Children's Defense FundNon-Profit

Finding 2023-002: Internal Controls over Allowable Costs Federal Department: U.S. Department of Education Pass-through Agencies: State of South Carolina Department of Education, Minnesota Department of Education, and DC Office of the State Superintendent of Education Federal Program Name: Twenty-First Century Community Learning Centers Assistance Listing Number: 84.287 Type of Finding:  Significant Deficiency in Internal Control over Compliance  Other Matters Criteria 2 CFR Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Subpart D – Post-Federal Award Requirements Standards Section 200.303, Internal controls states “The non-Federal” entity must: (1) establish, document, 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 terms and conditions of the Federal award. Section 200.430 (i) Standards for Documentation of Personnel Expenses states (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 of 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 compensated activities…; (v) Comply with the established accounting policies and practices of the non-federal entity…; (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 adjustments must be made such that the final amount charged to the federal award is accurate, allowable, and properly allocated. Condition/Context During the current audit period, CDF did not maintain adequate control over allowable costs related to its federally funded program. Exceptions were noted in 21 of 60 tested payroll expenditures:  For 16 payroll expenditures, we were not provided with any evidence of approval of allocations. We noted these allocations were based on budget estimates, instead of actual time and effort reporting.  For five payroll expenditures tested, we were not provided with any supporting documentation to determine if the expenditures were allowable. Exceptions were noted in nine of 60 non-payroll expenditures tested:  For six non-payroll expenditures tested, we were not provided with any evidence of approval of the overhead allocations. We reviewed the supporting documentation, and the expenditures are deemed allowable.  For three non-payroll expenditures tested, we were not provided with any supporting documentation to determine if the expenditure was allowable. Cause Based on our discussions with management, this finding occurred due to staff turnover. As a result, consistent documentation was not maintained to support the approval of expenditure allocations. Effect The failure to maintain adequate documentation to verify that expenditures are properly reviewed and approved and to maintain adequate supporting documentation to ensure all payroll and non-payroll expenditures are reasonable and properly reviewed is a violation of federal regulations, which could result in unallowed costs being charged to the federally funded program. Questioned Costs $42,119 Identification of Repeat Findings Repeated (Prior Finding No. 2022-001). Recommendation We recommend that CDF implement procedures to ensure all expenditure allocations are properly reviewed and approved and supporting documentation is maintained in accordance with federal regulations. Views of Responsible Officials and Corrective Action Plan CDF agrees with the finding and recommendation. See CDF’s Corrective Action Plan on pages 18-20.

Finding 2023-003: Cash Management Federal Department: U.S. Department of Education Pass-through Agencies: State of South Carolina Department of Education, Minnesota Department of Education, and DC Office of the State Superintendent of Education Federal Program Name: Twenty-First Century Community Learning Centers Assistance Listing Number: 84.287 Type of Finding:  Material Weakness in Internal Control over Compliance  Material Noncompliance (Modified Opinion) Criteria 2 CFR Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Subpart D – Post-Federal Award Requirements Standards Section 200.303, Internal controls states “The non-Federal” entity must: (1) establish, document, 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 terms and conditions of the Federal award. 2 CFR Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Subpart D – Post-Federal Award Requirements Standards Section 200.305, Federal Payments states “when the reimbursement method is used, the Federal agency or pass-through entity must make payment within 30 calendar days after receipt of the payment request unless the Federal agency or pass-through entity reasonably believes the request to be improper.” 2 CFR section 200.305(b)(3) requires that expenditures be incurred prior to the date of the reimbursement request. Condition/Context During the current audit period, CDF is not in accordance with federal regulations regarding the cash management requirements. Exceptions were noted in five of five tested reimbursement requests:  For all five requests, we were not provided with the evidence to support the reimbursement requests were internally reviewed and approved prior to submission.  For all five requests, we were not provided with adequate documentation to determine that expenditures were incurred prior to the date of the reimbursement request. We were only provided with system-generated expenditures reports, instead of actual invoices, payroll registers, and payment support. Cause Based on our discussions with management, this finding occurred due to staff turnover. As a result, consistent documentation was not maintained to trace the reimbursement submissions to pass-through entities. Effect The failure to maintain adequate documentation to verify the reimbursement request submissions to pass-through entities could result in duplicate submissions of reimbursement requests and delayed reimbursements. Questioned Costs Unable to determine. Identification of Repeat Findings Repeated (Prior Finding No. 2022-002). Recommendation We recommend that CDF implement procedures to ensure all reimbursement requests are properly reviewed and approved and submission documentation is maintained in accordance with federal regulations. Views of Responsible Officials and Corrective Action Plan CDF agrees with the finding and recommendation. See CDF’s Corrective Action Plan on pages 18-20.

Finding 2023-004: Reporting Federal Department: U.S. Department of Education Pass-through Agencies: State of South Carolina Department of Education, Minnesota Department of Education, and DC Office of the State Superintendent of Education Federal Program Name: Twenty-First Century Community Learning Centers Assistance Listing Number: 84.287 Type of Finding:  Material Weakness in Internal Control over Compliance  Material Noncompliance (Modified Opinion) Criteria The subgrant award agreement between State of South Carolina Department of Education (SCDE) and CDF – Scope of Work and Special Conditions states that “programs are required to submit quarterly (at a minimum) expenditure reports via the SCDE’s grants accounting processing system (GAPS)… In accordance with generally accepted accounting principles (GAAP), all expenditure reports for funds spent must be submitted to the SCDE by the specified deadline”. The subgrant award agreement between Minnesota Department of Education (MDE) and CDF states that “Financial Reporting Forms (FRF) summarizing grant expenditures to date, shall be submitted in the form and manner prescribed by MDE”. The subgrant award agreement between DC Office of the State Superintendent of Education (OSSE) and CDF states that “The grant recipient is responsible for complying with all reporting requirements, and grant recipients are required to maintain all necessary supporting documentation and to ensure such documentation is available to OSSE, the U.S. Department of Education and/or other authorized entities for review, upon request.” Condition/Context During the current audit period, CDF is not in accordance with federal regulations regarding the reporting requirements. During our review, we noted that CDF was required to submit both periodic financial and progress reports. We selected 12 reports (10 financial and two progress reports across all five grants) for testing. Exceptions were noted in eight of 12 tested reports: For five reports tested, we were not provided with evidence that the reports were properly reviewed or approved before submission. For eight reports tested, we were not provided with copies of the actual reports, including the related supporting documentation. We also were not provided with any evidence of submissions of such reports. Cause Based on our discussions with management, this finding occurred due to staff turnover. As a result, policies and procedures were not implemented consistently and correctly to ensure timely, complete, and accurate financial reporting with adequate supporting documentation. Effect Failure to submit reports in a timely manner impairs the grantor agency’s ability to monitor program activities and could result in the loss of grant funding. Also, the failure to maintain adequate supporting documentation could result in inaccurate reporting and is a violation of grantor(s) reporting requirements. Questioned Costs Not applicable. Identification of Repeat Findings Repeated (Prior Finding No. 2022-003). Views of Responsible Officials and Corrective Action Plan CDF agrees with the finding and recommendation. See CDF’s Corrective Action Plan on pages 18-20.

Finding 2023-005: Late Submission of Reporting Package Federal Department: U.S. Department of Education Pass-through Agencies: State of South Carolina Department of Education, Minnesota Department of Education, and DC Office of the State Superintendent of Education Federal Program Name: Twenty-First Century Community Learning Centers Assistance Listing Number: 84.287 Type of Finding:  Material Weakness in Internal Control over Compliance  Other Matters Criteria 2 CFR Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Subpart F – Audit Requirements, Section 200.512, Report submission, states “(a) General. (1) The audit, the data collection form, and the reporting package must be submitted within 30 calendar days after the auditee receives the auditor's report(s) or nine months after the end of the audit period (whichever is earlier). The cognizant agency for audit or oversight agency for audit (in the absence of a cognizant agency for audit) may authorize an extension when the nine-month timeframe would place an undue burden on the auditee. If the due date falls on a Saturday, Sunday, or Federal holiday, the reporting package is due the next business day.” Condition/Context CDF did not submit its Single Audit Package in a timely manner as required by federal regulations. The federal reporting deadline for CDF’s Single Audit Reporting Package for the year ended December 31, 2023, was September 30, 2024. As of the audit report date, CDF has not yet submitted its Single Audit Reporting Package. Cause Based on discussions with management, this finding occurred due to a disruption in the accounting platform because of staff turnover, which resulted in the financial and compliance audits being completed later than anticipated. Effect The late submission of the Single Audit Package is a violation of federal regulations and impairs grantor agencies’ ability to monitor federally funded program. As a result, CDF is designated a high-risk auditee until it accomplishes timely submission of its Single Audit Package for two consecutive years. Questioned Costs Not applicable. Identification of Repeat Finding Repeated (Prior Finding No. 2021-002 and 2022-004). Recommendation We recommend that CDF implement procedures to ensure timely completion and submission of its Single Audit Reporting Package in accordance with 2 CFR Part 200.512. Views of Responsible Officials and Planned Corrective Action CDF agrees with the finding and recommendation. See CDF’s Corrective Action Plan on pages 18-20.

Finding 2022–001: Internal Controls over Allowable Costs Federal Department: U.S. Department of Education Pass-through Agencies: State of South Carolina Department of Education, Minnesota Department of Education, and DC Office of the State Superintendent of Education Federal Program Name: Twenty-First Century Community Learning Centers Assistance Listing Number: 84.287 Type of Finding:  Significant Deficiency in Internal Control over Compliance  Other Matters Criteria 2 CFR Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Subpart D – Post-Federal Award Requirements Standards Section 200.303, Internal controls states “The non-Federal” entity must: (1) establish, document, 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 terms and conditions of the Federal award. Section 200.430 (i) Standards for Documentation of Personnel Expenses states (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 of 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 compensated activities…; (v) Comply with the established accounting policies and practices of the non-federal entity…; (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 adjustments must be made such that the final amount charged to the federal award is accurate, allowable, and properly allocated. Condition/Context During the current audit period, CDF did not maintain adequate control over allowable costs related to its federally funded program. Exceptions noted in 11 of 60 tested payroll expenditures:  For 11 payroll expenditures tested, we were not provided with any evidence of approval of the payroll allocations. We noted these allocations were based on budget estimates, instead of actual time and effort reporting. Exceptions noted in 23 of 60 non-payroll expenditures tested:  For 22 non-payroll expenditures tested, we were not provided with any evidence of approval of the overhead allocations. We reviewed the supporting documentation, and the expenditures are deemed allowable.  For one expenditure tested, we were not provided with any supporting documentation to determine if the expenditure was allowable. Cause Based on our discussions with management, this finding occurred due to staff turnover. This resulted in consistent documentation not maintained to support the approval of expenditure allocations. Effect The failure to maintain adequate documentation to verify that expenditures are properly reviewed and approved and to maintain adequate supporting documentation to ensure all payroll and non-payroll expenditures are reasonable and properly reviewed is a violation of federal regulations, which could result in unallowed costs being charged to the federally funded program. Questioned Costs $4,697 Identification of Repeat Findings Not a repeat finding.   Recommendation We recommend that CDF implement procedures to ensure all expenditure allocations are properly reviewed and approved and supporting documentation is maintained in accordance with federal regulations. Views of Responsible Officials and Corrective Action Plan CDF agrees with the finding and recommendation. See CDF’s Corrective Action Plan on pages 17-18.

Finding 2022–002: Cash Management Federal Department: U.S. Department of Education Pass-through Agencies: State of South Carolina Department of Education, Minnesota Department of Education, and DC Office of the State Superintendent of Education Federal Program Name: Twenty-First Century Community Learning Centers Assistance Listing Number: 84.287 Type of Finding:  Material Weakness in Internal Control over Compliance  Material Noncompliance (Modified Opinion) Criteria 2 CFR Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Subpart D – Post-Federal Award Requirements Standards Section 200.305, Federal Payments states “when the reimbursement method is used, the Federal agency or pass-through entity must make payment within 30 calendar days after receipt of the payment request unless the Federal agency or pass-through entity reasonably believes the request to be improper.” 2 CFR section 200.305(b)(3) requires that expenditures be incurred prior to the date of the reimbursement request. Condition/Context During the current audit period, CDF is not in accordance with federal regulations regarding the cash management requirements. Exceptions noted in 30 of 30 tested reimbursement requests:  For all 30 requests, we were not provided with adequate documentation to determine that expenditures were incurred prior to the date of the reimbursement request. We were only provided with system generated expenditures reports, instead of actual invoices, payroll registers, and payment support.  For one request, we did not receive any supporting documentation to substantiate the amount requested.  For two requests, we were not provided with the evidence to support the reimbursement requests were internally reviewed and approved prior to submission. Cause Based on our discussions with management, this finding occurred due to staff turnover. This resulted in consistent documentation not maintained to trace the reimbursement submissions to pass-through entities. Effect The failure to maintain adequate documentation to verify the reimbursement request submissions to pass-through entities could result in duplicate submissions of reimbursement requests and delayed reimbursements. Questioned Costs Unable to determine. Identification of Repeat Findings Not a repeat finding. Recommendation We recommend that CDF implement procedures to ensure all reimbursement requests are properly reviewed and approved and submission documentation is maintained in accordance with federal regulations.   Views of Responsible Officials and Corrective Action Plan CDF agrees with the finding and recommendation. See CDF’s Corrective Action Plan on pages 17-18.

Finding 2022–003: Reporting Federal Department: U.S. Department of Education Pass-through Agencies: State of South Carolina Department of Education, Minnesota Department of Education, and DC Office of the State Superintendent of Education Federal Program Name: Twenty-First Century Community Learning Centers Assistance Listing Number: 84.287 Type of Finding:  Material Weakness in Internal Control over Compliance  Material Noncompliance (Modified Opinion) Criteria The subgrant award agreement between State of South Carolina Department of Education (SCDE) and CDF – Scope of Work and Special Conditions states that “programs are required to submit quarterly (at a minimum) expenditure reports via the SCDE’s grants accounting processing system (GAPS)… In accordance with generally accepted accounting principles (GAAP), all expenditure reports for funds spent must be submitted to the SCDE by the specified deadline”. The subgrant award agreement between Minnesota Department of Education (MDE) and CDF states that “Interim Progress Report, summarizing grant activities and outcomes, including any data collected/requested related to the grant program, are due to MDE by the specified date” and that “Financial Reporting Forms (FRF) summarizing grant expenditures to date, shall be submitted in the form and manner prescribed by MDE”. Condition/Context During the current audit period, CDF is not in accordance with federal regulations regarding the reporting requirements. During our review, we noted that CDF was required to submit both quarterly financial and progress reports. We selected 36 reports (three quarterly financial and progress reports across all six grants) for testing and we were not provided with copies of the actual reports, including the related supporting documentation. We also were not provided with any evidence of submissions of such reports.   Cause Based on our discussions with management, this finding occurred due to staff turnover. This resulted in inconsistent and incorrect implementation of policies and procedures to ensure timely, complete, and accurate financial reporting with adequate supporting documentation. Effect Failure to submit reports in a timely manner impairs the grantor agency’s ability to monitor program activities and could result in the loss of grant funding. Also, the failure to maintain adequate supporting documentation could result in inaccurate reporting and is a violation of grantor(s) reporting requirements. Questioned Costs Not applicable. Identification of Repeat Findings Not a repeat finding. Views of Responsible Officials and Corrective Action Plan CDF agrees with the finding and recommendation. See CDF’s Corrective Action Plan on pages 17-18.

Finding 2022–004: Late Submission of Reporting Package Federal Department: U.S. Department of Education Pass-through Agencies: State of South Carolina Department of Education, Minnesota Department of Education, and DC Office of the State Superintendent of Education Federal Program Name: Twenty-First Century Community Learning Centers Assistance Listing Number: 84.287 Type of Finding:  Material Weakness in Internal Control over Compliance  Other Matters   Criteria 2 CFR Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Subpart F – Audit Requirements, Section 200.512, Report submission, states “(a) General. (1) The audit, the data collection form, and the reporting package must be submitted within 30 calendar days after the auditee receives the auditor's report(s) or nine months after the end of the audit period (whichever is earlier). The cognizant agency for audit or oversight agency for audit (in the absence of a cognizant agency for audit) may authorize an extension when the nine-month timeframe would place an undue burden on the auditee. If the due date falls on a Saturday, Sunday, or Federal holiday, the reporting package is due the next business day.” Condition/Context CDF did not submit its Single Audit Package in a timely manner as required by federal regulations. The federal reporting deadline for CDF’s Single Audit Reporting Package for the year ended December 31, 2022, was September 30, 2023. As of the audit report date, CDF has not yet submitted its Single Audit Reporting Package. Cause Based on discussions with management, this finding occurred due to disruption in the accounting platform because of staff turnover, which resulted in the financial and compliance audits being completed later than anticipated. Effect The late submission of the Single Audit Package is a violation of federal regulations and impairs grantor agencies’ ability to monitor federally funded program. As a result, CDF is designated a high-risk auditee until it accomplishes timely submission of its Single Audit Package for two consecutive years. Questioned Costs Not applicable. Identification of Repeat Finding Repeated (Prior Finding No. 2021-002). Recommendation We recommend that CDF implement procedures to ensure timely completion and submission of its Single Audit Reporting Package in accordance with 2 CFR Part 200.512. Views of Responsible Officials and Planned Corrective Action CDF agrees with the finding and recommendation. See CDF’s Corrective Action Plan on pages 17-18.

Finding 2021-002: Reportable Finding Considered a Material Weakness ? Noncompliance with Report Submission Requirements Program Name: 21st Century Community Learning Assistance listing #: 84.287C Federal Award Number: S287C170008; S287C1700023; S287C160041 Federal Award Year: 2021 Federal Awarding Agency: U.S. Department of Education Compliance Requirement: Report Submission Criteria: According to 2 CFR 200.512(a)(1) the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's reports or nine months after the end of the audit period. Condition: The auditee experienced staffing changes throughout the fiscal year ending September 30, 2021, resulting in some financial reporting positions being replaced or absorbed, as well as broad restructuring of the auditee?s financial reporting team. As a result, audit fieldwork was delayed by greater than four months, and during the audit, appropriate audit evidence to support financial information was not obtained until later than nine months after the end of the audit period. Cause: Staffing changes and restructuring contributed to audit delays. These changes and restructuring resulted in inconsistent and incorrect implementation of policies and procedures to ensure timely, complete, and accurate financial reporting with adequate supporting documentation. Effect: According to 2 CFR 200.512(a)(1) reports must be submitted within nine months after the end of the audit period. Staffing and restructuring changes resulted in significant delays in financial reporting processes and audit preparedness, and the organization was not able to achieve compliance with the federal regulations related to report submissions. Repeat Finding: Not a repeat finding. Recommendation: We recommend increasing staffing and financial expertise in the organization?s financial reporting team, including a Chief Financial Officer or Controller with knowledge and experience with generally accepted accounting principles and compliance related to federal awards. It is important that this condition be remediated as soon as possible. The significant delay in providing complete financial information raises concerns about the timing of reporting for subsequent periods.

Criteria: Costs should conform to any limitations or exclusions set forth in 2 CFR 200, subpart E, or in the federal award as to types or amount of allowed items. Under CFR section 200.437 employee morale costs are excluded from allowable costs. Condition: During testing we noted three instances of expenses charged to 21st Century Community Learning- CFDA 84.287C, Grant S287C170023 for employee morale which were not identified during review by program managers or management. Context: Internal controls were not in place to identify unallowable costs totaling $165.97 related to employee morale, which is now excluded under CFR section 200.437. These costs were not explicitly excluded under the former OMB A-122 standards. Additional procedures were performed to examine compliance and controls over compliance related to allowability of costs, and no additional instances of noncompliance were noted. Cause: We noted there was no policy in place surrounding entertainment or employee morale expenses and CDF staff were not fully aware of the updated allowability exclusions. Effect: There were charges to the grant that were not allowable as a result of management not having a clear understanding or communicating to staff about what expenses were excluded from allowable expenses. Recommendation: Aronson recommends maintaining updated policies relating to federal grant expenditures based on the most recent guidance and providing training and communications regarding these policies to staff when incurring and reviewing expenses on federal awards.

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