FEED THE CHILDREN, INC.Non-Profit

Assistance Listing Number, Federal Agency, and Program Name - 98.001, U.S. Agency for International Development, USAID Foreign Assistance for Programs Overseas Federal Award Identification Number and Year - AID-612-A-16-00003, 2016; 72061222CA00003, 2022 Pass through Entity - N/A Finding Type - Significant deficiency Repeat Finding - No Criteria - In accordance with 2 CFR 200.502(a), the determination of when a federal award is expended must be based on when the activity related to the federal award occurs. Generally, the activity pertains to events that require the nonfederal entity to comply with federal statues, regulations, and the terms and conditions of federal awards, such as expenditure/expense transactions associated with awards. Condition - The schedule of expenditures of federal awards (SEFA) for the year ended June 30, 2022 includes expenditures incurred during the prior fiscal year. Questioned Costs - None Identification of How Questioned Costs Were Computed - Not applicable Context - Out of a sample of 40 expenditures selected for allowability testing, 4 samples related to expenditures incurred in the prior fiscal year but not accrued by the Organization until the current fiscal year-end. The identified expenditures that pertain to prior fiscal year amount to $40,944 and are incorrectly included in the schedule of expenditures of federal awards as of June 30, 2022. Cause and Effect - Internal controls did not ensure proper cut-off of federal expenditures therefore overstating the SEFA for the current fiscal year. The improper inclusion of prior year expenditures in the current fiscal year SEFA did not affect the major program determination. Furthermore these costs were incurred within the period of performance creating no questioned costs. Recommendation We recommend the Organization establish controls and processes to ensure expenditures are reported in the appropriate fiscal year within the general ledger and the SEFA. Views of Responsible Officials and Corrective Action Plan The Organization acknowledges this finding. Going forward the Organization will implement a review process of the Schedule of Expenditures of Federal Awards.

Finding: Item 2020-001 Procurement Bidding Criteria: 2 CFR ? 200.303, Internal Controls requires that a non-Federal entity 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. Additionally, FEED's procurement policy requires varying levels of solicitations of quotes based on the amount of the expenditure. Condition: One disbursement tested out of a sample of 10 that were subject to the procurement policy for small purchases did not indicate that the minimum of three quotations from qualified sources were obtained. Cause: FEED did not follow its procurement policy and prudent business practices for bid solicitations of certain expenditures. Effect: FEED may improperly award and/or pay more than what could have been obtained for comparable goods or services for the geographic area. Repeat finding: This is not a repeat finding. Recommendation: FEED should evaluate its procurement policy, practices and internal controls to ensure that procurements are being awarded in accordance with the applicable procurement method and procurement files contain consistent and complete information to support the award. View of responsible officials: Management's response is reported in "Management's Views and Corrective Action Plan" at the end of this report.

Finding: Item 2020-002 Suspension and Debarment Criteria: FEED is required to follow 2 CFR ? 180.300, Responsibilities of Participants Regarding Transactions Doing Business With Other Persons. When FEED enters into a covered transaction with another person, FEED must verify that the person is not excluded or disqualified by (a) Checking The System for Award Management (SAM) Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person. Condition: Two disbursements tested out of a sample of 33 did not include documentation that the individual or vendor was verified with SAM Exclusions regarding suspension or debarment. Cause: FEED did not verify with SAM before completing a disbursement. Effect: Potential for FEED to not adhere to federally mandated suspension and debarment requirements. Repeat finding: This is not a repeat finding. Recommendation: FEED should evaluate its procurement policy, practices and internal controls to ensure that suspension and debarment searches are performed in accordance with applicable requirements. View of responsible officials: Management's response is reported in "Management's Views and Corrective Action Plan" at the end of this report.

Finding: 2019-001 Procurement Policy Material Weakness Questioned Costs $ - Federal Program ? USAID Foreign Assistance for Programs Overseas CFDA Number ? 98.001 Federal Award Number ? AID-612-A-16-00003 Federal Agency ? U.S. Agency for International Development Pass-Through Entity ? Not Applicable Criteria: FEED is required to follow 2 CFR ?200.318 General procurement standards through ?200.326 Contract provisions. On June 20, 2018, the Office of Management and Budget (OMB) issued a memorandum Implementing Statutory Changes to the Micro-Purchase and the Simplified Acquisition Thresholds for Financial Assistance. The memorandum increased certain thresholds for procurement and clarified the effective date of the Uniform Guidance procurement rules, which were effective for FEED on July 1, 2018. Condition/context: During most of the year under audit, FEED operated under a procurement policy that was last updated July 2016, which did not contain all the necessary elements required by UGG. The procurement policy was updated in May 2019. Cause: FEED had not completed an update of its procurement policy to implement the requirements under UGG effective July 1, 2018. Effect: Potential for FEED to not adhere to federally mandated procurement requirements. Repeat finding: This is not a repeat finding (See Schedule of Findings and Questioned Costs Section III). Recommendation: FEED should complete the update of its procurement policy to be in compliance with the procurement requirements of the Uniform Guidance and perform and assessment of expenditures beginning July 1, 2018 for potential noncompliance with UGG. We also recommend that responsibility for complying with and updating the procurement policy be clearly defined and documented. View of responsible officials: Management's response is reported in "Management's Views and Corrective Action Plan" at the end of this report.

Finding: 2019-002 Cumulative Costs for Bid Consideration Material Weakness Federal Program ? USAID Foreign Assistance for Programs Overseas CFDA Number ? 98.001 Federal Award Number ? AID-612-A-16-00003 Federal Agency ? U.S. Agency for International Development Pass-Through Entity ? Not Applicable Questioned Costs $ - Criteria: 2 CFR ?200.404 Reasonable costs states "a cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost." ?200.404(c) states consideration must be given to market prices for comparable goods or services for the geographic area. Condition/context: One disbursement we tested out of our sample of 60 was for transportation and delivery services. We determined that there were multiple invoices from this vendor during the year for services rendered. The Organization's policy and practices in place at that time did not require rebidding of services provided over an extended period of time to ensure the Organization was paying prevailing market rates for the service. These transportation and delivery services were not rebid during a time frame of approximately 18 months. Cause: FEED's process did not solicit bids for services that occurred over an extended period of time. Effect: FEED could pay more for transportation and delivery services than prevailing market rates for comparable services in the geographic area. Repeat finding: This is not a repeat finding (See Schedule of Findings and Questioned Costs Section III). Recommendation: FEED should ensure its procurement policy includes consideration for soliciting bids for services that occur frequently and over a length of time. FEED should periodically aggregate and analyze disbursements by vendor to ensure amounts disbursed are within policy and practice for obtaining current market prices and/or appropriate bids. View of responsible officials: Management's response is reported in "Management's Views and Corrective Action Plan" at the end of this report.

Finding: 2019-003 Procurement Bidding Material Weakness Federal Program ? USAID Foreign Assistance for Programs Overseas CFDA Number ? 98.001 Federal Award Number ? AID-612-A-16-00003 Federal Agency ? U.S. Agency for International Development Pass-Through Entity ? Not Applicable Questioned Costs $ - Criteria: 2 CFR ?200.303 Internal controls requires that a non-Federal entity 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. Additionally, FEED's procurement policy requires varying level of solicitations of bids based on the amount of the expenditure. Condition/context: For five non-payroll expenditures from of a sample of 60 transactions, based upon a review of procurement file documents and interviews with employees, there were inconsistencies in or a lack of clear documentation regarding appropriate procedures and approval of these procurements in accordance with the policies and practices in place at that time. Cause: FEED did not consistently follow its procurement policy and prudent business practices for bid solicitations of certain expenditures. Effect: FEED may improperly award bids and/or pay more than what could have been obtained for comparable goods or services for the geographic area. Repeat finding: This is not a repeat finding. Recommendation: FEED should evaluate its procurement policy, practices and internal controls to ensure that procurement bids are being awarded in accordance with the applicable procurement method and procurement files contain consistent and complete information to support the award. View of responsible officials: Management's response is reported in "Management's Views and Corrective Action Plan" at the end of this report.

Finding: 2019-004 Corporate Oversight Material Weakness Federal Program ? USAID Foreign Assistance for Programs Overseas CFDA Number ? 98.001 Federal Award Number ? AID-612-A-16-00003 Federal Agency ? U.S. Agency for International Development Pass-Through Entity ? Not Applicable Questioned Costs $ - Criteria: 2 CFR ?200.302 (4) stipulates, among other requirements, that a non-Federal entity maintain effective control over, and accountability for, all funds, property and other assets, including adequately safeguarding all assets and assure they are only used for authorized purpose. 2 CFR ?200.303 Internal controls requires that a non-Federal entity 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/context: FEED's corporate headquarters did not timely identify significant and material compliance deficiencies at its Malawi office. Cause: FEED did not have sufficient and effective governance and transaction level controls in place at corporate headquarters to timely identify and remediate significant and material compliance deficiencies at its Malawi office. Effect: Insufficient or ineffective controls at corporate headquarters regarding activities and transactions associated with FEED's major federal program grant may result in significant or material noncompliance. Repeat finding: This is not a repeat finding (See Schedule of Findings and Questioned Costs Section III). Recommendation: FEED should institute policies and procedures to effectively monitor activities at its Malawi office, which should include on-site visits for direct access to personnel and original documents. View of responsible officials: Management's response is reported in "Management's Views and Corrective Action Plan" at the end of this report.

Finding: 2019-005 Subrecipient Monitoring Procedures Significant Deficiency Federal Program ? USAID Foreign Assistance for Programs Overseas CFDA Number ? 98.001 Federal Award Number ? AID-612-A-16-00003 Federal Agency ? U.S. Agency for International Development Pass-Through Entity - Not Applicable Questioned Costs $ - Criteria: In accordance with 2 CFR ?200.331(d), Requirements for Pass-Through Entities, FEED must monitor the activities of the subrecipients necessary to ensure that the subaward is used for authorized purposes, in compliance with federal statutes, regulations and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: (1) reviewing financial and performance reports required by the pass-through entity; (2) following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and other means; and (3) issuing a management decision for audit findings pertaining to the federal award provided to the subrecipient from the pass-through entity as required by 2 CFR ?200.521 Management decision. Condition/context: FEED did not retain documentation of all monitoring procedures to determine the allowability of the costs, and specific items tested to underlying documents to support the expenditures to its subrecipients. There was no documentation of any deficiencies discovered, or the absence of deficiencies. Cause: While management asserts that the Malawi Director of Financial Management and Operations did site visits with subrecipients and sighted underlying documentation, FEED did not retain documentation of what procedures were performed, or the result of any deficiencies discovered. Effect: Failure to comply with the subrecipient monitoring requirement of the Uniform Grant Guidance could result in unallowable expenses being charged to the grant by the subrecipient or otherwise not comply with provisions of the grant. Repeat finding: This is not a repeat finding (See Schedule of Findings and Questioned Costs Section III). Recommendation: FEED should retain documentation to support its monitoring of subrecipients through reviewing financial and performance reports; following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the federal award detected through audits, on-site reviews, and other means; and document the response and action to any management decisions for audit findings. View of responsible officials: Management's response is reported in "Management's Views and Corrective Action Plan" at the end of this report.

Finding: 2019-006 Draws and Obligated funds Significant Deficiency Federal Program ? USAID Foreign Assistance for Programs Overseas CFDA Number ? 98.001 Federal Award Number ? AID-612-A-16-00003 Federal Agency ? U.S. Agency for International Development Pass-Through Entity ? Not Applicable Questioned Costs $ - Criteria: 2 CFR ?200.302(4), Financial Management requires effective internal control over, and accountability for, all funds, property and other assets. The entity must adequately safeguard all assets and assure that they are used solely for authorized purposes. Condition/context: In September 2018, FEED drew down funds from its line of credit in excess of the amount obligated by USAID. The total dollars drawn was in excess of the obligated amount until the November 23, 2018, award modification. Cause: FEED did not have sufficient procedures to track total draws for the program to compare to the latest award modification in order to prevent drawing federal funds in excess of amounts obligated. Effect: FEED could incur expenditure of Federal funds in excess of amounts obligated by USAID. Repeat finding: This is not a repeat finding. Recommendation: FEED should maintain a schedule of cumulative draws to date and compare to the total obligated amount before drawing funds. View of responsible officials: Management's response is reported in "Management's Views and Corrective Action Plan" at the end of this report.

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