FASD United Inc.

Condition: The Organization had policies and procedures that were followed for processing accounting and personnel transactions. However, the policies and procedures were not formulated in a written document. In addition, there were some processes performed by employees that were not properly segregated and should have been performed by other employees. Criteria: Entities should have written policies and procedures to ensure uniformity and consistency by employees when performing their duties and responsibilities. Accounting functions should be properly segregated so that one employee is not performing every critical process. Cause: The Organization did not have many accounting transactions in the prior year. Effect: The lack of documented policies and procedures increases the risk of employees not processing transactions properly and circumventing internal controls. Recommendation: We recommend the Organization develop written policies and procedures. The policies and procedures should include duties and responsibilities that are properly segregated between the employees for each critical process. Views of Responsible Official and Planned Corrective Action: The Organization understands and accepts the identification of a lack of written internal controls and full segregation of duties. Accounting policies and procedures will be reviewed, approved by the Finance Committee, and recorded in a written document. The Organization did not have adequate staff to segregate all accounting duties and is continually working to clearly define roles, responsibilities, and control activities. The Organization will regularly review current processes, access rights, and role assignments and train employees involved in accounting functions to adhere to segregation procedures.

Condition: The Organization’s accounting system records did not agree to the billing invoices to the pass-through entity. Criteria: Under 200.302, federal award recipients must maintain records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. Cause: The accounting system records included both billed and unbilled grant costs. The unbilled costs were not separately identified. Context: Allowable Federal awards expended during the fiscal year. Questioned Costs: $0. Recommendation: We recommend the Organization track the billed federal award expenses separately from the unbilled costs so that an audit trail exists of the grant award expense transactions. Views of Responsible Official and Planned Corrective Action: The Organization acknowledges that all accounting system records did not agree to the billing invoices and recognizes the importance of maintaining accurate and timely accounting records. The Organization notes that it was not found that any variances between system records and billing invoices resulted in questioned costs. The Organization will establish and follow detailed policies and procedures to thoroughly track and record all grant award expense transactions. Accounting records will be modified to include the recordation of unbilled costs under grants and contracts. Billings will be reconciled to the general ledger prior to the submission of invoices to third parties

Condition: In our testing of personnel costs charged to the grant, we identified the following control deficiency related to employment agreements. Signed employment agreements were not provided for four employees; One employment agreement was not signed by an authorizing official. Criteria: Under 200.403 costs charged to federal awards must be adequately supported with documentation. Cause: The Organization did not establish adequate processes and procedures related to the completion of signed employment agreements with its employees. Context: We reviewed the payroll costs for eight employees whose payroll costs were charged to the grant during the year. Questioned Costs: $0. Recommendation: We recommend the Organization establish signed employment agreements with its employees. Views of Responsible Official and Planned Corrective Action: The Organization agrees that employment agreements for some employees were not completed or fully executed. Employment agreements and subsequent modifications for all employees will be signed by both the employee and an authorizing official and regularly reviewed by the organization for completeness

Condition: The Organization charged indirect costs to the grant that exceeded the maximum allowed amount under the grant. The excess indirect cost charged to the grant was $23,584. Criteria: Recipients and subrecipients that do not have a current Federal negotiated indirect cost rate (including provisional rate) may elect to charge a de minimis rate of up to 10 percent of modified total direct costs (MTDC). Cause: The Organization charged indirect costs based on the rate in the grant award agreement. Context: The total amount of indirect costs charged to the grant was $55,029.Questioned Cost: $23,584. Recommendation: We also recommend the Organization charge the 10 percent de minimis indirect cost rate to the grant until a provisional indirect cost rate is received from the federal government. Views of Responsible Official and Planned Corrective Action: The Organization agrees that the indirect costs charged to the grant exceeded the maximum allowed under the grant. The Organization understood that it could charge a higher initial provisional indirect rate, reflecting the Organization’s actual rate of allowable indirect costs, as stated in the subrecipient agreement while a negotiated indirect cost rate was pending. As the negotiated rate was not completed, the Organization understands that the initial provisional rate was not applicable and the 10% de minimis rate applies from the inception of the award agreement. The Organization will charge the de minimis indirect rate to the project until a federally negotiated rate agreement is approved by the government.

Condition: In the monthly reimbursement requests, the supplies line item reflected budgeted amounts. In addition, the Organization’s reimbursement request process was not properly segregated. The same person performed the preparation and review functions. Criteria: For grants and cooperative agreements to non-Federal entities that are paid on a reimbursement basis, supporting documentation shows that the costs for which reimbursement was requested were paid prior to the date of the reimbursement request. Accounting functions should be properly segregated so that one employee is not performing every critical process. Cause: The Organization has not fully developed its reimbursement requests policies and procedures. Supplies were estimated in the requests because the actual receipts had not been received and recorded in its accounting system. Context: The Organization submitted 12 reimbursement requests to its pass-through entity. Questioned Cost: $1,950. Recommendation: We recommend the Organization include actual incurred expenses in its reimbursement requests. In addition, we recommend the Organization incorporate in its policies and procedures the proper segregation of duties so that the reimbursement request process is not limited to one employee. Views of Responsible Official and Planned Corrective Action: The Organization accepts and understands that detailed reimbursement policies and procedures should be fully developed and implemented, and actual expenditures should be billed. The Organization believes that the actual cost of supplies allocated to the project exceeded the questioned cost.