METLAKATLA INDIAN COMMUNITYTribal Government

Finding 2025-003 Noncompliance with Reporting Requirements Federal Agencies: U.S. Department of Defense Federal Programs: Native American Lands Environmental Mitigation Program (NALEMP) ALN: 12.116 (NALEMP) Award Numbers: W911KB-23-2-0303 (NALEMP) Award Years: 2023 (NALMEP) Type of Finding: Material weakness in internal control over compliance and material noncompliance Criteria: The NALEMP program requires quarterly financial reports to be submitted within 30 days of the end of the quarter. Condition and Context: During the testing of the NALEMP program, we noted that the expenditure amounts being reported on the quarterly reports did not agree to the general ledger. At the end of the grant period this resulted in a large amount of expenditures that had not been properly reported to the granting agency and the Community recorded a large grant receivable balance. Cause: Lack of internal control over reporting. Effect: Failure to follow compliance requirements could result in loss of Federal funding. Questioned Costs: None noted. Repeat Finding: No. We believe the finding to be an isolated instance and not a systemic issue. Recommendation: We recommend the Community complies with all reporting requirements. Managements Response: Management agrees with this finding. See Corrective Action Plan.

Finding 2025-004 Late Reporting and Noncompliance with Reporting Requirements Federal Agencies: U.S. Department of Health and Human Services Federal Programs: Head Start Cluster ALN: 93.600 Award Numbers: 90CI010107 Award Years: 2024 Type of Finding: Significant deficiency in internal control over compliance and noncompliance Criteria: Reporting requirements within the Head Start grant agreement state that annual and semi-annual reports are required to be submitted. The due date is set by the U.S. Department of Health and Human Services, which for the Community is March 1 for annual reports and June 30 for semi-annual reports. Condition and Context: The Community submitted the annual report, due March 1, 2025, late on April 15, 2025. Additionally, the Community had an on-site review by the Office of Head Start (OHS) during fiscal year 2025. During this review, it was discovered that the Federal Financial Report SF-425 submitted for the reporting period ended November 30, 2023 was submitted August 13, 2024 (165 days after the due date). While this is outside the period under audit, this provides additional context to our finding. We also noted that expenditures reported on the June 30, 2025 semi-annual report did not agree to the general ledger and were overstated by roughly $40,000. Cause: Lack of internal control over reporting. Effect: Failure to follow compliance requirements could result in loss of Federal funding. Questioned Costs: None noted. Repeat Finding: No. We believe the finding to be an isolated instance instance and not a systemic issue. Recommendation: We recommend the Community complies with all reporting requirements. Managements Response: Management agrees with this finding. See Corrective Action Plan.

Finding 2025-005 Lack of Internal Control over Special Tests and Provisions- Character Investigations Federal Agencies: U.S. Department of Health and Human Services Federal Programs: Indian Health Services Compact ALN: 93.210 Award Numbers: 58G970043 Award Years: 2024 and 2025 Type of Finding: Significant deficiency in internal control over compliance and noncompliance Criteria: The Indian Child Protection and Family Violence Prevention Act(25 USC 3207 (c)) requires tribes and tribal organzations that receive funds under the Indian Self-Determination and Education Act (ISDEAA) to conduct an investigation of the chracter of each individual who is emnployed or is being considered for employment in a position that involves regular contact with, or control over, Indian children. The Community must perform required background investigations on individuals who are employed or being considered for employment at Tribal and IHS health care facilities. Condition and Context: We selected a sample of 25 current employees who have regular contract with Indian children. The Community was missing federal background checks for seven of the employees sampled. Cause: Lack of internal control over chracter investigations. Effect: Failure to follow compliance requirements could result in loss of Federal funding. Questioned Costs: None noted. Repeat Finding: No. Recommendation: We recommend that management implement a policy to perform required background checks for all employees that have regular contact with Indian children. Managements Response: Management agrees with this finding. See Corrective Action Plan.

Finding 2024-003 Lack of Internal Control over Activities Allowed or Unallowed and Allowable Costs/Cost Principles Federal Agencies: U.S. Department of the Interior and U.S. Department of Health and Human Services Federal Programs: BIA Compact of Self-Governance (BIA) and Tribal Self-Governance and Determination Cluster (IHS) ALN: 15.022 and 93.210, respectively Award Numbers: GT-OSGT199, A17AV00414, A19AV00379, A20AV00451, A21AV00106, A22AV00088, A23AV00051, and A24AV00302 (BIA) and 58G970043 (IHS), respectively. Award Years: 2014 through 2024 (BIA), 2020 through 2024 (IHS), respectively. Type of Finding: Significant deficiency in internal control over compliance and noncompliance. Criteria: Internal control procedures should be in place to ensure that the payroll accounting system is maintained to be able to accurately record payroll transactions. Payroll transactions should be supported by approved timesheets, pay rates, coding, and deductions should be documented in the personnel files. Condition and Context: The payroll system of the Community lacks internal controls necessary to ensure accurate financial reporting. During our testing of payroll transactions, for any paycheck where deductions were withheld, there was a lack of documentation of approval of the deductions. These errors occurred in 1 out of 18 transactions for the BIA program and 9 out of 46 transactions for the IHS program. We also noted that deductions were being incorrectly calculated. These errors occurred in 1 transaction for the BIA program and 2 transactions for the IHS program. We also noted two additional errors in payroll transactions charged to the BIA program which included an employee’s paycheck not agreeing to the timesheet, which resulted in an overpayment to the employee and a payroll transaction where an employee was underpaid when cashing out accrued leave. We also noted three additional errors in payroll transactions charged to the IHS program, which included an employee being underpaid by $10 per hour for regular hours, an employee being overpaid by $3.34 per hour for regular hours, and an employee missing a documented pay rate for council stipends. Cause: Lack of internal control over payroll transactions. Effect: The lack of internal controls over payroll transactions allows for the potential for misstatement of expenditures due to employees being paid incorrectly. Lack of approval for deductions allows for the potential for employees to have incorrect deductions withheld from their paychecks.   Questioned Costs: Actual and estimated questioned costs were determined to be less than the $25,000 reporting threshold. Repeat Finding: This is a repeat of Finding 2023-005, and since it is a repeat finding we believe this to be a systemic issue. Recommendation: We recommend the Community adhere to their internal control policies to ensure accurate reporting of payroll transactions. Managements Response: Management agrees with this finding. See Corrective Action Plan.

Finding 2020-005 Lack of Internal Control over Procurement Federal Agency: U.S. Department of the Interior Federal Program: BIA 638 Contract, Indian Rights Protection (BIA 638 Contract) and BIA Compact of Self Governance (BIA Compact) CFDA Number: 15.036 and 15.022, respectively Award Number: A16AV00709 and GT-OSGT199, respectively Award Years: 2016 (BIA 638 Contract) and 2009, 2014-2020 (BIA Compact) Type of Finding: Material weakness in internal control over compliance and material noncompliance Criteria: Uniform Guidance requires that entities receiving federal funding must have written policies and procedures related to procurement that meet the criteria listed in 2 CFR 200.318 and 200.320. Condition and Context: During our compliance testing of the programs, it was determined that management did not have adequate supporting documentation to demonstrate that construction projects, equipment and supplies purchases, and professional services went through a formal procurement process. The Community has also not updated the procurement policies and procedures to be in compliance with the Uniform Guidance requirements. Cause: Lack of internal controls over procurement requirements. Effect: Failure to follow compliance requirements could result in loss of federal funding. Questioned Costs: None noted. Costs incurred under the programs appeared reasonable based on our review. However, we were unable to determine if the lowest cost contractor or item was selected. Repeat Finding: This is a repeat of Finding 2019-002 and since it is a repeat finding we believe this to be a systemic issue. Recommendation: We recommend that all necessary purchases go through a formal procurement process to comply with grant requirements and that the Community update their policies and procedures so they meet the criteria listed in 2 CFR 200.318 and 200.320. Management?s Response: Management agrees with this finding. See Corrective Action Plan.

Finding 2020-006 Late Reporting and Noncompliance with Reporting Requirements Federal Agencies: U.S. Department of the Interior, U.S. Department of the Treasury (direct and passed through the State of Alaska), and U.S. Department of Health and Human Services Federal Programs: BIA 638 Contract, Indian Rights Protection (BIA 638 Contract), CARES Act (CARES), and Head Start (HS), respectively CFDA Numbers: 15.036, 21.019, and 93.600, respectively Award Numbers: A16AV00709 (BIA 638 Contract), SLT1062 and 20-CRF-132 (CARES), and 90CI9928-05-04, 90CI9928-04-01, 90HI0013-05-01, and 90H100036-01-02 (HS), respectively Award Years: 2016 (BIA 638 Contract), 2020 (CARES), and 2020, 2018, 2019, and 2020 (IHS), respectively Type of Finding: Material weakness in internal control over compliance and material noncompliance Criteria: Reporting requirements within the grant agreements state that quarterly financial and narrative reports must be submitted within 30 days of end of quarter. The annual narrative report (if required) must be submitted within 90 days after year end. Also, support for reported expenses and approval by management should be available. Condition and Context: The Community did not adhere to the quarterly reporting requirements specified in the grant agreements. During our review of the quarterly and annual reports, where applicable, management was unable to provide us with supporting documentation to determine whether the reports were properly approved, submitted timely, or in agreement with the general ledger. Cause: Lack of internal control over reporting. Effect: Failure to follow compliance requirements could result in loss of Federal funding. Questioned Costs: None noted. Repeat Finding: This is a repeat of Finding 2019-004 and since it is a repeat finding we believe this to be a systemic issue. Recommendation: We recommend that management complies with all reporting requirements. Management?s Response: Management agrees with this finding. See Corrective Action Plan.

Finding 2020-007 Lack of Internal Control over Activities Allowed or Unallowed and Allowable Costs/Cost Principles Federal Agency: U.S. Department of the Interior, U.S. Department of Health and Human Services, and U.S. Department of the Treasury (direct and passed through the State of Alaska) Federal Program: BIA 638 Contract, Indian Rights Protection (BIA 638 Contract), BIA Compact of Self Governance (BIA Compact), Indian Health Services Compact (IHS), and CARES Act, respectively CFDA Number: 15.036, 15.022, 93.210, and 21.019 respectively Award Number: A16AV00709 (BIA 638 Contract), GT-OSGT199 (BIA Compact), 58G970043 (IHS), SLT1062 and 20-CRF-132 (CARES), respectively Award Years: 2016 (BIA 638 Contract), 2009, 2014-2020 (BIA Compact), 2016-2020 (IHS), and 2020 (CARES), respectively Type of Finding: Significant deficiency in internal control over compliance and noncompliance Criteria: Proper internal controls over payroll and current policies require hourly employees to clock in and out for start, lunch and ending hours. Condition and Context: During our testing of payroll transactions charged to the four individual programs listed above, we noted eleven transactions of the 95 tested which lacked proper clock in and clock out times. These improper time entries were corrected by an individual who lacked the necessary supervisory capacity to determine and approve corrections to the time entries. Therefore, approval of these corrections by management could not be substantiated. We also noted four transactions of the 95 tested which lacked time cards and six instances where an individual, other than the employee, clocked in and out for another employee circumventing internal controls. Therefore, managerial approval of hours worked could not be substantiated. Cause: Lack of internal control over payroll transactions charged to the major programs. Effect: Lack of internal control over payroll transactions such as proper clocking in and out and employee timecards could lead to possible fraud or error with employees being paid for hours not actually worked. Questioned Costs: Actual and likely questioned costs are below the reporting threshold of $25,000 Repeat Finding: This is a repeat of Finding 2019-006 and since it is a repeat finding we believe this to be a systemic issue. Recommendation: We recommend that management hold individuals accountable for violation of current polices or implement new software that requires employee thumbprints, facial recognition or other form of control that prevents unauthorized override of time. We also recommend that management maintains copies of all approved timecards in a secure location. Managements Response: Management agrees with this finding. See Corrective Action Plan.

Finding 2020-008 Lack of Internal Control over Activities Allowed or Unallowed and Allowable Costs/Cost Principles and Procurement Federal Agency: U.S. Department of the Interior Federal Program: BIA 638 Contract, Indian Rights Protection CFDA Number: 15.036 Award Number: A16AV00709 Award Year: 2016 Type of Finding: Material weakness in internal control over compliance and material noncompliance Criteria: Allowable cost principles are defined in 2 CFR 200.400 and general procurement standards are defined in 2 CFR 200.318. Condition and Context: In 2019 the Community entered into a professional service contract that allowed a contractor to serve as a sole source vendor to provide supplies and equipment to the program. During our testing of allowable costs charged to the program in 2019 we noted invoices from the contractor requesting reimbursement for the purchase of equipment. There were supporting documents showing the original purchase price of the equipment and the contractor then marked up the cost of the equipment purchased by an additional 20%. We tested an additional sample of transactions paid to this vendor in 2020; however, the vendor no longer supplied any supporting documents that showed the purchase price of equipment. The only information provided was the amount to be paid to the contractor. Per review of the professional service contract there were no changes made to it during 2020; therefore, we are assuming that the Community is still paying a mark-up on all equipment purchased by the contractor. Per discussion with management, they have been unable to get supporting documentation for equipment purchases from the contractor. Cause: Lack of internal controls over procurement standards and allowable cost principles. The Community should have not allowed the contractor to serve as a sole source vendor to the program. By doing so, the Community?s internal procurement processes were circumvented and they had to rely on the contractor to provide supplies and equipment. This resulted in excess costs being charged to the program. Effect: Failure to follow compliance requirements could result in loss of federal funding or questioned costs being incurred, which would result in the Community having to repay funds to the federal government. Questioned Costs: Actual and likely questioned costs are below the reporting threshold of $25,000. Repeat Finding: This is a repeat of Finding 2019-007 and since it is a repeat finding we believe this to be a systemic issue. Recommendation: We recommend that all professional service contracts are reviewed to ensure they meet federal guidelines. Management?s Response: Management agrees with this finding. See Corrective Action Plan.

Criteria: Uniform Guidance requires that entities receiving federal funding must have written policies and procedures related to procurement that meet the criteria listed in 2 CFR 200.318 and 200.326. Condition and Context: During our compliance testing of the program, it was determined that management did not have adequate supporting documentation to demonstrate that construction projects went through a formal procurement process. The Community has also not updated the procurement policies and procedures to be incompliance with the Uniform Guidance. Cause: Lack of internal controls over procurement requirements. Effect: Failure to follow compliance requirements could result in loss of federal funding. Questioned Costs: None noted. Costs incurred under the programs appeared reasonable based on our review. However, we were unable to determine if the lowest cost contractor was selected to work on the projects. Repeat Finding: This is a repeat of Finding 2018-004 and since it is a repeat finding we believe this to be a systemic issue. Recommendation: We recommend that all professional service contractors go through a formal procurement process to comply with grant requirements and that the Community update their policies and procedures so they meet the criteria listed in 2 CFR 200.318 and 200.326. Management?s Response: Management agrees with this finding. See Corrective Action Plan.

Criteria: Federal guidelines require that contractors pay the current prevailing rates of wages as required by the Davis-Bacon Act (40 U.S.C. 3141-3148). Condition and Context: The Community was unable to provide support showing that project contractors had paid current prevailing wages and submitted certified payrolls to the State Department of Labor. During our compliance testing it was determined that management did not have adequate supporting documentation to demonstrate that the contractors had paid prevailing wages or submitted certified payroll reports to the State of Alaska. Cause: Lack of internal controls over prevailing wage requirements. Effect: Failure to follow compliance requirements could result in loss of funding. Questioned Costs: None noted. Repeat Finding: This is a repeat of Finding 2018-005 and since it is a repeat finding we believe this to be a systemic issue. Recommendation: We recommend that contracts for all federally funded projects include language addressing the Davis-Bacon Act (40 U.S.C. 3141-3148) and prevailing wage requirements and that management works with contractors to ensure the requirements are being met. Management?s Response: Management agrees with this finding. See Corrective Action Plan.

Criteria: Reporting requirements within the grant agreements state that quarterly financial and narrative reports must be submitted within 30 days of end of quarter. The annual narrative report (if required) must be submitted within 90 days after year end. Also, support for reported expenses should be available. Condition and Context: The Community did not adhere to the quarterly reporting requirements specified in the grant agreements. During our review of the quarterly reports, it was noted that one of two reports tested were submitted late for NALEMP and one of three reports tested were submitted late for Head Start. Management also could not provide support to show that the annual narrative report for the Head Start program was submitted by the deadline. Management was also unable to provide support for reported expenses on three of the quarterly financial reports that we reviewed. Cause: Lack of internal controls over reporting. Effect: Failure to follow compliance requirements could result in loss of Federal funding. Questioned Costs: None noted. Repeat Finding: This is a repeat of Finding 2018-006 and since it is a repeat finding we believe this to be a systemic issue. Recommendation: We recommend that management complies with all reporting requirements. Management?s Response: Management agrees with this finding. See Corrective Action Plan.

Criteria: 2 CFR 200.450 states that lobbying costs are unallowed costs and cannot be charged to federal awards. Condition and Context: During our review of costs charged to the indirect cost pool, we noted the Community included $28,603 of lobbying expenditures in the indirect cost pool. Management subsequently moved these costs out of the indirect cost pool. Cause: Lack of internal controls over expenditures charged to the indirect cost pool. Effect: Unallowable cost could be charged into the indirect cost pool. Questioned Costs: None noted. As noted above, these costs were subsequently moved out of the indirect cost pool. Repeat Finding: In 2018 the Community received a similar finding (Finding 2018-008). The only difference between the findings is that in the prior year the unallowed costs were related to capital assets instead of lobbying costs. Therefore, we believe this is a repeat finding and a systemic issue. Recommendation: We recommend that management implement policies and procedures to ensure that only allowable costs are charged to the indirect cost pool. Managements Response: Management agrees with this finding. See Corrective Action Plan.

Criteria: Proper internal controls over payroll require employee pay rates to be properly approved and documented in a permanent personnel file. Condition and Context: During our testing of payroll transactions charged to the program we noted one paycheck, out of a sample size of 25, where the employee was not being paid their approved pay rate. The employee received a pay raise and the pay raise was not implemented. Cause: Lack of internal controls over payroll transactions charged to the major program. Effect: Lack of internal control over payroll transactions could lead to unallowable costs being charged to a major program. Questioned Costs: None. The employee in question was being underpaid which did not result in questioned costs. Repeat Finding: This is a repeat of Finding 2018-009 and since it is a repeat finding we believe this to be a systemic issue. Recommendation: We recommend that management implement policies and procedures to ensure that all paychecks are supported by an approved pay rate and that pay rates are reviewed periodically to ensure they match the personnel file. Managements Response: Management agrees with this finding. See Corrective Action Plan.

Criteria: Allowable cost principles are defined in 2 CFR 200.400 and general procurement standards are defined in 2 CFR 200.318. Condition and Context: The Community entered into a professional service contract that allowed a contractor to serve as a sole source vendor to provide supplies and equipment to the program. During our testing of allowable costs charged to the program we noted an invoice from the contractor requesting reimbursement for the purchase of equipment. There were supporting documents showing the original purchase price of the equipment and it appears the contractor had marked up the cost of the equipment purchased. Based on the supporting documentation available it appears that the Community was charged an additional 20% mark-up on the equipment purchased by the contractor. Cause: Lack of internal controls over procurement standards and allowable cost principles. The Community should have not allowed the contractor to serve as a sole source vendor to the program. By doing so, the Community?s internal procurement processes were circumvented and they had to rely on the contractor to provide supplies and equipment. This resulted in excess costs being charged to the program. Effect: Failure to follow compliance requirements could result in loss of federal funding or questioned costs being incurred, which would result in the Community having to repay funds to the federal government. Questioned Costs: Actual and likely questioned costs are below the reporting threshold of $25,000. Repeat Finding: No, and as such we believe this to be an isolated instance. Recommendation: We recommend that all professional service contracts are reviewed to ensure they meet federal guidelines. Management?s Response: Management agrees with this finding. See Corrective Action Plan.

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