DEFENSEWERX, INC.

Criteria: 2 CFR Section 200.512(a) requires the reporting package and Data Collection Form (DCF) to be submitted to the Federal Audit Clearinghouse (FAC) by the earlier of 30 calendar days after the reports are received from the auditor or nine months after fiscal year-end. Condition: The Organization did not meet this filing requirements related to timely submission of the Single Audit reporting package for the fiscal year ended September 30, 2024. Cause: There has been turnover of key personnel involved in the financial reporting process that prevented the Organization from providing timely information for the completion of the audit. Effect: The Organization is not in compliance with the Uniform Guidance requirements regarding the filing of the Single Audit reporting package. Questioned Costs: None Recommendation: We recommend that management establish procedures to ensure monthly and year-end accounting activity, including various reconciliations, be performed and reviewed on a timely basis by appropriately experienced and trained personnel to alleviate potential delays and facilitate the completion of the audit on a timely basis. Views of Responsible Officials: See management’s view and corrective action plan at the end of this report.

Criteria: When Federal awards allow for advance payments, recipients must follow procedures to minimize the time lapsing between the transfer of funds from the Federal government and disbursement. Condition: The Organization requests funds from their partner agencies in advance with no written procedures in place to minimize the time between receipt of the Federal funds and the related disbursement of those funds. Cause: Historically, upon execution of annual partnership intermediary agreements, the Organization is instructed by the funding agency to request the full amount of the award at that time. These awards span anywhere from six months to a year in length. Effect: The Organization was not in compliance with the Uniform Guidance cash management requirements. Questioned Costs: None Context: The Organization has not established written policies and procedures to minimize the time elapsing between the transfer of funds from the Federal government and the related disbursement of those funds. Recommendation: The Organization should establish written policies and procedures for contracts which require cash advances and determine an appropriate length of time, or interval of funding, necessary for the Organization to operate at the appropriate level. Additionally, when possible, the Organization should operate its contracts on a cost reimbursement basis, with minimal cash advances. Views of Responsible Officials: See management’s view and corrective action plan at the end of this report.

Criteria: 2 CFR §200.313 requires that equipment be used in the program for which it was acquired or, when appropriate, other Federal programs. Equipment records shall be maintained, a physical inventory of equipment shall be taken at least once every two years and reconciled to the equipment records, an appropriate control system shall be used to safeguard equipment, and such equipment shall be adequately maintained. Condition: The Organization has not maintained adequate documentary evidence with respect to maintenance of equipment records and does not perform periodic inventories of equipment purchased with Federal funds. Cause: The Organization has not established entity-wide policies and procedures that require various hubs to uniformly follow the equipment management requirements. Effect: The Organization was not in compliance with the Uniform Guidance requirements equipment and real property management requirements. Questioned Costs: None Context: Each hub, or location, of the Organization maintains some form of records for equipment purchased with Federal funds. However, the inconsistency of the records between the locations has resulted in certain documentation of the required elements being incomplete. In addition, not every hub that has purchased equipment with Federal funds performs physical inventory counts for equipment, as required by the Uniform Guidance. Recommendation: The Organization should establish written policies and procedures that require equipment records to be maintained in accordance with Uniform Guidance. The policies and procedures should also require a physical inventory count for equipment purchased with Federal funds to be conducted, at least biannually. The Organization should also consider hiring additional personnel at the organizational level to facilitate implementation of these procedures and ensure compliance by the various hubs. Views of Responsible Officials: See management’s view and corrective action plan at the end of this report.

Criteria: Nonprofit organizations will use procurement procedures that conform to applicable Federal law and regulations and standards identified in 2 CFR §200.318. Condition: The Organization does not have written policies and procedures regarding procurement, suspension and debarment as required by the Uniform Guidance. Cause: The Organization has not established written policies and procedures for procurement that require the retention of documentary evidence of competitive solicitations of quotes or bids. Effect: The Organization was not in compliance with the Uniform Guidance procurement, suspension, and debarment requirements. Questioned Costs: None Context: The Organization could not provide documentary evidence to corroborate its compliance with the procurement requirements for a sample of expenditures charged to the Federal program. Recommendation: We recommend that management establish written formal policies and procedures that require purchasing staff to retain supporting evidence of the required solicitation methods (i.e., bids, quotes, sole source), documentation of management approval, and resulting outcomes. Such procedures should be implemented in conjunction with control activities for purchasing and cash disbursements. Views of Responsible Officials: See management’s view and corrective action plan at the end of this report.

Criteria: Federal awards may include staffing proposals that specify individuals who will work on the project and the extent of the planned involvement of personnel. The recipient may change the staffing mix and level of involvement, within limits specified by agency policy or in the award but may be required to obtain Federal awarding agency approval of changes in key personnel and changes in the project director’s time commitment/level of participation in the project. For Federal awards, this may include not only a change in the project director but also the disengagement from the project for more than three months, or a 25 percent reduction in time devoted to the project, by the approved project director. Condition: The Organization has not established written policies and procedures regarding approval of key personnel on projects funded with Federal awards. Cause: There has been a substantial number of new hires as well as turnover of management personnel throughout various levels of the Organization, which has partially delayed the planned implementation of control activities that would provide for approval of key personnel on projects funded with Federal awards. Effect: Identified controls over the Organization’s compliance with the Uniform Guidance requirements regarding special tests and provisions related to key personnel were not properly designed and implemented. Questioned Costs: None Context: We performed sample testing of partnership intermediary agreements in effect for the period under audit, which found no instances of changes in key personnel for the Federal program for which no supporting evidence could be provided. However, the Organization has not formally established written policies to ensure compliance with the Uniform Guidance requirements, which could indicate that no corrective action has been taken on this prior year audit finding. Recommendation: The Organization should implement written policies and procedures that require retention of documentary evidence of the awarding Federal agency’s approval of any changes in identified key personnel. The Organization should also consider establishing policies that facilitate maintaining records of specific key personnel identified in each of the various partnership intermediary agreements. Views of Responsible Officials: See management’s view and corrective action plan at the end of this report.

Criteria: 2 CFR §200.403 and §200.412–.415 require recipients to utilize consistent and equitable methods for allocating indirect costs to Federal programs. Condition: The Organization was unable to provide adequate supporting documentation to substantiate its allocation of indirect costs to various Federal award programs. Cause: The Organization has not established written policies and procedures regarding the methodology and allocation of indirect costs to Federal programs. Effect: The absence of a formal policy leads to an increased risk of inconsistent or non-compliant cost allocation practices, which may lead to questioned costs, audit findings, or indemnification of Federal awarding agencies. Questioned Costs: None Context: The Organization does not have formal or informal procedures in place to allocate indirect costs to Federal awards and other activities using a specific allocation method set forth in the Uniform Guidance. While performing testing over indirect costs, we proposed adjustments for allocated indirect costs based on rates approved by Federal awarding agencies. Recommendation: We recommend that management establish and implement a comprehensive indirect cost allocation policy that aligns with the requirements of the Uniform Guidance. The policy should clearly define the methodology for calculating, allocating, and applying indirect costs to Federal programs and other activities. Views of Responsible Officials: See management’s view and corrective action plan at the end of this report.

Criteria: 2 CFR §200.403 and §200.430 require all costs charged to Federal awards by recipients to be allowable, allocable, and adequately documented. Specifically, payroll costs must reflect actual time worked and be supported by appropriate review and approval processes. Condition: The Organization was unable to provide sufficient documentary evidence that all payroll-related costs were charged to Federal programs in compliance with the Uniform Guidance requirements. Cause: Due to staff turnover and vacancies, the Organization did not perform regular reconciliations of payroll records to the general ledger and accounting system throughout the year. Effect: Identified controls over the Organization’s compliance with allowed cost requirements for Federal award programs were not functioning as designed. Questioned Costs: None Context: As part of our follow-up procedures required by professional auditing standards with respect to prior year audit findings, we tested whether solutions were implemented by the Organization to address prior year identified deficiencies related to allocating payroll-related costs. Those follow-up procedures did not provide us with documentary evidence to support the assertion that corrective action was taken in the current year. This deficiency was discovered in the prior year as part of testing the Organization’s compliance with allocating indirect costs. The indirect cost allocation compliance requirement was not deemed to be direct and material to the Organization’s major Federal program for the period under audit. Recommendation: The Organization should adhere to its policies and procedures regarding supervisory review of documentation to support the allowability of costs charged to Federal award programs. Furthermore, we recommend that the individual performing reviews of documentation for allowable costs initial or sign off on such support to provide evidence of their actions. In addition, the Organization should review, and possibly revise, its policies and procedures for preventing or detecting and correcting unallowable costs charged to Federal programs to ensure consistent application of those policies and procedures to all costs charged to federal awards. Views of Responsible Officials: See management’s view and corrective action plan at the end of this report.

Criteria: 2 CFR §200.328 and §200.302 provides that recipients of Federal awards must submit performance and financial reports in a timely manner, ensure reports are accurate and reconcilable to financial records, and maintain documentation of control activities, including review procedures. Condition: The Organization was unable to provide sufficient documentary evidence that reports were reviewed and approved prior to their submission to Federal agencies. Cause: There has been a substantial number of new hires as well as turnover of management personnel throughout various levels of the Organization, which has partially delayed the planned implementation of control activities that would facilitate supervisory review and approval of all financial and performance reports submitted to Federal funding agencies. Effect: Required performance and financial reports were not submitted to Federal agencies on a timely basis throughout the year. This indicates that identified controls over the Organization’s compliance with the Uniform Guidance special tests and provisions requirements regarding performance and financial reporting are not properly designed and implemented. Questioned Costs: None Context: We performed procedures to test the Organization’s reporting practices related to federal awards. We selected a sample of required financial and performance reports submitted to federal awarding agencies for testing. The objective was to verify whether reports were submitted timely, accurately reflected accounting data, and included evidence of management review. During the testing, we were unable to obtain sufficient and appropriate documentary evidence to corroborate the Organization’s compliance with reporting requirements. We noted that some reports were not submitted before the stated deadline. In addition, substantial adjustments were required to reconcile some of the amounts reported to the Federal awarding agencies with the Organization’s accounting records. Recommendation: We recommend that management establishes and implements policies that provide for documentary evidence of supervisory review of reports required by Federal agencies to ensure the timely submission of accurate reports throughout the year. Additionally, we recommend that the management establishes control activities to facilitate the reconciliation of data reported to Federal awarding agencies to the Organization’s underlying accounting records. Views of Responsible Officials: See management’s view and corrective action plan at the end of this report.

Criteria: 2 CFR §200.430 states that incentive compensation is allowable if it is based on cost reduction, efficient performance, suggestion awards or safety awards to the extent that the overall compensation is determined to be reasonable and such costs are paid or accrued according to an agreement entered into in good faith between the recipient and the employees before services were rendered, or according to an established plan followed by the recipient so consistently as to imply, in effect, an agreement to make such payment. Condition: The Organization made incentive compensation payments to employees that lacked the elements required by the Uniform Guidance. Cause: The Organization did not establish written policies and procedures outlining the basis, criteria, and extent of incentive compensation payments before the services were rendered by employees. Effect: In the absence of written policies regarding incentive compensation, there is an increased risk of inconsistent or non-compliant cost allocation practices, which may lead to additional scrutiny, such as questioned costs, audit findings, or even indemnification of the Federal awarding agency for amounts expended on unallowable costs. Questioned Costs: $229,998 Context: The Organization made bonus payments to employees totaling $229,998 during the period under audit. The majority of these incentive compensation payments were allocated across several Federal awards as indirect costs despite the absence of written policies or an established plan that facilitates consistent application of indirect costs to both Federal and non-Federal activities. Recommendation: We recommend that management adopts written policies and procedures for making incentive compensation payments to employees for allowable purposes according to an established plan that contains the required elements set forth in the Uniform Guidance. Furthermore, we recommend that management obtains approval in advance from Federal awarding agencies regarding bonus compensation paid with Federal funds. Views of Responsible Officials: See management’s view and corrective action plan at the end of this report.

Criteria When federal awards allow for advance payments, recipients must follow procedures to minimize the time lapsing between the transfer of funds from the federal government and disbursement. Condition The Organization requests funds from their partner agencies in advance with no procedures in place to minimize the time between their drawdown and disbursement. Cause Historically, upon execution of annual partnership intermediary agreements, the Organization is instructed by the funding agency to request the full amount of the award at that time. These awards span anywhere from six months to a year in length. Effect The Organization is not in compliance with the cash management requirements. Questioned Costs None Context The Organization does not have procedures in place to minimize the time elapsing between the transfer of funds from the federal government and their disbursement. Recommendation The Organization should create a business plan for its contracts which require cash advances and determine an appropriate length of time or interval of funding necessary for the Organization to operate at the appropriate level. The Organization should then establish policies and procedures over the development of this business plan to evidence their procedures over cash management. Lastly, the Organization should operate its contracts on a cost reimbursement basis, with minimal advances, when possible. Views of Responsible Officials See the accompanying Corrective Action Plan.

Criteria OMB Circular A-110 requires that equipment be used in the program for which it was acquired or, when appropriate, other Federal programs. Equipment records shall be maintained, a physical inventory of equipment shall be taken at least once every two years and reconciled to the equipment records, an appropriate control system shall be used to safeguard equipment and equipment shall be adequately maintained. Condition The Organization does not have formal policies and procedures over the maintenance of equipment records and does not perform periodic inventories of equipment. Cause The Organization does not have entity-wide policies and procedures in place to require the different locations to, uniformly, follow the equipment management requirements. Effect The Organization is not in compliance with the equipment and real property management requirements. Questioned Costs None Context Each location of the Organization maintains some form of equipment records. However, not all of them contain the required elements: description, including serial number, source, who holds title, acquisition date and cost, percentage of Federal participation in the cost, location, condition and any disposition data. Also, not every location indicates when the last equipment inventory was conducted. Recommendation The Organization should create formal policies and procedures that require equipment records be maintained in accordance with Uniform Guidance. Those policies and procedures should also require an inventory of equipment be conducted, at least bi-annually. The Organization should also expand personnel at the Corporate level to allow for someone to follow up on these corrective actions and ensure compliance by the various locations. Views of Responsible Officials See the accompanying Corrective Action Plan.

Criteria Institutions of higher education, hospitals and other non-profit organizations will use procurement procedures that conform to applicable Federal law and regulations and standards identified in OMB Circular A-110 (2 CFR part 215). Condition The Organization does not have formal policies and procedures over procurement, suspension and debarment to ensure compliance with these requirements. Cause The Organization does not have formal policies and procedures over procurement which requires the retention of evidence of quotes and bids. Effect The Organization is not in compliance with the procurement, suspension or debarment requirements. Questioned Costs None Context The Organization could not provide evidence to support compliance with the procurement requirements for a sample of expenditures charged to the program. Recommendation The Organization should create formal policies and procedures that require employees overseeing the purchasing of items to retain evidence of the necessary bids, quotes and/or sole source documentation. Such documentation should be required for approval of these disbursements. Views of Responsible Officials See the accompanying Corrective Action Plan.

Criteria Applications/proposals or awards may include staffing proposals that specify individuals who will work on the project and the extent of the planned involvement of personnel. The non-Federal entity may change the staffing mix and level of involvement, within limits specified by agency policy or in the award, but may be required to obtain Federal awarding agency approval of changes in key personnel (as identified in the award, which may differ from the non-Federal entity’s designation in the application/proposal) and changes in the principal investigator’s/project director’s time commitment/level of participation in the project. For federal awards and cooperative agreements, this may include not only a change in the principal investigator or project director but also the disengagement from the project for more than three months, or a 25 percent reduction in time devoted to the project, by the approved project director or principal investigator. Condition The Organization does not have formal policies and procedures to determine whether key personnel involved in projects were approved by the underlying contract funding agency. The Organization represented that it did obtain verbal approval for changes in the key personnel. Cause The Organization does not have formal policies and procedures regarding approval of key personnel on projects funded via federal awards. Effect The Organization was not able to provide evidence that it was in compliance with the special tests and provisions over key personnel. Questioned Costs None Context We performed testing over partnership intermediary agreements in effect for the period under audit. The Organization was not able to provide evidence of the key personnel being approved by the funding agency as required by the agreements. Recommendation The Organization should create formal policies and procedures that require retention of evidence of the funders' approval of any changes in identified key personnel. The Organization should also add policies and procedures in place to maintain a listing of all key personnel identified in the various partnership intermediary agreements. Views of Responsible Officials See the accompanying Corrective Action Plan.

Criteria 2 CFR Sections 200.403 and 200.412–415 require non-federal entities to utilize consistent and equitable methods for allocating indirect costs to federal programs. Condition The Organization was unable to provide adequate support to substantiate its allocation of indirect costs to federal award programs. Cause The Organization does not have formal policies and procedures over procurement which requires the retention of evidence of quotes and bids. Effect Without a formal policy, there is an increased risk of inconsistent or noncompliant cost allocation practices, which may lead to questioned costs, audit findings, or disallowed reimbursements by federal awarding agencies. Questioned Costs None Context The Organization does not have procedures in place to allocate indirect costs to contracts. Auditor allocated costs based on allowed percentages as part of testing. Recommendation We recommend that management develop and implement a comprehensive indirect cost allocation policy that aligns with Uniform Guidance requirements. The policy should clearly define the methodology for calculating, allocating, and applying indirect costs to federal awards and be communicated to all relevant personnel. Views of Responsible Officials See the accompanying Corrective Action Plan.

Criteria 2 CFR Section 200.403 and Section 200.430 requires all costs charged to federal awards by nonfederal entities to be allowable, allocable, and adequately documented. Specifically, payroll costs must reflect actual time worked and be supported by appropriate review and approval processes. Condition The Organization was unable to provide documentary evidence that costs were charged to federal awards in compliance with the requirements of the Uniform Guidance. We identified multiple instances in which expenditures were charged to federal award programs for costs that were not allowable or documentation provided by the Organization lacked documentary evidence of review by appropriate individuals. Cause The supporting documentation for charging costs to federal awards provided by the Organization was not consistently reviewed on a timely basis by supervisory personnel. Effect Key controls over the Organization’s compliance with allowable cost requirements for federal award programs were not functioning as designed. Questioned Costs $12,814 Context There were six instances in which the Organization’s payroll hours charged to federal awards exceeded the 80-hour limit per individual per pay period and were not detected by employees. In addition, there were four instances in which the Organization was unable to provide any documentary evidence of review by supervisory personnel. The extrapolation of unallowable costs identified during sample testing to the related population resulted in projected likely questioned costs of $256,199 from a total population of approximately $10.1 million of related costs. Recommendation The Organization should adhere to its policies and procedures regarding supervisory review of documentation to support the allowability of costs charged to federal awards. Furthermore, we recommend that the personnel reviewing support for allowable costs initial or sign off on such support to provide evidence of their actions. In addition, the Organization should review, and possibly revise, its policies and procedures for preventing or detecting and correcting unallowable costs charged to federal awards to ensure consistent application of those policies and procedures to all costs charged to federal awards. Views of Responsible Officials See the accompanying Corrective Action Plan.

Criteria Per 2 CFR §200.328 and §200.302 of the Uniform Guidance, recipients of federal awards must submit performance and financial reports in a timely manner, ensure reports are accurate and reconcilable to financial records, and maintain documentation of internal controls including review procedures. Condition The Organization was unable to provide adequate documentary evidence that it complied with the reporting requirements of the Uniform Guidance. We noted that some reports were not submitted before the stated deadline. In addition, some adjustments were required to reconcile the amounts reported to the federal awarding agencies with the Organization’s accounting records. Cause The Organization’s system of internal control, including control activities, was inadequate to ensure timely submission of required reports or facilitate a reconciliation of reported amounts to the Organization’s accounting records. Additionally, the Organization was unable to provide documentary evidence that reports were reviewed by the appropriate personnel prior to their submission. Effect The lack of supervisory review of the required reports increases the risk of material noncompliance with the reporting requirements set forth in the Uniform Guidance. Furthermore, certain information reported to federal awarding agencies for the fiscal year under audit may be inaccurate or inconsistent with the Organization’s underlying accounting records. Questioned Costs None Context We performed procedures to test the Organization’s reporting practices related to federal awards. We selected a sample of required financial and performance reports submitted to federal awarding agencies for testing. The objective was to verify whether reports were submitted timely, accurately reflected accounting data, and included evidence of management review. During the testing, we were unable to obtain sufficient and appropriate documentary evidence to corroborate the Organization’s compliance with reporting requirements. Recommendation We recommend that management establishes and implements policies that provide for documentary evidence of review of reports required by federal awards by appropriate individuals to ensure the timely submission of required reports. In addition, we recommend that the Organization establishes controls to reconcile the data reported to federal awarding agencies to the Organization’s underlying accounting records. Views of Responsible Officials See the accompanying Corrective Action Plan.

Criteria When federal awards allow for advance payments, recipients must follow procedures to minimize the time lapsing between the transfer of funds from the federal government and disbursement. Condition The Organization requests funds from their partner agencies in advance with no procedures in place to minimize the time between their drawdown and disbursement.Cause Historically, upon execution of annual partnership intermediary agreements, the Organization is instructed by the funding agency to request the full amount of the award at that time. These awards span anywhere from six months to a year in length. Effect The Organization is not in compliance with the cash management requirements. Questioned Costs None Context The Organization does not have procedures in place to minimize the time elapsing between the transfer of funds from the federal government and their disbursement. Recommendation The Organization should create a business plan for its contracts which require cash advances and determine an appropriate length of time or interval of funding necessary for the Organization to operate at the appropriate level. The Organization should then establish policies and procedures over the development of this business plan to evidence their procedures over cash management. Lastly, the Organization should operate its contracts on a cost reimbursement basis, with minimal advances, when possible. Views of Responsible Officials See the accompanying Corrective Action Plan.

Criteria OMB Circular A-110 requires that equipment be used in the program for which it was acquired or, when appropriate, other Federal programs. Equipment records shall be maintained, a physical inventory of equipment shall be taken at least once every two years and reconciled to the equipment records, an appropriate control system shall be used to safeguard equipment and equipment shall be adequately maintained. Condition The Organization does not have formal policies and procedures over the maintenance of equipment records and does not perform periodic inventories of equipment. Cause The Organization does not have entity-wide policies and procedures in place to require the different locations to, uniformly, follow the equipment management requirements.Effect The Organization is not in compliance with the equipment and real property management requirements. Questioned Costs None Context Each location of the Organization maintains some form of equipment records. However, not all of them contain the required elements: description, including serial number, source, who holds title, acquisition date and cost, percentage of Federal participation in the cost, location, condition and any disposition data. Also, not every location indicates when the last equipment inventory was conducted. Recommendation The Organization should create formal policies and procedures that require equipment records be maintained in accordance with Uniform Guidance. Those policies and procedures should also require an inventory of equipment be conducted, at least bi-annually. The Organization should also expand personnel at the Corporate level to allow for someone to follow up on these corrective actions and ensure compliance by the various locations. Views of Responsible Officials See the accompanying Corrective Action Plan.

Criteria Institutions of higher education, hospitals and other non-profit organizations will use procurement procedures that conform to applicable Federal law and regulations and standards identified in OMB Circular A-110 (2 CFR part 215). Condition The Organization does not have formal policies and procedures over procurement, suspension and debarment to ensure compliance with these requirements. Cause The Organization does not have formal policies and procedures over procurement which requires the retention of evidence of quotes and bids. Effect The Organization is not in compliance with the procurement, suspension or debarment requirements.Questioned Costs None Context The Organization could not provide evidence to support compliance with the procurement requirements for a sample of expenditures charged to the program. Recommendation The Organization should create formal policies and procedures that require employees overseeing the purchasing of items to retain evidence of the necessary bids, quotes and/or sole source documentation. Such documentation should be required for approval of these disbursements. Views of Responsible Officials See the accompanying Corrective Action Plan.

Criteria Applications/proposals or awards may include staffing proposals that specify individuals who will work on the project and the extent of the planned involvement of personnel. The non-Federal entity may change the staffing mix and level of involvement, within limits specified by agency policy or in the award, but may be required to obtain Federal awarding agency approval of changes in key personnel (as identified in the award, which may differ from the non-Federal entity’s designation in the application/proposal) and changes in the principal investigator’s/project director’s time commitment/level of participation in the project. For federal awards and cooperative agreements, this may include not only a change in the principal investigator or project director but also the disengagement from the project for more than three months, or a 25 percent reduction in time devoted to the project, by the approved project director or principal investigator. Condition The Organization does not have formal policies and procedures to determine whether key personnel involved in projects were approved by the underlying contract funding agency. The Organization represented that it did obtain verbal approval for changes in the key personnel. Cause The Organization does not have formal policies and procedures regarding approval of key personnel on projects funded via federal awards. Effect The Organization is not able to provide evidence that it is in compliance with the special tests and provisions over key personnel. Questioned Costs None Context We performed testing over partnership intermediary agreements in effect for the period under audit. The Organization was not able to provide evidence of the key personnel being approved by the funding agency as required by the agreements. Recommendation The Organization should create formal policies and procedures that require retention of evidence of the funders' approval of any changes in identified key personnel. The Organization should also add policies and procedures in place to maintain a listing of all key personnel identified in the various partnership intermediary agreements. Views of Responsible Officials See the accompanying Corrective Action Plan.

Criteria Per 2 CFR § 200.403 and § 200.412–415 of the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), non-federal entities must have consistent and equitable methods for allocating indirect costs to federal programs. Condition The Organization was unable to provide adequate support to substantiate its allocation of indirect costs to federal awards. Cause The Organization does not have formal policies and procedures for the allocation and application of indirect costs to federal awards. Effect Without a formal policy, there is an increased risk of inconsistent or noncompliant cost allocation practices, which may lead to questioned costs, audit findings, or disallowed reimbursements by federal awarding agencies. Questioned Costs None Context The organization does not have procedures in place to allocate indirect costs to contracts. Auditor allocated costs based on allowed percentages as part of testing. Recommendation We recommend that management develop and implement a comprehensive indirect cost allocation policy that aligns with Uniform Guidance requirements. The policy should clearly define the methodology for calculating, allocating, and applying indirect costs to federal awards and be communicated to all relevant personnel. Views of Responsible Officials See the accompanying Corrective Action Plan.

Criteria The cash management compliance requirements in Part 3 of the OMB Compliance Supplement indicate recipients must follow procedures to minimize the time lapsing between the transfer of funds from the federal government and disbursement when awards are provided for in advance payments. Condition The Organization requests funds from their grantors in advance with no procedures in place to minimize the time between their drawdown and disbursement. Cause Historically, upon execution of annual grant agreements, the Organization was instructed by the grantor to request the full amount of the award at that time. These awards span anywhere from six months to a year in length. Effect The Organization is not in compliance with the cash management requirements. Questioned Costs None Context The Organization does not have procedures in place to minimize the time elapsing between the transfer of funds from the federal government and their disbursement. Recommendation The Organization should create a business plan for its grants which require cash advances and determine an appropriate length of time or interval of funding necessary for the Organization to operate at the appropriate level. The Organization should then establish policies and procedures over the development of this business plan to evidence their procedures over cash management. Lastly, the Organization should operate grants on a cost reimbursement basis, with minimal advances, when possible. Views of Responsible Officials See the accompanying Corrective Action Plan.

Criteria OMB Circular A-110 requires that equipment be used in the program for which it was acquired or, when appropriate, other Federal programs. Equipment records shall be maintained, a physical inventory of equipment shall be taken at least once every two years and reconciled to the equipment records, an appropriate control system shall be used to safeguard equipment and equipment shall be adequately maintained. Condition The Organization does not have formal policies and procedures over the maintenance of equipment records and does not perform periodic inventories of equipment. Cause The Organization does not have entity-wide policies and procedures in place to require the different locations to uniformly follow the equipment management requirements. Effect The Organization is not in compliance with the equipment and real property management requirements. Questioned Costs None Context Each location of the Organization maintains some form of equipment records. However, not all of them contain the required elements: description, including serial number, source, who holds title, acquisition date and cost, percentage of Federal participation in the cost, location, condition and any disposition data. Also, not every location indicates when the last equipment inventory was conducted. Recommendation The Organization should create formal policies and procedures that require equipment records be maintained in accordance with Uniform Guidance. Those policies and procedures should also require an inventory of equipment be conducted, at least bi-annually. The Organization should also expand personnel at the Corporate level to allow for someone to follow up on these corrective actions and ensure compliance by the various locations. Views of Responsible Officials See the accompanying Corrective Action Plan.

Criteria Institutions of higher education, hospitals and other non-profit organizations will use procurement procedures that conform to applicable Federal law and regulations and standards identified in OMB Circular A-110 (2 CFR part 215). Condition The Organization does not have formal policies and procedures over procurement, suspension and debarment to ensure compliance with these requirements. Cause The Organization does not have formal policies and procedures over procurement which requires the retention of evidence of quotes and bids. Effect The Organization is not in compliance with the procurement, suspension or debarment requirements. Questioned Costs None Context The Organization could not provide evidence to support compliance with the procurement requirements for a sample of expenditures charged to the program. Recommendation The Organization should create formal policies and procedures that require employees overseeing the purchasing of items to retain evidence of the necessary bids, quotes and/or sole source documentation. Such documentation should be required for approval of the related disbursements. Views of Responsible Officials See the accompanying Corrective Action Plan.

Criteria The special tests and provisions compliance requirements for the R&D Cluster found in Part 4 of the OMB Compliance Supplement indicate applications/proposals or awards may include staffing proposals that specify individuals who will work on the project and the extent of the planned involvement of personnel. The non-Federal entity may change the staffing mix and level of involvement, within limits specified by agency policy or in the award but may be required to obtain Federal awarding agency approval of changes in key personnel (as identified in the award, which may differ from the non-Federal entity’s designation in the application/proposal) and changes in the principal investigator’s/project director’s time commitment/level of participation in the project. For grants and cooperative agreements, this may include not only a change in the principal investigator or project director but also the disengagement from the project for more than three months, or a 25 percent reduction in time devoted to the project, by the approved project director or principal investigator. Condition The Organization does not have formal policies and procedures to determine and document if key personnel who were involved in projects were approved by the grantors. The Organization represented that it did obtain verbal approval for changes in the key personnel. Cause The Organization does not have formal policies and procedures over key personnel. Effect The Organization is not able to provide evidence that it is in compliance with the special tests and provisions over key personnel. Questioned Costs None Context We sampled one of the seven grant agreements in effect for the period under audit. The Organization was not able to provide evidence of the key personnel being approved by the funder as required by the grant agreement. Recommendation The Organization should create formal policies and procedures that require retention of evidence of the funders' approval of any changes in identified key personnel. The Organization should also add policies and procedures in place to maintain a listing of all key personnel identified in the various grant agreements. Views of Responsible Officials See the accompanying Corrective Action Plan.

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