SPRUCE ROOT, INC.Non-Profit

Finding # 2022-001 Type: Noncompliance Assistance Listing Number: U.S. Department of Agriculture ? Rural Development 10.755 Rural Innovation Stronger Economy U.S. Department of the Treasury 21.027 Coronavirus State and Local Fiscal Recovery Funds Criteria/Requirement: Expenses should be reviewed for allowability of costs before requesting reimbursement. Condition: USDA?s review of submitted reports, SF-270 and SF-425, identified various adjustments due to disallowed expenses included or insufficient supporting documentation for expenses incurred. Cause: Expenses incurred by the Organization and its subrecipients were not reviewed for allowability before requesting reimbursement and expenditure reporting. Effect: Disallowed costs could be charged to contracts. Questioned Costs: Approximately $15,000 Recommendation: The Organization should implement an additional review of expenses when preparing request for reimbursement and expenditure reports. Management Response: Management will enhance its review of expenditures before submitting to funders for reimbursement.

Finding # 2022-002 Type: Immaterial Noncompliance over Procurement Assistance Listing Number: U.S. Department of Agriculture - Rural Development 10.755 Rural Innovation Stronger Economy U.S. Department of the Treasury 21.027 Coronavirus State and Local Fiscal Recovery Funds Criteria/Requirement: The Organization should follow the procurement standards set out at 2 CFR sections 200.318 through 200.326 including documentation to justify when a competitive process was not used. The Organization?s procurement policies also should be expanded to incorporate the provisions of the standards referenced. Condition: The procurement process was not properly documented and executed. For two out of two samples selected for testing, there was no documentation of the procurement process performed or reviewed. Cause: The Organization?s procurement policy does not meet the required federal standards, and application of the policy was not consistently applied. Effect: The Organization?s contracts could be from disbarred or disallowed vendors. Questioned Costs: None. Recommendation: The Organization's procurement policy must have documented procurement procedures, consistent with state, local, and tribal laws and regulations for the acquisition of property or services required under a federal award or subaward. The Organization should maintain records sufficient to detail the history of procurement. Management Response: Management will review the federal procurement guidelines and update its policies and procedures to be consistent with federal requirements.

Finding # 2022-003 Type: Material Weakness over Subrecipient Monitoring Type: Material Noncompliance Assistance Listing Number: U.S. Department of Agriculture - Rural Development 10.755 Rural Innovation Stronger Economy Criteria/Requirement: The Organization is required to monitor activities of subrecipients in accordance with federal regulations. Condition: The Organization?s subrecipient agreements did not include the required federal award identification, and the Organization did not provide sufficient financial monitoring. One subrecipient had a single audit finding, and management did not take actions to resolve the findings with the subrecipient. Cause: There are no formal policies for subrecipient monitoring. Effect: Subrecipients could be out of compliance with federal guidelines if the required federal award information was not clearly defined in subaward agreements or if the Organization does not monitor the subrecipient?s use of federal funds. Questioned Costs: None. Recommendation: The Organization should implement a subrecipient monitoring policy that ensure a proper system to monitor, detect and take timely follow-up action on any issues identified in site visits and internal or external audits. Management should evaluate each subrecipient's risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward and monitor the activities of the subrecipient to ensure that the subaward is used for authorized purposes. The Organization should consider on-site reviews of the subrecipient?s operations and formalizing a monitoring report checklist to ensure that all compliance requirements have been considered and documented. Management Response: Management will review the federal subrecipient monitoring and management guidelines and update its policies and procedures to be consistent with federal requirements. Management will issue contract amendments for its subrecipient agreements to ensure the proper federal award identification is documented.