LANSING ECONOMIC DEVELOPMENT CORPORATIONNon-Profit

2025-001 - Charging of Indirect Costs to Federal Program Finding Type. Immaterial Noncompliance / Significant Deficiency in Internal Control over Compliance (Allowable Cost/Cost Principles). Program. Coronavirus State and Local Fiscal Recovery Funds; U.S. Department of Treasury; Assistance Listing Number 21.027; Passed through the City of Lansing. Criteria. When calculating an indirect cost application rate, the rate must be determined using actual costs. Budgeted costs may be used only if there is a process to true up to actual costs periodically. Condition. The Corporation used budgeted amounts as direct costs for calculating the administrative cost charged to the grant. When recalculated using actual costs, the amount calculated did support the amount charged, but the control system and methodology was not in compliance with federal cost principles. Cause. This condition was caused by a lack of understanding of the cost principles applicable to the charging of indirect costs to federal programs. Effect. As a result of this condition, the Corporation had an increased risk of charging an unallowable amount of indirect cost to the federal award. Questioned Costs. No costs are required to be questioned as a result of this finding, inasmuch as the recalculation with actual costs did not result in the grant being overcharged. Recommendation. We recommend that grant staff become better acquainted with the portion of the Uniform Guidance that deals with the allocation of indirect costs. View of Responsible Officials. Management will use actual costs of the prior year audited financial books to determine indirect / other administrative cost rates charged to the grant. If administrative costs are charged to the grant prior to audited financial records are available, they shall be re-calculated when the audited financial records are available and an adjustment made.

2025-002 - Suspension and Debarment Checks Finding Type. Immaterial Noncompliance / Significant Deficiency in Internal Control over Compliance (Procurement, Suspension and Debarment). Program. Coronavirus State and Local Fiscal Recovery Funds; U.S. Department of Treasury; Assistance Listing Number 21.027; Passed through the City of Lansing. Criteria. Non-federal entities are prohibited from contracting with or making subawards under covered transactions to parties that are suspended or debarred. “Covered transactions” include contracts for goods and services awarded under a non-procurement transaction (e.g., grant or cooperative agreement) that are expected to equal or exceed $25,000 or meet certain other criteria as specified in 2 CFR 180.220. Condition. Although the Corporation provided debarment check documentation from www.sam.gov showing all vendors tested were not under any active exclusions, these checks were not done prior to entering into a contract with these vendors. Cause. This condition was caused by a lack of understanding of the procurement and suspension and debarment requirements applicable to federal programs. Effect. As a result of this condition, the Corporation had an increased risk of contracting and doing business with entities that were suspended or debarred from federal award work. Questioned Costs. No costs are required to be questioned as a result of this finding, inasmuch as no suspended or debarred entities were found. Recommendation. We recommend that the Corporation periodically check vendors that have or may reach the $25,000 threshold with www.sam.gov for potential exclusions from federal work. We further recommend that the Corporation do a similar check for each entity for which they are entering into a purchase contract for $25,000 or more, before signing the contract. View of Responsible Officials. Management will perform and document debarment checks for all contracts for goods or services expected to equal or exceed $25,000, or if a contract requires the consent of an official of a federal agency, or meets certain other criteria as specified in 2 CFR 180.220. We will also incorporate in future contracts for which this requirement applies, so that the vendor certifies that they are not suspended or debarred.

2025-003 - Quarterly Report Reconciliation and Independent Review and Approval of Reporting Finding Type. Immaterial Noncompliance / Significant Deficiency in Internal Control over Compliance (Reporting). Program. Coronavirus State and Local Fiscal Recovery Funds; U.S. Department of Treasury; Assistance Listing Number 21.027; Passed through the City of Lansing. Criteria. The subrecipient is required to submit quarterly project and expenditure reports to the pass-through agency throughout the life of the grant. Reported information should be supported by the entity’s accounting records and subjected to an independent review and approval prior to submission in order to detect and correct any errors or omissions. Condition. Quarterly reported cumulative expenditures do not reconcile to total expenditures reported in the financial records for fiscal years 2023 through 2025. In addition, total fiscal year expenditures per quarterly reporting do not reconcile to the current year general ledger for the federal program. Further, there does not appear to be any evidence of a review or reconciling process being done at the time reports are created. Cause. This condition was caused by the reporting process not taking the reconciled general ledger balances into account when preparing the reports and lack of understanding by program staff of the specific requirements over reporting. Effect. As a result of this condition, the Corporation had increased risk of communicating inaccurate information to the pass-through agency. Questioned Costs. No costs are required to be questioned as a result of this finding, inasmuch as no unallowed costs were noted in our transactional testing. Recommendation. We recommend that all financial reporting to grantor agencies or pass-through agencies be reviewed by an individual independent of the report preparation. We further recommend that the reviews include reconciling amounts to the general ledger. Copies of the general ledger and any reconciling items should be retained for review by auditors or other program reviewers. View of Responsible Officials. Management will perform reviews of expenditure reports, including reconciling them to the general ledger for the company, not less often than quarterly. We will also attach a copy of the supporting general ledger transactions to each quarter’s report.

2025-004 - Written Policies Required by the Uniform Guidance Finding Type. Immaterial Noncompliance / Significant Deficiency in Internal Control over Compliance (Allowable Costs/Cost Principles, Cash Management and Procurement, Suspension and Debarment). Program. Coronavirus State and Local Fiscal Recovery Funds; U.S. Department of Treasury; Assistance Listing Number 21.027; Passed through the City of Lansing. Criteria. The Uniform Guidance requires a non-federal entity that has expended federal awards for a grant awarded on or after December 26, 2014 to have written policies pertaining to various areas, including: 1) Payments (draws of federal funds and how to minimize the time elapsing between the receipt of federal funds and the disbursement to contractors/employees/subrecipients) (§200.302 (6)); 2) Procurement (including bidding and a conflict of interest policy) (§200.318); 3) Allowability of costs charged to federal programs (§200.302 (7)); 4) Compensation (personnel and benefits policy) (§200.430 and §200.431); and 5) Travel costs (including mileage and per diem) (§200.474). Condition. Although the Corporation has processes in place to cover all of these areas, the Corporation has no formal written policies covering payments, procurement or allowable costs that address all of the areas required by the Uniform Guidance. Cause. This condition appears to be the result of a lack of understanding of the written policy requirements contained in the Uniform Guidance. Effect. As a result of this condition, the Corporation did not fully comply with requirements of the Uniform Guidance. Questioned Costs. No costs were required to be questioned as a result of this finding inasmuch as our testing did not reveal any unallowed costs. Recommendation. We recommend that the Corporation draft and implement the required policies as soon as practical, but no later then the end of fiscal year 2026. View of Responsible Officials. Management will draft and implement the required policies covering payments, procurement, and allowable costs that address all the areas required by the Uniform Guidance and follow them.