Food LifelineNon-Profit

2024-002: Documentation of Internal Controls over Compliance Requirements for Activities Allowed or Unallowed and Allowable Costs/Cost Principles Federal Agency: U.S. Department of Agriculture Assistance Listing Number: 10.568 Federal Program Name: Emergency Food Assistance Program (Administrative Costs) Pass-through Entity: Washington State Department of Agriculture Pass-through Award Number: K4747 Federal Agency: U.S. Department of the Treasury Assistance Listing Number: 21.027 Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds Pass-through Entities: Washington State Department of Agriculture; Hopelink Pass-through Award Numbers: K4778; K2602, K4820 Type of Finding: Significant deficiency in internal control over compliance. Criteria: Under 2 CFR 200.303(a), the non-federal entity must establish and maintain effective internal control over federal awards. Condition: During the year ended June 30, 2024, Food Lifeline did not sufficiently document internal controls over compliance with requirements for activities allowed or unallowed and allowable costs/cost principles. Cause: Food Lifeline did not maintain proper internal controls or have staff members with the appropriate experience to accurately track grant expenditures using the correct project codes. Effect: Although there were no such instances identified during the audit, inadequate internal control over activities allowed or unallowed and allowable costs/cost principles could lead to potential waste or abuse of federal award funds, whether due to fraud or error, and future disallowed costs. Context: Due to turnover among both upper- and lower-level Finance Department personnel during the year ended June 30, 2024, as well as the shuffling of responsibilities among staff, project codes were not properly used to accurately track grant expenditures. Questioned Costs: None Recommendation: We recommend that management implements formal procedures to document internal controls over the allowability of expenditures incurred with federal program funds. Views of Responsible Officials: There is no disagreement with the finding.

Federal Agencies: Department of Agriculture Federal Assistance Listing Numbers: 10.568, 10.569 Program or Cluster: COVID-19 Food Distribution Cluster Pass-Through Entity Identifying Numbers: K2770 Criteria: 2 CFR section 200.303 requires that non-federal entities receiving federal awards establish and maintain internal controls over federal awards that provide reasonable assurance that the non-federal entity is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Additionally, Part 6 of the Compliance Supplement states that the Organization should have controls in place to ensure that the accuracy and completeness of data used to determine eligibility requirements are reviewed and agreed to support as necessary by staff and are reviewed by a knowledgeable supervisor. Condition: These activities were temporarily suspended during the COVID-19 pandemic; however the eligibility requirements resumed during the year ended June 30, 2022. The Organization did not resume eligibility verifications when the requirements were reinstated. A risk assessment spreadsheet is maintained and submitted to the funder annually, which details if subrecipients meet the required eligibility criteria. However, the Organization does not have controls in place to review these eligibility determinations to verify that they are complete and correct. Cause: There has been turnover in management personnel for the program and management did not know the requirements for subrecipient eligibility verifications had been reinstated. Effect or Potential Effect: There is a reasonable possibility that resources were provided to subrecipients who were not eligible. The Organization does not have the documentation to verify that eligibility procedures performed over prospective subrecipients occurred. Questioned Costs: Unknown Recommendation: Additional internal controls should be implemented to ensure that certifications are performed over all prospective subrecipients, and documentation is maintained and reviewed by an appropriate member of management. Appropriate personnel should also have adequate training related to eligibility compliance requirements and changes in program requirements. Views of Responsible Officials: Management agrees with the finding and recommendations set forth within and has developed a corrective action plan to address the instances of noncompliance identified and lapses in prescribed internal controls.

Federal Agencies: Department of the Treasury Federal Assistance Listing Numbers: 21.027 Program or Cluster: COVID-19 Coronavirus State and Local Fiscal Recovery Funds Pass-Through Entity Identifying Numbers: K3524, K3633 Criteria: In accordance with ?200.318, the non-federal entity must use its own documented procurement procedures which reflect applicable laws and regulations, provided that the procurements conform to applicable federal law and the standards identified. Additionally, the nonfederal entity must maintain records sufficient to detail the history of the procurement. These records are required to 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. All procurement transactions must be conducted in in accordance with ?200.317 through ?200.327. In accordance with ?200.214 non-federal entities cannot enter into awards, subawards, or contracts with certain parties that are debarred, suspended, or otherwise excluded from or ineligible for participation in federal assistance programs or activities. Non-federal entities must either check for exclusions in the System for Award Management (SAM); collect a certification from the entity or add a clause or condition to the covered transaction with the entity prior to entering into a covered transaction with a non-federal entity. Condition: The Organization has a policy outlining procurement and suspension and debarment procedures. The Organization also has standard forms in place guiding purchasing decisions. However, those forms lack elements that prompt staff to perform and document procurement and suspension and debarment procedures. The Organization did not maintain adequate documentation that procurement practices were performed in accordance with the Uniform Grant Guidance requirements. The Organization also did not perform or document suspension and debarment checks on prospective vendors and subrecipients. Cause: The Organization?s personnel did not adhere to the documented policies and procedures for ensuring complete documentation of the history of the procurement and the Organization did not have adequate internal controls in place to identify the need to ensure a check for suspended or debarred vendors on contractors occurred and was documented prior to entering into those agreements. Effect: Failure to maintain proper documentation for vendor selection process and failure to obtain vendor solicitation for procurements is noncompliance with Federal regulations. There is a reasonable possibility that resources were purchased from vendors and/or passed through to subrecipients who were suspended and/or debarred. Questioned Costs: Unknown Recommendation: Standard forms should be updated to incorporate procurement and suspension and debarment criteria for both vendors and subrecipients. Controls should be implemented to ensure that the procurement decisions and suspension and debarment checks are reviewed by an appropriate member of management and are properly stored for future reference. Views of Responsible Officials: Management agrees with the finding and recommendations set forth within and has developed a corrective action plan to address the instances of noncompliance identified and lapses in prescribed internal controls.

2020-001: Schedule of Expenditures of Federal Awards Federal Agencies: Department of Agriculture CFDA Number: 10.569/10.568 Program: TEFAP Criteria: The Uniform Guidance (2 CFR ?200.510) states that the auditee must prepare a Schedule of Expenditures of Federal Awards ("the Schedule") for the period covered by the financial statements. Condition: The Organization does not have an effective process in place to ensure that all items are properly reflected on the Schedule, specifically related to reporting food commodities under different government programs. Context: During our audit, we discovered a misclassification of reported amounts of food commodities presented under the TEFAP and TMP programs. Cause: The Organization marked food as distributed and then recorded it as revenue again under the program based on periodic inventory counts. As a result of inquiry during the audit, the Organization was able to reconcile and adjust these transactions to expense, and commodity amounts adjusted. Note that total government food commodities were materially correct. Effect: The preliminary Schedule of Expenditures of Federal Awards received for audit was incorrectly stated and an adjustment of $1,677,541 was recorded to reduce the amount of food commodities reported under the TEFAP program. Questioned Costs: N/A Recommendation: We recommend that management establish a procedure to reconcile with the State of Washington the amount of food commodities being received under each program to the Organization?s records. This procedure should be performed independent of the audit process. This will ensure food commodity amounts are properly reported under their respective programs. Views of Responsible Officials and Planned Corrective Action: Management concurs with the finding. See the attached unaudited correction action plan. Which explains additional review and reconciliation procedures to be performed.