ADVENTIST DEVELOPMENT AND RELIEF AGENCY INTERNATIONAL

Finding 2021-001 (Significant deficiency in control compliance for allowable costs and activities) Federal Agency: United States Agency for International Development and United States Department of Agriculture CFDA Number: Various CFDA Name: All Federal Programs Award Numbers: All Federal Awards Award Year: Various Criteria: In accordance with ?200.302 Financial Management, a non-federal entity?s financial management systems, including records documenting compliance with federal statutes, regulations, and the terms and conditions of the federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the federal statutes, regulations, and the terms and conditions of the federal award. The financial management system of each non-federal entity must provide for the following: (1) Identification, in its accounts, of all federal awards received and expended and the federal programs under which they were received. (2) Accurate, current, and complete disclosure of the financial results of each federal award or program in accordance with the reporting requirements set forth in ?200.327 Financial Reporting and ?200.328 Monitoring and Reporting Program Performance. (3) Records that identify adequately the source and application of funds for federally-funded activities. (4) Effective control over, and accountability for, all funds, property, and other assets. Additionally, ?200.303 Internal Controls states that a non-federal entity must (a) establish 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 the terms and conditions of the federal award. Condition: The internal controls established for the monitoring of affiliated implementing partners to ensure federal award compliance were such that there is more than a remote likelihood that a misstatement of the affiliated implementing partners? financial statements would not be prevented or detected. Cause: Adventist Development and Relief Agency International?s audit committee is responsible for reviewing and ensuring that the organization has the appropriate structure, staffing, budget and capability to effectively carry out the internal audit responsibilities. Adventist Development and Relief Agency International experienced extensive employee turnover within the organization?s internal audit function during 2021. The employee turnover resulted in the organization having limited resources available to complete their monitoring functions. As a result only two internal audit reviews of federally funded grants being completed in 2021. Due to these unforeseen circumstances a formalized Master Audit Plan was not approved by the organization?s audit committee and ultimately was not implemented for the 2021 fiscal year. Effect: Without appropriate controls in place to review the activity of the affiliate implementing partners the organization is at risk of unallowable costs being charged to the grant. Question costs: $0 Recommendation: Adventist Development and Relief Agency International should implement procedures and controls to ensure that affiliated implementing partners activity is reviewed on a rotational basis each year. The approval and implementation of a Master Audit Plan to be completed by the organization?s internal audit function would help to ensure that the affiliated implementing partners are appropriately following OMB, USAID and other federal agency compliance requirements throughout the year. Management?s View: The Organization concurs with the facts of this finding and is implementing procedures to prevent this in the future. Sufficient staff has already been hired in 2021 in the Internal Audit department, to ensure adequate monitoring of affiliate implementing partners from now on.

Finding 2020-002 Considered a significant deficiency Criteria: Under the audit requirements of Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), auditees are required to submit the data collection form and the reporting package to the FAC within the earlier of 30 calendar days after receipt of the auditor?s report or nine months after the end of the audit period. Condition: Adventist Development and Relief Agency International's data collection form and the reporting package for the year ended December 31, 2019 were not submitted to the Federal Audit Clearinghouse (FAC) within a timely manner. Cause: The Organization initially submitted the data collection form to the Federal Audit Clearinghouse (FAC) on time, however, the audit was subsequently withdrawn and removed from the Federal Audit Clearinghouse resulting in the data collection form no longer being considered as a timely submission to the Federal Audit Clearinghouse. Effect: The Organization?s data collection form and reporting package were not submitted, as required under Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Question costs: $0 Recommendation: Adventist Development and Relief Agency International currently has procedures and controls in place to effectively monitor the status of the submission of the data collection form and the reporting package to ensure that the required information is submitted in a timely manner. The cause related to this finding was not due to failure in internal controls, therefore, we have no further recommendation for the Organization at this time. Management?s View: The Organization concurs with the facts of this finding and has procedures in place to ensure the timely submission of the data collection form and the reporting package.

Finding 2020-003 (Significant deficiency in control compliance for allowable costs and activities) Federal Agency: United States Agency for International Development CFDA Number: 98.001 CFDA Name: USAID foreign Assistance for Programs Overseas Award Numbers: 72-DFFP-19-GR-00066: Award period September 18, 2019 to September 30, 2020 72-DFFP-19-GR-00009: Award period February 4, 2019 to November 4, 2020 72-DFFP-20-GR-00075: Award period October 1, 2020 to September 30, 2021 Criteria: Allowable costs requirements contained in Title 2 U.S. Code of Federal Regulations Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards, Subpart E - Cost Principles, Section 200.403(e) requires that costs charged to Federal awards must be determined in accordance with generally accepted accounting principles (U.S. GAAP). Condition: The Organization's internal controls over allowable costs require that costs be reviewed and approved by the appropriate level of the internal control hierarchy of the Organization prior to being charged to the federal grant in accordance with U.S. GAAP, and that financial accounts be reconciled in order to charge costs to a Federal award timely. Of the 240 items tested for payroll and nonpayroll costs, we noted: - 4 nonpayroll instances in which the expenditure did not have documentation of the review process by the appropriate level within the internal control hierarchy - 1 payroll instance where an employee was paid a lower rate than what was stated in the contract - 1 payroll instance where an employee was underpaid based on the number of days worked Cause: The organization did not have consistently implement the controls in place to ensure that the expenditures were completely reviewed prior to being charged. Effect: Deficiencies in internal controls related to U.S. GAAP cost recognition could result in questioned costs under 2 CFR 200.403. Question costs: $0 Recommendation: Adventist Development and Relief Agency International should monitor and enforce its policies related to affiliate implementing partner activities. When areas of noncompliance are identified through monitoring, appropriate follow up should be performed to ensure that the affiliate implementing partner has corrected the internal control deficiencies. Management?s View: The Organization concurs with the facts of this finding and is implementing procedures to prevent this in the future.

Finding 2020-004 (Significant deficiency in control compliance for allowable costs and activities) Federal Agency: United States Agency for International Development and United States Department of Agriculture CFDA Number: Various CFDA Name: All Federal Programs Award Numbers: All Federal Awards Award Year: Various Criteria: In accordance with ?200.302 Financial Management, a non-federal entity's financial management systems, including records documenting compliance with federal statutes, regulations, and the terms and conditions of the federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the federal statutes, regulations, and the terms and conditions of the federal award. The financial management system of each non-federal entity must provide for the following: (1) Identification, in its accounts, of all federal awards received and expended and the federal programs under which they were received. (2) Accurate, current, and complete disclosure of the financial results of each federal award or program in accordance with the reporting requirements set forth in ?200.327 Financial Reporting and ?200.328 Monitoring and Reporting Program Performance. (3) Records that identify adequately the source and application of funds for federally-funded activities. (4) Effective control over, and accountability for, all funds, property, and other assets. Additionally, ?200.303 Internal Controls states that a non-federal entity must (a) establish 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 the terms and conditions of the federal award. Condition: The internal controls established for the monitoring of affiliated implementing partners to ensure federal award compliance did not operate as designed. Cause: The internal controls established for the monitoring of affiliate implementing partners to ensure federal expenditure completeness and accuracy did not operate as designed. Adventist Development and Relief Agency International has implemented monitoring procedures over the activities of its affiliated implementing partners. The procedures require internal audit to review the activities of the affiliated implementing partners on a rotational basis as designed through a Master Audit Plan. During 2020, the Organization?s Internal Audit function only performed 2 reviews of affiliate implementing partners out of 8 planned reviews for 2020. Effect: Without appropriate controls in place to review the activity of the affiliate implementing partners the Organization is at risk of unallowable costs being charged to the grant. Question costs: $0 Recommendation: Adventist Development and Relief Agency International should enforce its procedures and controls to ensure that affiliated implementing partners are performed in accordance with internal audit?s Master Audit Plan. This would help to ensure that the affiliated implementing partners are appropriately following OMB, USAID and other federal agency compliance requirements throughout the year Management?s View: The Organization concurs with the facts of this finding and is implementing procedures to prevent this in the future.

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