual grant time. Instance 2: Cost was allocated to IL ACL Direct at 47%. The invoice indicates cost should have been allocated to IL Indirect at 60.60% which in turn agrees to the cost allocation plan. The total allocated to all grants was $28,850.60. Management indicated that the purchase was initially thought to be for painting of a location where multiple programs services were performed but later it was determined that it was a location mainly used for training. The correction was made in the allocation but not to the supporting documentation. Instance 3: Payroll tax was allocated to IL ACL Direct at 89% for $66.61 which included time spent on IL ACL and Your Choice grant. Per timesheet, amount allocated to IL ACL should have been 83% for $62.34. The total allocated to all grants was $75.12. Instance 4: Total cost credited to IL ACL Indirect was $(11,380.42). Cause Instance 1-2: Documentation to support the cost and allocation was initially completed incorrectly or had been marked for specific program allocations incorrectly and not updated to final allocation determined to be appropriate for the cost. Instance 3: Due to allocation being allocated manually for all costs, there is more risk for human error. Error in calculation of amount allocated to IL ACL and was overlooked by management. Instance 4: In prior year, full asset costs were expensed in error. Effect Instance 1-2: Documentation maintained to support cost and allocation to grants was different than actual allocations. Instance 3: Cost allocation plan was not followed and expenses were incorrectly allocated to the grant. Instance 4: Indirect expense account was credited; therefore, reported to the State of IL with incorrect expenditures. Recommendation Instance 1-2: We recommend that management correct supporting documentation when initially completed incorrectly to substantiate how the costs are allocated to each program or grant. Instance 3: We recommend that management update the cost allocation policy to incorporate more automated processes to reduce the risk of human error in allocating grant expenditures by manual spreadsheet. Instance 4: We recommend that management follow the cost allocation and capitalization policy to ensure correct expenditures.

Federal Program Name ACL Independent Living State Grants-ACL Title VII-Chapter 1, Part B CFDA # 93.369 Federal Agency Department of Human Services Criteria The Organization is responsible for ensuring all grant expense allocations are in accordance with the set cost allocation policy. Condition Instance 1: Timesheet was filled out incorrectly by an employee and was also approved by management. Instance 2: Entire asset costs were allocated to grant. Context Instance 1: Payroll is allocated based on employee hours worked on each grant. Some employees do not work on grant specific items so their time is recorded elsewhere. Instance 2: Property and equipment should be allocated to the grant through depreciation expense. Questioned Costs Instance 1: We believe this to be a one-time error. All other payroll allocations sampled were allocated correctly. The questioned costs for this occurrence is $600. Instance 2: Four assets were capitalized and allocated to the grant during the year for a total of $13,943. Cause Instance 1: Employee did not properly know how to record time and the error was overlooked by management. Instance 2: The internal cost allocation policy was not consistent with federal guidelines for property and equipment grant expenditures.Effect Instance 1: Incorrect allocation of payroll expense to grant. Instance 2: Cost allocation policy was not followed by management. Recommendation Instance 1: We recommend that employees are trained to properly fill out timesheets and that management goes through a more detailed approval process when approving timesheets. Instance 2: We recommend that management update the Organization’s cost allocation policy. Management’s Response Management agrees with the finding and will take steps to update the Organization’s cost allocation policy to match federal regulations.

Federal Program Name ACL Independent Living State Grants-ACL Title VII-Chapter 1, Part B CFDA # 93.369 Federal Agency Department of Human Services Criteria The Organization is responsible for staying in compliance with equipment and real property management attribute related to the grant. To be considered in compliance, all property and equipment must be maintained in property records and reconciled to a physical inventory. Condition All assets were noted in the property records except for one. The assets was not able to be reconciled to the physical inventory taken during the year. Context Physical inventory is taken once a year at each location by room. We obtained the physical inventory records for the year as well as the master inventory list used to maintain inventory. Cause Management overlooked recording the asset in the master inventory list. Effect The potential negative impact of not following compliance standards for the grant could lead to revocation of the grant. Recommendation We recommend that management takes the time to go through the inventory master list and ensures all assets have been recorded and have reconciled to the physical inventory. Management’s Response Management agrees with this finding.

Criteria Entities that receive federal grants or programs are required to know the source of all grants and awards as the requirements of the U.S. Office of Management and Budget’s (OMB) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Final Rule (Uniform Guidance). Entities must be able to document the key components of the schedule of expenditures of federal awards. Condition The schedule of expenditures of federal awards provided by management included only the name of the program and amount spent. It did not include key information required (organized by federal program or agency, details of sub-recipients, pass through entities and their number, or CFDA numbers) under Uniform Guidance. In addition, federal funds that were expended in a prior fiscal year were incorrectly included in the schedule provided by management. Context Management has all the information to complete the schedule of federal awards in compliance with the Uniform Guidance but had not compiled it prior to the start of the audit. In addition, notification from one of the granting agencies during the financial audit indicated that the portion of some of the grants considered federal funding had been updated. Cause Southern Illinois Center for Independent Living has not had an audit requirement under Uniform Guidance in several years and therefore the current finance director has not had to previously provide the detailed information previously. Effect The audit firm assisted with compiling all the necessary information to ensure the schedule of federal awards was complete and accurate. In addition, if the error in federal awards had not been discovered, the result could have been inaccurate reporting of federal expenditures. Recommendation We recommend management incorporate proper training and education on the information and amounts that must be outlined in the schedule of federal awards and further we recommend that management prepare the schedule at least annually including in those years when they are not required to have an audit of federal awards under the Uniform Guidance. Management’s Response Management has a corrective action plan in place to address the finding as follows: •Management will prepare the schedule of expenditures of federal awards as part of the year end closing process each year to determine their audit requirements under the Uniform Guidance and provide the schedule to the audit firm during the financial audit process.