The Well Community Development CorporationNon-Profit

Significant Deficiency: Payroll Allocation True Up Related to Construction Management Fees Condition: During our testing of federal expenditures, we noted payroll expenses related to construction management fees were allocated and billed to the federal grant based on the Organization’s budgeted time allocations determined at the beginning of the year with no reconciliation to actual time allocations during 2023. We consider this instance to be a significant deficiency over compliance relating to allowable costs and the cost principles. Criteria: Expenditures charged to the federal grant must follow the cost principles outlined in 2 CFR Part 200, Subpart E including “Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles.” Cause: Internal billings were not updated for actual 2023 payroll allocations and management did not perform reconciliation of budgeted allocations to actual time incurred. Effect: As a result of the deficiency noted, the federal grant could be charged in excess of actual expenditures necessary and reasonable to run the programs. Recommendation: We recommend management review their calculations of payroll allocations for the federal grant on a periodic basis to ensure the amounts being billed to the federal grant are reasonable and in line with actual costs incurred.

Significant Deficiency: Maintain Documentation on Approval of Invoices Related to Federal Expenditures Condition: During our review of controls over expenditures of federal awards, we noted that the program managers review the billing reports, including supporting documentation (vendor invoices) for allowability under the grant agreements and the Uniform Guidance; however, support of their review of the expenditures reported on the SEFA that are unbilled at year-end is not maintained by the Organization. Criteria: The Organization’s internal control system should be properly designed to ensure that allowable costs charged to grants are receiving the appropriate level of oversight and review. Cause: The Organization’s internal control policies require approval of all invoices prior to payment; however, support for these approvals was not maintained by the Organization outside of the program manager’s approval at the time of billing. Effect: Out of a sample of 37 expenditures, we noted 6 did not have support of the required approval by the program manager. Statistical sampling was not used in making sample selections. Our testing did not identify any questioned costs as a result of this deficiency in control. Recommendation: We recommend management implement a process to ensure that documentation on the approval of expenditures be maintained and that the review by the program manager occurs in a timely manner, not just at the time the expenditures are billed to the grantors.