Public Law CenterNon-Profit

(2023-002) Allowable Costs Federal Agency: U.S. Department of Treasury CFDA No.: 21.027 Federal Program: Coronavirus State and Local Fiscal Recovery Funds Federal Award Year: 2023 Control Category: Allowable Costs Questioned Costs: $371,621 Condition The Center billed $852,359 to the State Bar of California for the above mentioned grant during the year ended December 31, 2023. Of the total costs charged, $694,940 was for payroll and benefit costs. The Center provided a detail of quarterly expenses by employee that totaled $603,238, leaving $91,702 of questioned costs. From the $603,238 of employee costs, we selected a sample of 20 individual payroll expenses covering both grants and two quarters. We then obtained the employee’s personnel action form and timesheet to determine if the time billed to the grant was supported by the timesheet. In situations where the employee completed a timesheet, we identified differences between what was allocated to the grant and what was reported on the timesheet. For other employees, we noted that no timesheet was retained to support the allocation. Criteria 2 CFR 200.430(i), Standards for Documentation of Personnel Expenses, states, in part: “Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed…” Charges must “support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award;…” And “budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards.” Cause The Center's calculation of payroll allocated to the grant is not reconciled to the actual hours reported by the employee on their individual timesheet, and in many cases no timesheet is maintained by the employee. Effect Payroll costs allocated to the program are not supported by the Center’s accounting records. Questioned Costs We identified $52,780 of unsupported allocations to the grant from the sample selected, which extrapolates to a possible error of $279,919. Additionally, as previously reported, $91,702 of costs allocated to the grant were not supported by the accounting records. The total questioned costs are $371,621. Per discussion with Center staff, the State Bar of California does not require the payroll allocation to be supported by evidence of actual time spent on the grant. Recommendation We recommend that the Center allocate time to the grants based on actual hours worked per the employees' timesheets to comply with the federal guidelines. Management Response Beginning in March of 2024, when the Center received the 2022 Single Audit findings, the Center has been charging personnel costs to the federal program based on actual time recorded in the organization’s case management software. On a quarterly basis, the Unit Heads, CFO, CEO/ED, and Chief Legal Program Officer review the hours to ensure accuracy and completeness. Management notes that this finding involved the period of time before the Center had submitted its Corrective Action Plan (which was on March 28, 2024).

(2023-002) Allowable Costs and Procurement Federal Agency: Environmental Protection Agency CFDA No.: 66.458 Federal Program: Drinking Water State Revolving Fund Federal Award Year: 2023 Control Category: Procurement, Suspension and Debarment Condition We selected three contracts for testing procurement, suspension, and department requirements. We were unable to verify the District reviewed whether or not two of the vendors were eligible to do work with the federal government because the District did not retain evidence of verifying suspension and debarment. Criteria 2 CFR 200.320 Methods of Procurement includes several required procurement procedures including competitive bidding and verification that vendors re not suspended or debarred from working with the federal government. Cause The District did not retain evidence of verifying suspension and debarment for the contract selected. Effect We were able to subsequently verify that the vendors were not suspended or debarred as of January 2025. Management Response The District has updated its Standard Operating Procedures (SOP) document for the Expenditure of Federal Funds to clearly require that evidence be retained to demonstrate all contractors utilized were not suspended or debarred. The revised SOP was provided. The audit finding and resulting change to the SOP has been discussed with all people having expenditure authority at the District. Management will monitor this issue regularly to ensure full compliance.

(2022-003) Allowable Costs Federal Agency: U.S. Department of Treasury CFDA No.: 21.027 Federal Program: Coronavirus State and Local Fiscal Recovery Funds Federal Award Year: 2022 Control Category: Allowable Costs Questioned Costs: $118,513 Condition The Center charged payroll expenses to the program based an allocation and did not adjust the charges to reconcile to actual time documents per employee timesheets. Criteria 2 CFR 200.430(i), Standards for Documentation of Personnel Expenses, states, in part: “Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed…” Charges must “support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award;…” And “budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards.” Cause The Center's calculation of payroll charged to the grant is not reconciled to the actual hours reported by the employee on their individual timesheet. Effect Payroll costs charged to the program were greater than amounts supported by the documentation Questioned Costs There were questioned costs in the amount of $19,688 for the sample selected, which was extrapolated to $118,513 when the error rate was applied to the personnel costs not tested. Recommendation We recommend that the Center charge time to the program based on actual hours worked per the employees' timesheets. Management Response Personnel costs will be charged to the program based on actual time recorded in the organization’s case management software. Hours will be audited quarterly to ensure accuracy and completeness. The Center notes that the grantor, the State Bar of California, never requested the Center to charge payroll expenses to the program based on actual time documents, nor had they ever noted this discrepancy during their periodic audits of the program.

(2022-004) Allowable Costs and Procurement Federal Agency: U.S. Department of Treasury CFDA No.: 21.027 Federal Program: Coronavirus State and Local Fiscal Recovery Funds Federal Award Year: 2022 Control Category: Allowable Costs and Procurement, Suspension and Debarment Questioned Costs: $804.05 Condition The Center did not retain evidence of competitive bidding or evidence of verifying suspension and debarment for the two contracts selected for testing. Additionally, the Center did not retain invoice support and documentation of approval for two disbursements selected for testing. Criteria 2 CFR 200.403 Factors Affecting Allowability of Costs, states, in part that costs “be adequately documented”. 2 CFR 200.320 Methods of Procurement includes several required procurement procedures including competitive bidding and verification that vendors re not suspended or debarred from working with the federal government. Cause The Center did not retain evidence of bidding, suspension and debarment, or invoice documentation for certain purchases. Effect We are unable to determine if the costs are allowable in accordance with the Uniform Guidance. Management Response The Center will retain evidence of competitive bidding, unless an emergency or other situation precluding the delay of competitive bidding has arisen (in which case, the Center will retain the evidence and rationale justifying the sole source contract). The Center will retain verification of suspension and debarment for all potential contract service providers. The Center notes that one of the contracts selected for testing arose during an emergency situation (flooding). CFO will ensure that all invoices and supporting documentation are retained. ED and/or Director of Legal Services(depending on amount of expenditure, both may be required) will approve electronic payments inBill.com. Approval of expenses paid with paper checks will be indicated by signature of checks after reviewing accompanying support.