HENRY L. STIMSON CENTER (THE)Non-Profit

Finding 2023-002: Sub-recipients Federal Program: Assistance Listing Number 19.124 Criteria: As noted in 2 CFR 200.331 part (d): Monitor the activities of the sub-recipient as necessary to ensure that the sub-award is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions for the sub-award; and that sub-award performance goals are achieved. Condition: During our audit, we noted that the Center does not have updated policies and procedures in place for monitoring sub-recipients to be in compliance with 2 CFR 200.331. We also noted the pre-award risk assessment procedures were not properly documented. Lastly, we noted the Center did not perform the FFATA (Federal Funding Accountability and Transparency Act) reporting requirements. Cause: The Center does not have updated policies and procedures in place to be in compliance with monitoring activities of their sub-recipients. During 2023, the Center's finance department turned over significantly, resulting in oversight of the compliance requirement. Our audit procedures consisted of substantive testwork over a sample of sub-recipient expenditures. We consider our sample to representative of the population. Effect or Potential Effect: The Center could inadvertently engage in relationships with subrecipients of higher risk without the appropriate level of oversight (monitoring) to ensure subrecipients are expending funds in accordance with the provisions and terms of the subaward. Questioned Costs: None noted. Context: The Center failed to properly document its due diligence with respect to risk assessment procedures and FFATA reporting requirements. Identification as a Repeat Finding, if Applicable: 2022-001 Recommendation: As a result, we concluded that certain enhancements would add value to the Center’s due diligence with respect to its monitoring processes, and the following are our recommendations (of activities/documents that should be performed/maintained by the Center: - Enhance pre-award risk assessment; an evaluation and assignment of level of the financial (and programmatic) risk associated with the intended recipient/grantee for the purpose of determining the expected level of oversight and monitoring during the period of performance. - Enhance documentation of evidence of an evaluation process with respect to the identification of the prospective recipient. - A regularly documented review process with respect to periodic financial reports received from grantees. - An evaluation of the need for a periodic site visit. - Receipt of the grantee’s annual audit reports, if available (to ensure there are no weaknesses or deficiencies in internal control during the grant period). If there are deficiencies that directly affect the program, then a corrective action plan be established. - The Center will need to evaluate the FFATA reporting requirements and comply with the act.

Finding 2023-003: Salaries and Wages (Allowable Costs) Federal Programs: All programs Criteria: According to 2 CFR Section 200.430(i), charges to Federal grants for salaries and wages must be based on records that accurately reflect the work performed and the 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; iv. Encompass Federally-assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity’s written policy; v. Comply with the established accounting policies and practices of the non-Federal entity; vi. [Reserved] vii. Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. viii. Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards.” Condition: The Center has a timekeeping system in place that provides for employees to record hours worked to specific cost objectives, including to US Government grants. However, we noted one instance the allocation amount as per the timekeeping system with the applicable compensation amount paid to the employee was different from the amounts ultimately recorded within the Center's general ledger. While the difference was not significant, this discrepancy indicate a deficiency in the internal controls around recording of salary expenditures to projects. We also noted the Center changed the payroll allocation methodology during the year under audit but this change was not documented in the policies and procedures. We also did not obtain evidence for review and approval of several payroll registers. Cause: During 2023, the Center's finance department turned over significantly, resulting in oversight of some the salary and wages procedures. Effect or Potential Effect: Salary expenditures that are not charged in accordance with the standards referenced above may be questioned or disallowed by the donor. Questioned Costs: Undetermined Context: This is a condition identified per review of the Center's compliance with the specified requirements using a statistically valid sample. Identification as a Repeat Finding: Not applicable. Recommendation: We recommend that management revisit its procedures for transferring data from the timekeeping system to the general ledger and implement proper internal controls to ensure that the amounts of salary expenditures charged to projects in the general ledger reconcile to the amounts calculated by the timekeeping system and current wages and salaries.We also recommend the payroll registers be reviewed and approved by management immediately upon receipt; any discrepancies or issues must be addressed with the accounting department within a timely period following the close of the payroll period. We also recommend that any change in the payroll allocation methodology be formalized in writing and incorporated into the accounting policies and procedures manual.

Finding 2023-004: Suspension and Debarment Federal Programs: All programs Criteria: As stated in 2 CFR §200.303, the non-Federal entity (i.e. the Center) must 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 terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or in the “Internal Control Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). According to 2 CFR §200.214, the non-Federal entity is subject to the non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, 2 CFR part 180. The regulations in 2 CFR part 180 restrict awards, subawards, and contracts with certain parties that are debarred, suspended, or otherwise excluded from or ineligible for participation in Federal assistance programs or activities. Condition: During our audit, we noted several cases in which the Center did not perform, or did not maintain proper support to demonstrate that it performed checks via SAM.gov to ensure that potential vendors, contractors, or consultants are suspended or debarred. The failure to screen such parties increases the possibility that U.S. Government funds may inadvertently be provided to individuals or organizations deemed to be excluded by the U.S. Government. Cause: During 2023, the Center's finance department turned over significantly, resulting in oversight of the compliance requirement. Effect or Potential Effect: The Center is exposed to an increased risk that future noncompliance could occur by entering into transactions with vendors, contractors, or consultants that are suspended and debarred. If a non-Federal entity knowingly does business with an excluded person, the agency responsible for the Center's funding may disallow costs, annul or terminate the transaction, issue a stop work order, debar or suspend the non-Federal entity, or take other remedies as appropriate. Questioned Costs: None noted. Context: The Center failed to perform and/or properly document its due diligence with respect to these requirements. The issue is considered systemic in nature. Identification as a Repeat Finding: Not applicable. Recommendation: We recommend the Center implement internal controls to ensure that all vendors, contractors, and consultants are screened for suspension and debarment prior to entering into any executed contract. We further recommend that a policy be formalized and implemented that requires an annual screening of any current vendors, contractors, or consultants as well.

Finding 2023-005: Procurement Federal Program: 19.124 Criteria: According to 2 CFR §200.303, the 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. These internal controls should be in compliance with guidance in Standards for Internal Control in the Federal Government issued by the Comptroller General of the United States or the internal Control Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Additionally, according to 2 CFR §200.318 Procurement standards, the non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Title 2, Subtitle A Chapter II Part 200 Subpart D 200.319 Procurement Standards. All procurement transactions for the acquisition of property or services required under a Federal award must be conducted in a manner providing full and open competition consistent with the standards of this section and §200.320. The non-Federal entity must have written procedures for procurement transactions. These procedures must ensure that all solicitations: (1) Incorporate a clear and accurate description of the technical requirements for the material, product, or service to be procured. Such description must not, in competitive procurements, contain features which unduly restrict competition. The description may include a statement of the qualitative nature of the material, product or service to be procured and, when necessary, must set forth those minimum essential characteristics and standards to which it must conform if it is to satisfy its intended use. Noncompetitive procurements can only be awarded in accordance with §200.320(c). According to 2 CFR §200.320 Procurement Standards, there are specific circumstances in which noncompetitive procurement can be used. Noncompetitive procurement can only be awarded if one or more of the following circumstances apply: 1. The acquisition of property or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold (see paragraph (a)(1) of this section); 2. The item is available only from a single source; 3. The public exigency or emergency for the requirement will not permit a delay resulting from publicizing a competitive solicitation; 4. The Federal awarding agency or pass-through entity expressly authorizes a noncompetitive procurement in response to a written request from the non-Federal entity; or 5. After solicitation of a number of sources, competition is determined inadequate. Condition: During our testing over procurement, we determined that the Center did not clearly document the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. In addition, for noncompetitive procurements, there was no documentation to support which of the five criteria was met to allow for the noncompetitive procurement. Cause: During 2023, the Center's finance department turned over significantly, resulting in oversight of the compliance requirement. Effect or Potential Effect: Procurement records were insufficient to meet the requirements noted in the Criteria section above, as well as the Center's internal procurement policy. Questioned Costs: None noted. Context: We noted one item selected for testing did not document the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. In addition, we noted that the item selected for testing for noncompetitive procurements did not maintain documentation of which of the five criteria were met to allow for the noncompetitive procurement. Identification as a Repeat Finding: Not applicable. Recommendation: We recommend the Center retain sufficient procurement documentation to meet the requirements noted in the Criteria section above.

Finding 2023-006: Reporting Federal Program: 19.124 Criteria: Grantor requires that the Center submit programmatic reports in accordance with the schedules indicated in its grant agreements. Internal controls should provide for these reports to report the measurement of the recipient's performance to show achievement of program goals and objectives, share lessons learned, improve program outcomes, and foster adoption of promising practices (2 CFR §200.301(a)). Condition: During our audit, we noted that certain programmatic reports were not submitted within the deadlines outlined in the grant agreements. We also noted the Center did not have evidence that certain programmatic reports were submitted in accordance with specific grant terms. Cause: The Center did not have the proper internal controls in place to ensure proper management of the Federal award(s) in compliance with the terms and conditions of the Federal award(s). During 2023, the Center's finance department turned over significantly, resulting in oversight of the compliance requirement. Effect or Potential Effect: The performance progress according to the Federal award(s) may not be monitored, thus having potential unallowable costs or unallowable activities. Questioned Costs: None noted. Context: Several programmatic reports tested were not submitted on a timely basis. Identification as a Repeat Finding: Not applicable. Recommendation: We recommend the Center develop proper internal controls to ensure appropriate tracking of reporting deadlines for all Federal awards to ensure the preparation and timely submission of all reports required under its Federal awards' terms and conditions.

Finding 2022-001: Sub-recipients Federal Programs: Assistance Listing Number 19.124 Criteria: As noted in 2 CFR 200.331 part (d): Monitor the activities of the sub-recipient as necessary to ensure that the sub-award is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions for the sub-award; and that sub-award performance goals are achieved. Condition: During our audit, we noted that the Center does not have updated policies and procedures in place for monitoring sub-recipients to be in compliance with 2 CFR 200.331. We also noted the pre-award risk assessment procedures were not properly documented. Lastly, we noted the Center did not perform the FFATA (Federal Funding Accountability and Transparency Act) reporting requirements. Cause: The Center does not have updated policies and procedures in place to be in compliance with monitoring activities of their sub-recipients. Our audit procedures consisted of substantive testwork over a sample of sub-recipient expenditures that were selected based on a threshold. We consider our sample to representative of the population. Effect or Potential Effect: The Center could inadvertently engage in relationships with sub-recipients of higher risk without the appropriate level of oversight (monitoring) to ensure sub-recipients are expending funds in accordance with the provisions and terms of the subaward. Questioned Costs: None noted. Context: The Center failed to properly document its due diligence with respect to risk assessment procedures and FFATA reporting requirements. Identification as a Repeat Finding, if Applicable: N/A Recommendation: As a result, we concluded that certain enhancements would add value to the Center?s due diligence with respect to its monitoring processes, and the following are our recommendations (of activities/documents that should be performed/maintained by the Center: Enhance pre-award risk assessment; an evaluation and assignment of level of the financial (and programmatic) risk associated with the intended recipient/grantee for the purpose of determining the expected level of oversight and monitoring during the period of performance. Enhance documentation of evidence of an evaluation process with respect to the identification of the prospective recipient. A regularly documented review process with respect to periodic financial reports received from grantees. An evaluation of the need for a periodic site visit. Receipt of the grantee?s annual audit reports, if available (to ensure there are no weaknesses or deficiencies in internal control during the grant period). If there are deficiencies that directly affect the program, then a corrective action plan be established. The Center will need to evaluate the FFATA reporting requirements and comply with the act.

Finding 2021-001: Compliance with U.S. Government Terrorism Requirements Federal Programs: All Programs Criteria: The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act of 2001 was enacted in order to deter and punish terrorist acts in the United States and around the world and to enhance law enforcement investigatory tools. Executive Order (EO) 13224, which was signed into law during 2001, provides a means by which to disrupt the financial support network for terrorists and related organizations by authorizing the U.S. Treasury, in consultation with other U.S. Government agencies, to designate and block the assets of foreign individuals and entities that commit, or pose a significant risk of committing, acts of terrorism. Condition: During our audit, we noted that while the Center performed terrorist screening of its contractors, vendors, employees, etc. in accordance with the above-noted requirements, the screening was not properly documented. The failure to screen such parties increases the possibility that U.S. Government funds may inadvertently be provided to individuals or organizations deemed to be excluded by the U.S. Government. This is especially crucial based on the fact that the Center receives several grants from the U.S. Government. Cause: The Center does not document the screening process. Effect or Potential Effect: The Center could inadvertently contract with and/or make payments to vendors, suppliers, employees, subcontractors and subrecipients who have been disbarred, suspended or otherwise excluded from receiving Federal funds. Questioned Costs: None noted. Context: The Center failed to properly document its due diligence with respect to these requirements. Recommendation: Accordingly, we recommend that the Center develop a formal policy with respect to this requirement to ensure screening processes are conducted properly, timely and that the process is properly documented. Furthermore, management should regularly communicate these policies and procedures to all employees, and it should emphasize the importance of maintaining full compliance with U.S. Government ??anti-terrorism? provisions.