West Michigan Partnership for ChildrenLocal Government

Significant Deficiency in Internal Controls over Compliance (Allowable Costs), and Noncompliance with Laws and Regulations. Condition: Fringe benefits, including bonus distributions and increased Health Savings Account (HSA) and retirement contributions, were provided and charged to federal programs in the absence of adequate written policies and procedures. Programs Affected: Child Welfare Continuum of Care programs; Assistance Listing Numbers: 93.558, 93.658, 93.659, 93.667, 93.778. Criteria: 2 CFR 200.431(c) states that the cost of fringe benefits in the form of employer contributions or expenses for social security; employee life, health, unemployment, and worker’s compensation insurance; pension plan costs; and other similar benefits are allowable, provided such benefits are granted under established written policies. Cause: Original policies and procedures for fringe benefits lacked necessary detail, and subsequent updates have not been made. Effect: Unallowed costs may have been charged to the grant. Questioned Costs: Unknown. Due to MDHHS’s funding methodology for the Continuum of Care grants, the total federal portion of fringe benefits cannot be determined. Context: Fringe benefit policies lacked specificity regarding the process by which benefits such as bonus distributions, and changes to other forms of compensation such as HSA and retirement contributions, were determined. The Organization performed various due diligence activities to support such determinations, including comparability studies and board approval of all decisions made, however written policies to reflect these activities did not exist. Recommendation: The Organization should establish a formal written policy that accurately reflects the fringe benefits charged to federal programs, including but not limited to the bonus structure, retirement contributions, and HSA contributions. Organization’s Response: The Organization agrees with the finding and will implement corrective action to address the condition.

Finding type: Significant deficiency in internal control over major programs. Programs Impacted: Foster Care - Title IV-E. Criteria: Uniform Guidance, 2 CFR 200.303, requires that the Organization establish and maintain effective internal controls over Federal awards that provide reasonable assurance that the non-Federal entity is managing Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The Organization has not developed written procedures that are consistent with requirements imposed by the Uniform Guidance. Cause: The Organization has developed written financial procedures, however due to an emphasis on grant compliance have not dedicated the resources necessary to document written procedures that are in compliance with all requirements imposed by the Uniform Guidance. Effect: Control activities of the Organization were in some cases ineffective or nonexistent, thereby increasing the risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the Federal awards administered. Questioned Costs: $0 for all programs. Recommendation: We recommend that the Organization compile and adhere to Federal Written Procedures that support an effective control environment and provide reasonable assurance that the Organization is in compliance with all requirements imposed by the Uniform Guidance. Views of Responsible Officials: The Organization agrees with the finding and will compile and adhere to Federal Written Procedures.

Finding type: Significant deficiency in internal control over major programs and noncompliance. Programs Impacted: Foster Care - Title IV-E. Criteria: Uniform Guidance, 2 CFR 200.331(a), requires that all pass-through entities communicate to their subrecipient(s) specific information necessary to identify the Federal Awards and, when some information is not available, that they provide subrecipients with the best information available to describe the Federal awards. Condition: The Organization did not identify all required detail necessary to adequately describe the Federal awards, including total expenditures by Federal program, passed through to subrecipients. Whereas some of this information was not known to the Organization at the time of the award, subsequent communications to subrecipients were not made timely. Cause: The Organization did not receive detail of the Federal awards passed through to subrecipients until their grantor agency, the Michigan Department of Health and Human Services (MDHHS), provided such detail well after the audit period had closed. Effect: Subrecipients were not provided with the information necessary to ensure compliance with all federal requirements. Since the Organization does not know which Federal award MDHHS will use to fund their grant until after it has been spent, agreements with their subrecipients are incomplete and compliance with its terms does not ensure compliance with all federal program requirements. Questioned Costs: $0 for all programs. Recommendation: We recommend that the Organization implement control procedures to ensure that all required Federal award information is provided to subrecipients, as required by the Uniform Guidance. Views of Responsible Officials: The Organization agrees with the finding and will implement control procedures to ensure that all required Federal award information is communicated to subrecipients.

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