Three Rivers Education Foundation, Inc.Non-Profit

Federal Program Information: Funding Agency: U.S. Department of Education Title: Teacher & School Leader Incentive Program Assistance Listing: 84.374 A Passthrough: N/A Award Year: 2022 Criteria: 2 CFR Chapter I, and Chapter II, Parts 200, 215, 220, 225, and 230 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards ? 200.430 Compensation ? personal services (i) Standards for Documentation of Personnel Expenses (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensation activities (for IHE, this per the IHE?s definition of IBS); (iv) Encompass federally-assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity?s written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity (See paragraph (h)(1)(ii) above for treatment of incidental work for IHEs.); and (vii) Support the distribution of the employee?s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that: (A) The system for establishing the estimates produces reasonable approximations of the activity actually performed; (B) Significant changes in the corresponding work activity (as defined by the non-Federal entity?s written policies) are identified and entered into the records in a timely manner. Short term (such as one or two months) fluctuation between workload categories need not be considered as long as the distribution of salaries and wages is reasonable over the longer term; and (C) The non-Federal entity?s system of internal controls includes processes to review after-the-fact interim charges made to a Federal award based on budget estimates. All necessary adjustment must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated. Condition: The Foundation does not have a system of internal control to accurately track personnel costs when the individual works on more than one program. The Foundation makes a good-faith effort to budget an individual?s time based on their best estimate of the distribution of the employee?s time over the various programs. However, the Foundation?s employees were not required to track their time on a daily basis and identify which program was worked on during that day. The Foundation did not require those employees who are assigned to multiple cost programs to track and certify their time. The Foundation did not ?true-up? actual time versus budgeted time for the various programs during the year. Questioned Costs: None Cause: The Foundation had not implemented a method to track time for employees allocated between multiple program costs and to adjust those costs based on actual time spent on the programs. The Foundation believed that their goodfaithed effort to budget accurately an employee?s time was sufficient to meet the personnel requirements. Since bringing this to the attention of the Foundation, it has implemented a method for employees to properly track their time by program and to square-up their time to actual time on a timely and consistent basis. Effect: The Foundation is not in compliance with Federal regulations related to the grant and could put funding in jeopardy or require the Foundation to reimburse the program. Auditor?s Recommendation: The Foundation should implement internal control policies and procedures which require employees who work under two or more programs to track their time in a method that allows for proper allocation of expenses between those programs. Additionally, the Foundation should implement a process for employees to certify that their time is properly tracked and allocated. Finally, the Foundation should implement a time-frame to adjust budgeted salaries to actual salaries based upon the tracking performed by employees. Responsible official?s view: ? Specific corrective action plan for finding: Dr. Linda Coy in conjunction with James Coy, CFO and Patty Eaton, Business Manager have developed a revised process of collecting T & E data from employees affected by this action. Each affected employee will collect daily activities tied to the percentage of time allocated to their respective positions and submit on a monthly basis to the business office. The business office will calculate the time spent on each project and provide that information back to the employee for adjustment during the following month. The documentation, for each employee that is part of this process will be available to the auditors during the next audit cycle. The HR department will maintain these files for inspection. ? Timeline for completion of corrective action plan: After consultation with the auditors, it was decided that the effective date for implementation is September 1, 2023. ? Employee position(s) responsible for meeting the timeline: Dr. Linda Coy, Three Rivers Education Foundation Director & James L. Coy CFO

Federal Program Information: Funding Agency: U.S. Department of Education Title: Teacher Quality Partnership ? New Mexico Teacher Quality Partnership ? Texas Migrant Education High School Equivalency Program - Maricopa Migrant Education High School Equivalency Program - Borderland Federal Assistance Listing: 84.336S, 84.141A Federal Award Number: U336S180013 TQP-NM and U336S190003 TQP-TX S141A150015 BHEP and S141A190014 MHEP Award Year: October 1, 2019 ? September 30, 2020 ? TQP Grants October 1, 2020 ? September 30, 2021 ? TQP Grants July 1, 2019 ? June 30, 2020 ? MHEP Grants July 1, 2020 ? June 30, 2021 ? MHEP Grants Pass Through: None Type of Finding: Allowable Costs/Activity and Reasonable Costs Criteria: Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) establishes the following applicable requirements: Section 200.303 Internal Controls The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). (b) Comply with the U.S. Constitution, Federal statutes, regulations, and the terms and conditions of the Federal awards. (c) Evaluate and monitor the non-Federal entity's compliance with statutes, regulations and the terms and conditions of Federal awards. (d) Take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings. (e) Take reasonable measures to safeguard protected personally identifiable information and other information the Federal awarding agency or pass-through entity designates as sensitive or the non- Federal entity considers sensitive consistent with applicable Federal, State, local, and tribal laws regarding privacy and responsibility over confidentiality. Section 200.465 Rental Costs of Real Property and Equipment (a) Subject to the limitations described in paragraphs (b) through (d) of this section, rental costs are allowable to the extent that the rates are reasonable in light of such factors as: rental costs of comparable property, if any; market conditions in the area; alternatives available; and the type, life expectancy, condition, and value of the property leased. Rental arrangements should be reviewed periodically to determine if circumstances have changed and other options are available. (b) Rental costs under ?sale and lease back? arrangements are allowable only up to the amount that would be allowed had the non-Federal entity continued to own the property. This amount would include expenses such as depreciation, maintenance, taxes, and insurance. (c) Rental costs under ?less-than-arm?s-length? leases are allowable only up to the amount (as explained in paragraph (b) of this section). For this purpose, a less-than-arm?s-length lease is one under which one party to the lease agreement is able to control or substantially influence the actions of the other. Such leases include, but are not limited to those between: (1) Divisions of the non-Federal entity; (2) The non-Federal entity under common control through common officers, directors, or members; and (3) The non-Federal entity and a director, trustee, officer, or key employee of the non-Federal entity or an immediate family member, either directly or through corporations, trusts, or similar arrangements in which they hold a controlling interest. For example, the non-Federal entity may establish a separate corporation for the sole purpose of owning property and leasing it back to the non-Federal entity. (4) Family members include one party with any of the following relationships to another party: (i) Spouse, and parents thereof; (ii) Children, and spouses thereof; (iii) Parents, and spouses thereof; (iv) Siblings, and spouses thereof; (v) Grandparents and grandchildren, and spouses thereof; (vi) Domestic partner and parents thereof, including domestic partners of any individual in 2 through 5 of this definition; and (vii) Any individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship. (5) Rental costs under leases which are required to be treated as capital leases under GAAP are allowable only up to the amount (as explained in paragraph (b) of this section) that would be allowed had the non-Federal entity purchased the property on the date the lease agreement was executed. The provisions of GAAP must be used to determine whether a lease is a capital lease. Interest costs related to capital leases are allowable to the extent they meet the criteria in ? 200.449 Interest. Unallowable costs include amounts paid for profit, management fees, and taxes that would not have been incurred had the non-Federal entity purchased the property. (6) The rental of any property owned by any individuals or entities affiliated with the non- Federal entity, to include commercial or residential real estate, for purposes such as the home office workspace is unallowable. Condition: The Foundation has paid into a proprietorship owned by the two Foundation officers, including the project director, for two of the TQP grants for home office space. Total payments to the entity totaled $21,000 for home office space. Additionally, managers of programs have been paid for using home offices during the year. Those payments totaled $40,500. Due to the COVID-19 pandemic, the Foundation had determined to pay managers a stipend for home office space since they were required to work from home during much of the year. Questioned Costs: $61,500 ? (TQP Grants - $40,000; MHEP Grants - $21,500) Cause: Foundation personnel did not know that they could only pay actual costs for any rental/lease agreements for ?less-than-arm?s-length? agreements. Additionally, personnel were not aware that Federal guidelines prohibit the payment for home offices. Effect: The Foundation has incurred costs which are unallowable. Auditor?s Recommendation: The Foundation has stopped paying costs to the related-party company owned by the officers and directors which is proper. We would recommend that the related-party company reimburse the Foundation for costs which have been paid out during this current fiscal year so those funds can be returned to the granting agency. We also recommend that the Foundation stop the payments to individuals for their home office space as this is specifically identified as an unallowable cost of Federal grants. Responsible Official?s View: ? Specific corrective action plan for finding: We would recommend that the related-party company reimburse the Foundation for costs which have been paid out during this current fiscal year so those funds can be returned to the granting agency. The related proprietorship LJJL will reimburse the Foundation for the amount of $21,000, the amount in question in regards to the officers of the Foundation. We also recommend that the Foundation stop the payments to individuals for their home office space as this is specifically identified as an unallowable cost of Federal grants. Payments for home space reimbursements to field staff ceased on June 30, 2021. ? Timeline for completion of corrective action plan: The timeline for the reimbursement of $21,000 will be as of July 31, 2021. ? Employee position(s) responsible for meeting the timeline: Chief Executive Officer for Three Rivers Education Foundation

2019-002 FEDERAL DRAW DOWNS IN ADVANCE OF EXPENDITURES FEDERAL PROGRAM INFORMATION Title: Fund for the Improvement of Education (CL Plus) Funding Agency: Department of Education Federal Award Number: S215G160051 Award Year: October 1, 2018 ? September 30, 2019 CFDA Number: 84.215 Pass Through: None Repeat Finding: No Type of Finding: Material Non-compliance with Allowable Costs, Cash Management, and Period of Performance Requirements CONDITION The Foundation drew down funds in advance of immediate cash requirements for expenditures that had not been incurred and for expenditures that extended beyond the grant termination date. CONTEXT We selected 25 samples from the population of cash disbursements charged to this federal grant and 25 samples from the population of payroll disbursements charged to this federal grant. We noted 3 of the 25 cash disbursements totaling $73,581 and 1 of the 25 payroll disbursements totaling $57,387 were drawn down between two to six months in advance of expenditures being incurred. Through expanded testwork an additional $9,180 was noted to be drawn down over two months in advance of actual expenditure. In total $111,348 was received on April 30, 2019 and was based on anticipated future expenditures occurring from May 2019 through February 2020, and $28,800 was received on October 11, 2019 based on anticipated future expenditures occurring from September 2019 through December 2019. The grant expired September 30, 2019. Of the amounts listed above, expenditures charged to the grant that were not incurred until after the grant period expired totaled $78,257. CRITERIA Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) establishes the following applicable requirements: Section 200.305 states, payment methods must minimize the time elapsing between the transfer of funds from the United States Treasury and the disbursement by the non-Federal entity. Advance payments to a non-Federal entity must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the non-Federal entity in carrying out the purpose of the approved program or project. The timing and amount of advance payments must be as close as is administratively feasible to the actual disbursements by the non-Federal entity for direct program or project costs and the proportionate share of any allowable indirect costs. Section 200.403 states, except where otherwise authorized by statute, costs must be determined in accordance with generally accepted accounting principles (GAAP). Title 34 U.S. Code of Federal Regulations Part 75, Department of Education Direct Grant Programs establishes the following applicable requirements: Section 75.703 states, A grantee may use grant funds only for obligations it makes during the grant period. Section 75.707 stipulates the following: ? If the obligation is for personal services by an employee of the grantee, the obligation is made when the services are performed. ? If the obligation is for performance of work other than personal services, the obligation is made on the date on which the grantee makes a binding written commitment to obtain the work. Per page 32 of the grant award notification, the Department pays grantees in advance of their expenditures if the grantee demonstrates a willingness and ability to minimize the time between the transfer of funds to the grantee and the disbursement of the funds by the grantee and grantees repay to the Federal government interest earned on advances. In general, grantees should make payment requests frequently, only for small amounts sufficient to meet the cash needs of the immediate future. CAUSE Although the Foundation is familiar with the requirements of the grant award and 2 CFR Part 200, it is management?s opinion that grantee agency would consider the charges to be allowable. EFFECT The Foundation received federal funds totaling $140,148 up to seven months in advance of expenditures being incurred which is a violation of cash management compliance requirements. Additionally, expenses were recorded prior to delivering or producing goods or rendering services which is not in compliance with GAAP. Those incorrectly recorded expenses were used as support for draw down requests. This is a violation of the allowable cost compliance requirement. Finally, expenditures occurring outside the grant period were charged to the grant. This is a violation of the period of performance compliance requirement. QUESTIONED COSTS Auditors calculated questioned costs to be $140,148 resulting from a violation of the terms and conditions of the grant award regarding cash management and draw down of funds. Of that amount $78,256 was determined to have been incurred after the expiration of the grant period. RECOMMENDATION Management should ensure that any expenses charged to the federal grant comply with the grant agreement and 2 CFR Part 200. Management should obtain prior written approval from the grantor to support any deviations from grant agreements or federal regulations. MANAGEMENT RESPONSE Effective January 1, 2020, the Chief Financial Officer and the Foundation Director will ensure federal draw downs are in accordance with grant agreements and will obtain written approval from the grantor should deviations from the agreement be necessary.

2019-003 PERSONAL SERVICES CHARGED TO FEDERAL GRANT FEDERAL PROGRAM INFORMATION Title: Fund for the Improvement of Education (CL Plus) Funding Agency: Department of Education Federal Award Number: S215G160051 Award Year: October 1, 2018 ? September 30, 2019 CFDA Number: 84.215 Pass Through: None Repeat Finding: No Type of Finding: Material Non-compliance with Allowable Costs CONDITION Personnel bonuses were awarded and charged to this grant without written consent of the granting agency, Board approval or documentation regarding the reason for the payment or how it is necessary and reasonable for the performance of the federal award. CONTEXT We selected 25 samples from the population of payroll disbursements charged to this federal grant and 2 of the 25 payroll disbursements totaling $30,000 were for payment of personnel bonuses. CRITERIA Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) establishes the following applicable requirements: Section 200.53(b) Improper Payments states: (b) Improper payment includes any payment to an ineligible party, any payment for an ineligible good or service, any duplicate payment, any payment for a good or service not received (except for such payments where authorized by law), any payment that does not account for credit for applicable discounts, and any payment where insufficient or lack of documentation prevents a reviewer from discerning whether a payment was proper. Section 200.403 Factors affecting allowability of costs states: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards. (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. Section 200.404 Reasonable costs states: A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost. The question of reasonableness is particularly important when the non-Federal entity is predominantly federally-funded. In determining reasonableness of a given cost, consideration must be given to whether the cost is of a type generally recognized as ordinary and necessary for the operation of the non-Federal entity or the proper and efficient performance of the Federal award. Section 200.430 Compensation-personal services states: (f) Incentive compensation. Incentive compensation to employees based on cost reduction, or efficient performance, suggestion awards, safety awards, etc., is allowable to the extent that the overall compensation is determined to be reasonable and such costs are paid or accrued pursuant to an agreement entered into in good faith between the non-Federal entity and the employees before the services were rendered, or pursuant to an established plan followed by the non-Federal entity so consistently as to imply, in effect, an agreement to make such payment. (g) Nonprofit organizations. For compensation to members of nonprofit organizations, trustees, directors, associates, officers, or the immediate families thereof, determination must be made that such compensation is reasonable for the actual personal services rendered rather than a distribution of earnings in excess of costs. This may include director's and executive committee member's fees, incentive awards, allowances for off-site pay, incentive pay, location allowances, hardship pay, and cost-of-living differentials. CAUSE Bonuses were included in the personnel budget category, and because personnel expenses charged to the grant did not exceed the budget category, management believed these costs to be allowable. EFFECT Because bonuses were awarded without documentation to allow a reviewer to determine that they were authorized and they were necessary for the performance of the federal award, Auditor?s cannot determine that amounts are reasonable and thus allowable. QUESTIONED COSTS Auditors calculated questioned costs to be $30,000 resulting from a lack of documentation to support these expenditures. RECOMMENDATION Management should ensure that any expenses charged to the federal are supported by documentation which provides evidence that expenditures are necessary to the performance of the federal award. MANAGEMENT RESPONSE Issuing bonuses has been a past practice with the Foundation. Effective January 1, 2020, bonuses will be approved by the Board of Directors as a matter of policy.

2019-004 COMPENSATION FOR USE OF FOUNDATION EQUIPMENT FEDERAL PROGRAM INFORMATION Title: Fund for the Improvement of Education (CL Plus) Funding Agency: Department of Education Federal Award Number: S215G160051 Award Year: October 1, 2018 ? September 30, 2019 CFDA Number: 84.215 Pass Through: None Repeat Finding: No Type of Finding: Material Non-compliance with Allowable Costs CONDITION Reimbursement for the use of company vehicles exceeded allowable amounts. CONTEXT We selected 25 samples from the population of cash disbursements charged to this federal grant and 1 of the 25 cash disbursements totaling $10,000 was a non-cash expenditure recorded for the use of company vehicles. Through further testwork, it was determined that a total of $33,098 was charged to federal grants in the year ended December 31, 2019 for the use of company vehicles. Of that amount $22,183 was charged to this federal program and $10,915 was charged to another federal program. CRITERIA Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) establishes the following applicable requirements: Section 200.436 Depreciation states: (a) Depreciation is the method for allocating the cost of fixed assets to periods benefitting from asset use. The non-Federal entity may be compensated for the use of its buildings, capital improvements, equipment, and software projects capitalized in accordance with GAAP, provided that they are used, needed in the non-Federal entity's activities, and properly allocated to Federal awards. Such compensation must be made by computing depreciation. (d)(2) The depreciation method used to charge the cost of an asset (or group of assets) to accounting periods must reflect the pattern of consumption of the asset during its useful life. In the absence of clear evidence indicating that the expected consumption of the asset will be significantly greater in the early portions than in the later portions of its useful life, the straight-line method must be presumed to be the appropriate method. Section 200.474 Travel states (a) General. Travel costs are the expenses for transportation, lodging, subsistence, and related items incurred by employees who are in travel status on official business of the non-Federal entity. Such costs may be charged on an actual cost basis, on a per diem or mileage basis in lieu of actual costs incurred, or on a combination of the two, provided the method used is applied to an entire trip and not to selected days of the trip, and results in charges consistent with those normally allowed in like circumstances in the non-Federal entity's non-federally-funded activities and in accordance with non-Federal entity's written travel reimbursement policies. CAUSE TREF was charging both mileage and usage of the vehicles to the federal grant. EFFECT Amounts charged to this federal grant exceeded the amount allowable under federal cost principles related to depreciation and the use of company equipment. QUESTIONED COSTS Auditors calculated questioned costs to be $19,697 resulting from the amount charged to federal awards of $33,098 less the amount of annual straight-line depreciation which totals $13,401. RECOMMENDATION Management should become familiar with federal cost principals as they relate to reimbursement of non-cash services. Management should obtain specific written acceptance from the grantor when amounts charged to the federal award are conflicting with federal cost principles. MANAGEMENT RESPONSE The mileage reimbursement rate does not cover the expenses of the vehicles, as a result depreciation is charged to the federal grant. Effective April 1, 2020, the Foundation will increase the usage reimbursement rate charged per vehicle with no other charges for use.