CENTER FOR INDEPENDENCE OF INDIVIDUALS WITH DISABILITIES, INC.Non-Profit

Material Weakness in Internal Control over Compliance and Material Instance of Noncompliance (Scope Limitation) Federal Agency: U.S. Department of Health and Human Services Federal Program: Centers for Independent Living Assistance Listing Number: 93.432 Direct Award Numbers: 2322CAILCL-00 and 2338CAILCL-00 Pass-Through Entity: California Department of Rehabilitation Grant Identifying Number: 32594 Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles and Period of Performance – Payroll Expenditures, Cash Management and Reporting Criteria: Pursuant to 2 CFR §200.303, the Organization is required to establish and maintain effective internal control over the federal award that provides reasonable assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Under 2 CFR §200.403 and 2 CFR §200.405, costs charged to the Federal award must be allowable, allocable, reasonable, and adequately documented. Under 2 CFR §200.403(h) and 2 CFR §200.309, costs must be incurred within the approved period of performance. Under 2 CFR §200.305, for cash management using the reimbursement method, the Organization must maintain records sufficient to support amounts requested for reimbursement and demonstrate that reimbursement requests are based on allowable program expenditures. Under 2 CFR §200.328 (financial reporting) and §200.329 (performance reporting) recipients are responsible for monitoring activities under federal awards and must submit required performance and financial reports at the intervals required by the federal award, which may be no more frequent than quarterly and no less frequent than annually. Condition and Context: The Organization did not have adequately designed internal controls over the review and approval of allowable payroll activities and payroll expenditures, cash management activities and federal reporting requirements. Specifically, there were no documented review and approval procedures or supervisory controls in place to ensure the accuracy and completeness of time and effort tracking of payroll expenditures, reimbursement requests or financial reports under the federal program. Additionally, sufficient appropriate audit evidence was not available to support compliance with the Activities Allowed or Unallowed and Allowable Costs/Cost Principles-Payroll Expenditures, Cash Management and Reporting compliance requirements. The lack of documentation and supporting records resulted in a scope limitation that prevented the auditors from performing necessary procedures to determine whether the Organization complied with applicable federal requirements related to allowed or unallowed payroll activities and allowable costs/cost principles for payroll expenditures, cash management transactions and financial reporting submissions for the population selected for testing. The condition affected the administration of the Centers for Independent Living federal program for the fiscal year ended September 30, 2025.Cause: Management did not design and implement documented internal controls requiring supervisory review and approval of allowable payroll activities and payroll expenditures, cash management activities and federal financial reporting. In addition, management did not maintain adequate supporting documentation to demonstrate compliance with federal requirements. Effect: The lack of effective internal controls increased the risk that errors, omissions, or noncompliance related to allowed or unallowed payroll activities and allowable costs/cost principles for payroll expenditures, cash management and reporting could occur and not be detected in a timely manner. Furthermore, because sufficient appropriate audit evidence was unavailable, the auditors were unable to determine whether the auditee complied with applicable federal compliance requirements related to - allowable payroll activities and payroll expenditures, cash management and reporting. Questioned Costs: Questioned costs could not be determined due to the scope limitation. Repeat Finding: No Recommendation: We recommend that management design and implement formal internal controls over - allowable payroll activities and payroll expenditures, cash management and reporting activities, including documented supervisory review and approval procedures for all time and effort tracking of payroll expenditures, federal reimbursement requests and financial reports. Management should also establish policies and procedures to ensure adequate supporting documentation is retained and readily available to support compliance with federal program requirements and facilitate audit testing. This should include comprehensive training for staff involved in federal program administration, regular monitoring to ensure controls are consistently applied, and periodic internal audits to assess the effectiveness of compliance systems. Views of Responsible Officials: Management Position: Management agrees with this finding. Adequate internal controls over payroll, cash management, and federal reporting were not in place during FY2025 as a direct result of inconsistencies in procedures and internal controls.Corrective Actions:  Accountability & Role Clarity: The Executive Director and Program Manager have mapped compliance requirements for each federal award—including expenditure review, reporting, receivables, and deliverables—and assigned clear ownership across management positions to eliminate single points of failure and reinforce segregation of duties.  Training & Ongoing Monitoring: All management staff will receive annual training on federal grant requirements (allowable/unallowable costs, period of performance, cash management, and reporting) at the start of each fiscal year. Monthly monitoring meetings among the Executive Director, Program Manager, and Accountant will precede Finance Committee meetings to review grant spending. Periodic internal reviews and a final year-end reconciliation will be conducted. Documentation & Continuity: All grant-related records will be maintained on a shared organizational drive accessible to all responsible staff. Formal onboarding and off boarding procedures for federal grant management will be developed to ensure continuity regardless of personnel changes. The Finance Manual will be updated to reflect all procedures.  Hood & Strong has been retained suggests proper internal controls necessary to achieve full federal compliance. All federal award information will be regularly reported to the Board of Directors.

Material Weakness in Internal Control Over Compliance and Instance of Noncompliance - Missing Supporting Documentation for Tested Expenditures Federal Agency: U.S. Department of Health and Human Services Federal Program: Centers for Independent Living Assistance Listing Number: 93.432 Direct Award Numbers: 2322CAILCL-00 and 2338CAILCL-00 Pass-Through Entity: California Department of Rehabilitation Grant Identifying Number: 32594 Compliance Requirements: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Period of Performance – Nonpayroll Expenditures Criteria: Pursuant to 2 CFR §200.303, the Organization is required to establish and maintain effective internal control over the federal award that provides reasonable assurance that the Organization is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Under 2 CFR §200.403 and 2 CFR §200.405, costs charged to the Federal award must be allowable, allocable, reasonable, and adequately documented. Under 2 CFR §200.403(h) and 2 CFR §200.309, costs must be incurred within the approved period of performance. Condition and Context: The Organization lacked documented review and approval controls over activities allowed or unallowed, allowable costs/cost principles, and period of performance for nonpayroll expenditures. In addition, 3 of 40 nonpayroll expenditure transactions tested were not supported by adequate documentation to demonstrate the costs were allowable and incurred within the approved period of performance. Cause: Management did not design and implement documented review and approval controls over the applicable compliance requirements or procedures to ensure supporting documentation was obtained and retained for Federal expenditures. Effect: The lack of effective internal controls increased the risk that errors, omissions, or noncompliance related to activities allowed or unallowed, allowable costs/cost principles, and period of performance for nonpayroll expenditures could occur and not be detected in a timely manner, resulting in questioned costs and potential repayment of Federal funds. Questioned Costs: Undetermined. Repeat Finding: Yes. Reference number 2024-002. Recommendation: We recommend management design and implement documented review and approval controls over the applicable compliance requirements and require supporting documentation for Federal expenditures before costs are charged to the Federal award. This should include comprehensive training for staff involved in federal program administration, regular monitoring to ensure controls are consistently applied, and periodic internal audits to assess the effectiveness of compliance systems. Views of Responsible Officials: Management Position: Management agrees with this finding and acknowledges it as a repeat of Finding 2024-002. Systemic gaps in documentation practices under prior financial management resulted in insufficient supporting documentation for three of forty transactions tested. Corrective Actions:  Immediate Control Reinforcement & Training: The Executive Director and Program Manager reviewed each federal award to identify allowable cost categories, applicable periods of performance, and required documentation standards. Funders were engaged directly to clarify documentation requirements; at the April 14 all-staff meeting, a funder provided comprehensive training on reporting and compliance. Additional funder-led training sessions for management and all staff are underway.  Monitoring & Internal Audit: Monthly meetings among the Executive Director, Program Manager, and Accountant review grant spending and federal compliance. Written corrective action plans are developed for each identified noncompliance area. The Accountant will maintain current budget tracking with immediate notification to the Executive Director of discrepancies. All findings are reported to the Board monthly or by special session. Federal grant compliance is incorporated into relevant staff performance evaluations.  Documentation & Formalization: CID will implement a dual-storage documentation methodology combining a shared drive and a document management system (DMS) to ensure that all grantrelated expenditures are fully supported and readily retrievable. All financial files will be organized within a confidential folder structure using a standardized naming convention that includes vendor name, date, and grant code, with subfolders categorized by expense type. Copies of all supporting documentation including invoices, receipts, timesheets, and allocation records will be maintained in both the shared drive and the DMS to ensure redundancy and accessibility. The Executive Director, Accountant, and Program Manager will share responsibility for filing grant documentation in accordance with each grant's reporting deadline, with no costs posted to a grant prior to confirmation that adequate support has been filed and is retrievable. This structured methodology will ensure that CID can readily produce complete documentation for any audited expenditure and that unsupported costs are not charged against any grant funding source.  Finance documentation processes have been reviewed with the Accountant; Hood & Strong is providing Executive Director training on the FundEZ cloud platform. All updated procedures will be reflected in the Finance Manual.

Internal Control over Compliance Significant Deficiency Federal Grantor: U.S. Department of Health and Human Services Federal Program: Centers for Independent Living Assistance Listing Number: 93.432 Criteria: 2 CFR 200.303 (Uniform Guidance) – Internal Controls is the regulation that requires Federal entities receiving Federal awards to establish and maintain effective internal controls over those awards to ensure compliance with Federal statutes, regulations, and the award terms. These controls must include processes to monitor compliance, take prompt action on non-compliance, and safeguard sensitive information. Condition and Context: Internal controls designed relating to the major program’s direct and material compliance requirements were not operating effectively. Cause: Management was not following the Organization’s approved control activities for federal awards. Effect: Without effective internal controls, material non-compliance due to error or fraud could occur and not be detected. Questioned Costs: None. Context: We tested internal control over compliance for the direct and material compliance requirements of the Organization’s major program.Recommendation: We recommend management review and reinforce the Organization’s established control activities related to federal awards. This should include comprehensive training for staff involved in federal program administration, regular monitoring to ensure controls are consistently applied, and periodic internal audits to assess the effectiveness of compliance systems. We also recommend documenting all significant control activities and monitoring procedures, including review and approval, for future audit purposes. By strengthening adherence to approved control activities, the Organization will reduce the risk of potential non-compliance with federal requirements. Views of Responsible Official: Immediate Control Reinforcement and Staff Training - The Executive Director and the Program Manager have already started identifying specific areas of each contract and grant for federal awards. The Executive Director will call a meeting between all managers to go over each contract and grants together with information that has already been reviewed. It will be important to observe specific instances when controls were created, and documentation was not accurate. Staff will be trained regarding the agency budget, and each role and responsibility of their program to better understand how their service delivery affects organizational funding. Monthly monitoring of grant funding from all managers will be important for transparency and prudent decision making. All managers will receive frequent training to keep up with any changes or new processes that will impact federal funding. Monitoring and Periodic Internal Auditing - The Executive Director, Program Manager, and Finance manager will meet every month before the Finance Committee meeting to go over the progression of spending. The Executive Director and Finance Manager will keep record of all information that will be helpful for the next audit regarding federal grants. Written corrective action plans will be created for each area of noncompliance. Finance Manager will be responsible for maintaining accurate budget updates and will inform Executive Director of any updates and changes as soon as they happen to ensure full transparency and preparation. Failure to do so will result in disciplinary consequences. All information will be presented to the Board of Directors whether at the monthly Board meeting or at the request for a special meeting. Documentation and Formalization - The Executive Director will meet with the Finance Manager to understand what process is used for quality assurance and documentation the finance staff uses. Any improvements necessary will be implemented as soon as possible after evaluating all processes. An evaluation of the software used for tracking all grant funding will be done and any quality assurance improvements will be implemented as soon as possible. Federal grants compliance adherence will be included in performance reviews and documented.