CHAVES COUNTY CASA PROGRAMNon-Profit

2025-001 — Failure to Identify All Federal Awards and Prepare a Complete Schedule of Expenditures of Federal Awards Type of Finding: Material weakness in internal control over compliance related to the identification and reporting of federal awards and preparation of the Schedule of Expenditures of Federal Awards (SEFA) Federal Program and Specific Federal Award Information This finding relates to the Organization’s process for identifying and reporting federal awards received and expended during the year ended June 30, 2025. Criteria Under 2 CFR 200.302(b)(1), a nonfederal entity is required to identify in its accounts all federal awards received and expended, as well as the federal programs under which the awards were received. Federal award identification must include, as applicable, the Assistance Listing title and number, federal award identification number, year the federal award was issued, and the name of the federal agency or pass-through entity. Under 2 CFR 200.510, the auditee is required to prepare a SEFA for the period covered by the auditee’s financial statements. The SEFA must include total federal awards expended for each individual federal program, and federal programs must be listed by federal agency. For awards received as a subrecipient, the SEFA must include the name of the pass-through entity and the identifying number assigned by the pass-through entity. The SEFA must also include applicable Assistance Listing numbers or other identifying numbers, cluster totals, loan or loan guarantee amounts when applicable, and amounts provided to subrecipients when applicable. Condition During the audit of the Organization for the fiscal year ended June 30, 2025, the Organization did not identify all federal awards received and expended and did not prepare a complete Schedule of Expenditures of Federal Awards prior to the start of the audit. Additional federal awards and/or federal expenditures were identified through procedures performed during the audit. The Organization subsequently prepared or revised the SEFA with audit assistance and/or based on information identified during the audit. The awards or expenditures not initially identified are included in the table shown on the previous page and total $1,018,672. Total federal expenditures for the fiscal year ended June 30, 2025 were ultimately determined to be $1,716,735. The audit engagement was revised as a result of the Organization meeting the threshold for a Single Audit. Cause The Organization did not have adequate internal controls, policies, and procedures in place to ensure that all federal awards were identified, tracked, and reported in accordance with Uniform Guidance requirements. Specifically: • The Organization did not maintain a centralized grant listing or grant award register identifying all federal awards, including awards received directly from federal agencies and awards received as a subrecipient from pass-through entities. • Personnel in the finance department are relatively new to the Organization and federal award identification related to funds passed through by non-federal entities was not an area for which new personnel have received training. • Similarly, personnel have not received training in the preparation of the SEFA. Effect Because the Organization did not identify all federal awards and did not prepare a complete SEFA prior to the audit, there was a reasonable possibility that material misstatements of the SEFA and related disclosures would not be prevented, or detected and corrected, on a timely basis. The SEFA is the primary basis for determining whether a Single Audit is required and for identifying major programs subject to audit; therefore, incomplete identification of federal awards could result in an incorrect major program determination, incomplete audit coverage, untimely or inaccurate federal reporting. Questioned Costs The amount of questioned costs, if any, could not be determined because the finding relates to the Organization’s internal control process for identifying and reporting federal awards and preparing the SEFA, rather than to specific costs tested for allowability. No specific questioned costs were identified as a result of this finding. Recommendation We recommend that the Organization strengthen internal controls over the identification, accounting, and reporting of federal awards and the preparation of the SEFA. At a minimum, management should: 1) Capture required federal award information for each award, including Assistance Listing title and number, federal award identification number, award year, federal agency, pass-through entity, pass-through identifying number, award period, award amount, and applicable compliance requirements. 2) Configure the accounting system or supporting schedules to separately identify federal revenues and expenditures by program, award, funding source, and award year. 3) Develop written SEFA preparation procedures that identify responsible personnel, timing, required data sources, reconciliation steps, and review and approval requirements. 4) Provide training to accounting, finance, and program personnel responsible for grant management and federal award reporting. 5) Consult with federal awarding agencies or pass-through entities when award information is incomplete or unclear, including Assistance Listing numbers or pass-through identifying numbers. Views of Responsible Officials / Management Response Management agrees with the finding. The Organization acknowledges that it did not have adequate procedures in place during the fiscal year ended June 30, 2025 to identify all federal awards and prepare a complete SEFA prior to the audit. Management will implement corrective actions to strengthen controls over federal award identification, accounting, reconciliation, and SEFA preparation. (See separately issued corrective action plan.)

2025-002 —Commingling of Federal Award Funds in the General Ledger Type of Finding: Material weakness in internal control over compliance Federal Program and Specific Federal Award Information All federal grant awards are affected by this finding. Criteria Under 2 CFR 200.302(b)(1), a non-federal entity is required to identify in its accounts all federal awards received and expended and the federal programs under which they were received. Under 2 CFR 200.303, the auditee must establish, document, and maintain effective internal control over federal awards that provides reasonable assurance that the federal awards are managed in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Condition During our audit we noted that federal award receipts and expenditures for all federal programs were not separately identified in the general ledger. As a result, federal award transactions were commingled in the accounting records and could not be readily traced, accumulated, or reconciled by individual federal award without additional manual analysis outside the general ledger. The condition resulted a material weakness in internal control over compliance, because controls were not designed and/or operating effectively to ensure federal award activity was identified and tracked in the accounting records at the level required by Uniform Guidance. Cause The Organization did not have adequate internal controls, policies, and procedures in place to ensure that all federal awards were separately identified, tracked, and reported in the general ledger in accordance with Uniform Guidance requirements. Specifically: • The Organization had not designed its chart of accounts to separately identify federal award receipts and expenditures by program, award number, award year, funding source, and Assistance Listing number. • Policies and procedures did not require federal award transactions to be coded at the grant or award level when recorded in the general ledger. • Personnel in the finance department are relatively new to the Organization and federal award guidelines related to the structure of the general ledger was not an area for which new personnel have received training. Effect Because federal award funds were commingled in the general ledger, the Organization did not maintain accounting records that readily identified federal awards received and expended by program and award. This increases the risk that: • Federal expenditures may be charged to the incorrect program, award, period, or funding source; • Unallowable or unsupported costs may be charged to federal awards and not detected timely, including increasing the potential to duplicate expenses charged to federal awards; • The schedule of expenditures of federal awards may be incomplete, inaccurate, or not properly reconciled to the accounting records; and • Financial and programmatic reports submitted to the federal agency or pass-through entity may be inaccurate. Questioned Costs No questioned costs were identified as a result of this finding. However, the commingling of federal award activity in the general ledger creates a risk that questioned costs could exist but not be detected without additional analysis. Recommendation We recommend that the Organization strengthen internal controls over federal award accounting and compliance by implementing procedures to ensure federal award activity is separately identified in the accounting records. Such procedures should include, at a minimum: 1. Chart of accounts / project coding — Establish separate general ledger accounts, fund codes, project codes, grant codes, or other accounting identifiers for each federal program and award, including Assistance Listing number, award number, award year, federal agency, and pass-through entity, as applicable. 2. Transaction-level coding — Require all federal receipts and expenditures to be coded to the appropriate federal program and award at the time transactions are recorded in the general ledger. 3. Invoicing for federal grant programs should be generated directly from the general ledger after all expenses for the period are coded and entered. 4. Written policies and procedures — Develop and implement written grant accounting policies that define roles, responsibilities, required coding fields, review procedures, and reconciliation requirements. 5. Training — Provide training to accounting and program personnel responsible for identifying federal awards, recording, approving, and monitoring federal award transactions. Views of Responsible Officials / Management Response Management agrees with the finding. Corrective actions are currently being implemented to strengthen internal controls over federal award accounting and compliance and to ensure federal award activity is separately identified and tracked in the general ledger. (See separately issued corrective action plan.)