CAPITAL REGION MINORITY SUPPLIER DEVELOPMENT COUNCIL, INC.Non-Profit

Finding Reference 2024-002: Inaccurate SEFA Reporting Federal Agency: U.S. Department of Commerce Compliance Requirement: Reporting Federal Program: 11.034 - MBDA Business Center- Capital Readiness Program Grant Award: MB23OBD8020301 Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Matters Condition/Context: SEFA provided for audit did not accurately reflect federal expenditures for the Capital Readiness Program as of year-end. Specifically, the SEFA was not reconciled to the underlying financial statements, and differences were noted between reported federal expenditures, receivables, and deferred revenue balances. Criteria: Per 2 CFR 200.510(b), auditees must prepare a SEFA for the period being audited that accurately reflects federal award expenditures and is supported by the accounting records. The SEFA should reconcile to the financial statements. Cause: The SEFA was prepared using incomplete or inaccurate information and was not reconciled to the financial records prior to submission for audit. Effect: Failure to prepare an accurate SEFA increases the risk of audit adjustments, delays in completing the audit, and potential noncompliance with Uniform Guidance reporting requirements. Questioned Costs: None Recommendation: We recommend that CRMSDC implement stronger year-end closing and review procedures to ensure that grant revenue, deferred revenue, and receivables are accurately recorded. SEFA preparation should include a reconciliation process to the general ledger and supporting schedules to ensure completeness and accuracy. Views of Responsible Officials and Planned Corrective Actions: See Corrective Action Plans section.

Finding Reference 2024-003: Insufficient Non-Federal Share Federal Agency: U.S. Department of Commerce Compliance Requirement: Matching, Level of Efforts, Earmarking Federal Program: 11.034 - MBDA Business Center- Capital Readiness Program Grant Award: MB23OBD8020301 Type of Finding: Significant Deficiency in Internal Control over Compliance Condition/Context: CRMSDC reported $191,585 in matching expenditures for Grant Year 1. However, the supporting documentation provided totaled only $114,473, which did not align with the categories in the approved matching budget of $189,250. Reported costs included expenditures outside of approved categories and did not reconcile to the grant agreement requirements. As a result, there was a shortfall of $74,777 in the required non-federal share. Criteria: In accordance with 2 CFR §200.306, cost sharing or matching contributions must be verifiable from the recipient’s records, necessary and reasonable for the program, and must meet the amounts and categories established in the approved award budget. Cause: CRMSDC did not establish adequate procedures to ensure that matching expenditures were tracked and reported in accordance with approved budget categories and amounts. Further, management did not seek or obtain prior approval from the awarding agency for any modification or waiver of the matching requirement. Effect: As a result, CRMSDC did not fully meet the required non-federal share. This noncompliance exposes the organization to potential disallowance of costs, repayment of federal funds, or other administrative actions by the awarding agency. Questioned Costs: $74,777 32 CAPITAL REGION MINORITY SUPPLIER DEVELOPMENT COUNCIL, INC. SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED DECEMBER 31, 2024 – (CONTINUTED) Recommendation: We recommend that CRMSDC strengthen its monitoring controls and procedures to ensure compliance with matching requirements. Specifically, management should: • Implement periodic reviews (e.g., quarterly) to compare actual contributions against the required match amounts and approved budget categories. • Maintain detailed and verifiable documentation for all matching costs. • Provide training to staff responsible for grant compliance on Uniform Guidance and award-specific requirements. • Seek timely approval from the awarding agency for any modifications to budget categories or matching requirements. • Develop and implement a corrective action plan to address the identified shortfall and to prevent recurrence in future grant periods. Views of Responsible Officials and Planned

Finding Reference 2023-001: Federal Agency: U.S. Department of Commerce Compliance Requirement: Allowable Costs Federal Program: 11.805 - MBDA Business Center-Coronavirus Recovery/Relief Grant Award: MB22OBD8050257 Type of Finding: Significant Deficiency in Internal Control over Compliance Other Matters Condition/Context: For some employees working under the coronavirus grants, payroll costs charged to the grant were based on budgeted amounts rather than actual hours worked per submitted timesheets. Criteria: 2 CFR 200.430(i) states that charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. Cause: CRMSDC's internal controls over payroll charging practices for the federal program were not properly implemented to ensure that payroll costs were allocated to the program in accordance with the actual work performed by employees. Effect: CRMSDC's actual payroll costs per timesheets may be less than the amount budgeted and charged to the grant. Questioned Costs: Unable to determine. Recommendation: We recommend CRMSDC implement proper internal controls to ensure payroll costs are allocated to the program in accordance with the actual work performed by employees. Views of Responsible Officials and Planned Corrective Actions: See Corrective Action Plans section

Federal Agency: U.S. Department of Commerce Compliance Requirement: Period of Performance Federal Program: 11.805 - MBDA Business Center-Coronavirus Recovery/Relief Grant Award: MB21OBD8050183 Condition/Context: During FY2022, CRMSDC purchased a software subscription used to help MBEs locate state and local contract opportunities. The subscription period was from June 28, 2022 through June 27, 2023; however, the federal award ended on June 30, 2022. Thus, the benefits of the subscription service purchased under the award were received outside the grant?s period of performance. Criteria: 2 CFR Part 200 of the Uniform Guidance requires that a non-Federal entity may charge only allowable costs incurred during the approved budget period of a federal award?s period of performance. Cause: The organization did not obtain written approval from the federal funding source to purchase a yearly subscription at the end of the period of performance for the federal award. Effect: Since the charge was incurred outside of the grant?s period of performance, the federal award did not receive the benefit of the subscription service. Questioned Costs: The total software subscription cost selected for testing and charged to the federal award program was $25,000. Recommendation: We recommend that management enhance procedures to ensure that costs recorded during the latter part of a grant are incurred within the period of performance unless written approval is obtained from the funding source. Views of Responsible Officials and Planned Corrective Actions: See Corrective Action Plans section.

Federal Agency: U.S. Department of Commerce Compliance Requirement: Allowable Costs Federal Program: 11.805 - MBDA Business Center-Coronavirus Recovery/Relief Grant Award: MB21OBD8050183 Condition/Context: For some employees working under the coronavirus grants, timesheets were submitted and approved several months after the grant period ended. As a result, payroll costs charged to the grant were based on budgeted amounts rather than actual hours worked per timely submitted timesheets. Criteria: 2 CFR 200.430(i) states that charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. Timesheets must be submitted and approved in a timely manner. Cause: CRMSDC's internal controls over payroll charging practices for the federal program were not properly implemented to ensure timesheets were completed and approved promptly. Effect: CRMSDC's actual payroll costs per the late timesheets exceeded the budgeted amount charged to the grant. Questioned Costs: No overcharge costs resulted since CRMSDC charged less than actual supported costs. Recommendation: We recommend CRMSDC implement proper internal controls to ensure timesheets are completed, submitted, reviewed, and approved prior to payroll processing and charging payroll costs to the federal program. Supervisors should be required to review timesheets for appropriateness and accuracy. Views of Responsible Officials and Planned Corrective Actions: See Corrective Action Plans section

Federal Agency: U.S. Department of Commerce Compliance Requirement: Period of Performance Federal Program: 11.805 ? MBDA Business Center Program Grant Award: MB16OBD8050026 Condition/Context: During FY2021, CRMSDC purchased a software subscription used to help MBEs locate state and local contract opportunities. The subscription period was from June 28, 2021 through June 27, 2022; however, the federal award ended on June 30, 2021. Thus, the benefits of the subscription service purchased under the award were received outside the grant?s period of performance. Criteria: 2 CFR part 200 of the Uniform Guidance requires that a non-Federal entity may charge only allowable costs incurred during the approved budget period of a federal award?s period of performance. Cause: The organization did not obtain written approval from the federal funding source to purchase a yearly subscription at the end of the period of performance for the federal award. Effect: Since the charge was incurred outside of the grant?s period of performance, the federal award did not receive the benefit of the subscription service. Questioned Costs: The total software subscription cost selected for testing and charged to the federal award program was $25,000. Recommendation: We recommend that management enhance procedures to ensure that costs recorded during the latter part of a grant are incurred within the period of performance unless written approval is obtained from the funding source. Views of Responsible Officials and Planned Corrective Actions: See Corrective Action Plans section

Federal Agency: U.S. Department of Commerce Compliance Requirement: Allowable Costs Federal Program: 11.805 ? COVID-19 MBDA Business Center Program Grant Award: MB21OBD8050183 Condition/Context: During FY2021, CRMSDC charged the federal award program with consultant costs related to work products associated with CRMSDC?s grant submissions to various funding sources. The services provided by the consultant were not in accordance with the program objectives and terms and conditions of the federal award. Criteria: 2 CFR Part 200.403 of the Uniform Guidance requires that all costs conform to any limitations or exclusions set forth in the cost principals or in the federal award program as to type or amount of cost items. Cause: Consultant invoices were incorrectly charged against a federal grant by a part-time employee new to the process. Effect: The consultant expenses charged to the program were not in the award budget under an approved program objective. Questioned Costs: The total consultant costs selected for testing was $3,500. Total consultant costs charged to the federal award program was $6,500. Recommendation: We recommend that management be mindful that the costs charged to a federal award program should be in accordance with the program objectives and terms and conditions of the federal award. Views of Responsible Officials and Planned Corrective Actions: See Corrective Action Plans section

Finding Reference: 2019-002 Federal Agency: U.S. Department of Commerce Compliance Requirement: Activities Allowed, Allowable Costs (Non-Payroll) Type of Finding: Significant Deficiency in Internal Control over Compliance Federal Program: 11.802 ? Federal Procurement Center Grant Grant Award: MB16OBD802049 Condition/Context: CRMSDC?s approved grant budget included $157,262 of salary costs and $52,164 of fringe benefit costs associated with two (2) salaried Business Consultant positions. Additionally, the approved budget for contractual costs consisted only of $68,500 of contractual costs which were to be part of CRMSDC?s Non-Federal share contribution for the award. CRMSDC did not hire Business Consultants and instead entered into contractual relationships with various companies to achieve the desired project outcomes. An approved budget modification or written approval from the funding source to reprogram salary and related fringe benefit dollars to the contractual line item of the budget was not maintained or provided for the expenditures associated with contracts with various consultants which were charged to the grant as contractual expenses. Nine (9) of the 40 transactions selected for testing were documented consultant costs charged to the grant. Criteria: 2 CFR part 200.403 of the Uniform Guidance requires that all costs conform to any limitations or exclusions set forth in the cost principals or in the federal award program as to type or amount of cost items. Cause: The Organization did not maintain or provide sufficient documentation such as written approval from the federal funding source to reprogram certain salary and related costs to the consultant cost category when deciding to achieve programmatic objectives with the use of consultants in lieu of salaried employees. Effect: Consultant expenses charged to the program were not in the award budget as an approved cost category. Questioned Costs: The total consultant costs selected for testing was $48,500. Total consultant costs charged to the federal award program was $168,915. Recommendation: If allowable activities are to be performed by consultants instead of employees of the Organization, we recommend that management maintain written approval from the federal funding source to modify the proposed grant budget and reprogram salary and fringe benefit costs proposed to the consultant budget line. Views of Responsible Officials and Planned Corrective Actions: See Corrective Action Plans section

Finding Reference: 2019-003 Federal Agency: U.S. Department of Commerce Compliance Requirement: Activities Allowed, Allowable Costs (Non-Payroll) Type of Finding: Significant Deficiency in Internal Control over Compliance Federal Program: 11.802 ? Federal Procurement Center Grant Grant Award: MB16OBD802049 Condition/Context: Management did not provide sufficient documentation for three (3) of the 40 transactions selected for testing. Criteria: 2 CFR part 200 of the Uniform Guidance requires that all costs under federal award programs ?be adequately documented.? Cause: Sufficient documentation was not maintained by management for various expenditures under the federal award programs. Effect: It could not be determined if certain expenditures were for activities/costs allowable under grant and general federal award requirements. In addition, it could not be verified if these costs were accurately included in the schedule of expenditures of federal awards. Questioned Costs: The total amount charged to the federal award programs for the above transactions was $740. Recommendation: We recommend that management require supporting invoices and other documentation be maintained for all expenditures charged to the federal award programs, including those related to credit card purchases and ACH payments. Views of Responsible Officials and Planned Corrective Actions: See Corrective Action Plans section

Finding Reference: 2019-004 Federal Agency: U.S. Department of Commerce Compliance Requirement: Reporting Type of Finding: Significant Deficiency in Internal Control, Noncompliance Federal Program: Impacts All Federal Award Programs Grant Award: Various Condition/Context: The single audit report was not submitted to the Office Management and Budget in accordance with the reporting requirement. Criteria: COSO/Internal Control Framework defines control activities as ?policies and procedures that help ensures management?s directives are carried out? This would include preparation of the Schedule of Expenditures of Federal Awards and the related Data Collection Form in a timely manner. Uniform Guidance 2 CFR 200.501 states that the audit shall be completed, and the data collection form shall be submitted within the earlier of 30 days after the receipt of the auditor?s report, or nine months after the end of the audit period. In June 2020, OMB issued memorandum M-20-26 extending the single audit filing date as a direct result of the COVID 19 crisis. Accordingly, audits with normal due dates of September 30, 2020 (fiscal years ending December 31, 2019) would have an extension up to three (3) months beyond the normal due date or December 31, 2020. Cause: The single audit report was not submitted due to significant delays in year-end closing entries, schedules, and reconciliations. Effect: As a result of the finding, the Organization did not provide required information to its federal oversight agency in a timely manner. Questioned Costs: None Recommendation: We believe that the year-end closing process could proceed in a timely manner by adhering to a closing schedule and maintaining timely account reconciliations. Progress should be monitored by management to determine that due dates are being met and required reports are submitted to regulatory agencies within the compliance time frame. Views of Responsible Officials and Planned Corrective Actions: See Corrective Action Plans section

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