Social and Environmental Entrepreneurs, Inc.Non-Profit

Criteria: SEE must establish internal control procedures over compliance with provisions of 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), that require, among other things, that direct charges to federal awards be for allowable costs. To be an allowable cost, charges must be supported by appropriate documentation and be properly approved. The specific requirements for allowable activities are unique to each Federal Program and are found in the laws, regulations, and the provisions of each contract or grant agreement pertaining to the federal program. Section 200.340(8)(i) of the Uniform Guidance, Standards for Documentation of Personnel Expenses, states, “(1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated.” Condition/context: During our audit, we noted that the allocation methodology used to distribute payroll and payroll-related expenses across programs and funding sources was not adequately documented or supported. There was an inconsistency of formal effort reports for this specific grant to substantiate the basis for the allocations of expenses charged to the federal programs. Our testing noted that, for 13 of the 40 payroll transactions sampled for ALN 21.027, timesheets did not adequately support the charges to grants. Additionally, in the 15 payroll transactions tested for ALN 66.615, there was no sufficient documentation to support the total fringe benefit amounts charged to the grants. These deficiencies limit our ability to verify that salary and total fringe benefits charged to the grants are based on actual time and effort spent. The samples selected for testing were not chosen using a statistical sampling technique. Cause: This deficiency appears to result from insufficient controls over payroll cost allocation and documentation. SEE needs to enforce a formalized process requiring all project level employees to document and certify their time and effort spent on grant-related activities, similar to SEE Operations employees. Questioned Costs: Unknown Effect: Unsupported payroll allocations increase the risk of noncompliance with grant requirements and may lead to questioned costs during audits. The absence of supporting HR documentation increases the risk of unauthorized or inaccurate salary payments. Recommendation: We recommend that SEE implement a formal time and effort reporting system that requires employees to document and certify the percentage of time spent on grant-funded activities. Repeat Finding: Yes. See Finding 2023-003. Views of Responsible Officials: Management agrees with the finding and procedures have been implemented to address the related issues.

Material Weakness in Internal Control over Compliance: Other—Schedule of Expenditure of Federal Awards Preparation Criteria: 2 CFR 200.510 indicates that the auditee must prepare a Schedule of Expenditures of Federal Awards (SEFA) for the period covered by the auditee’s financial statements which must include the total federal awards expended as determined in accordance with 200.502 Basis for Determining Federal Awards Expended. Per 2 CFR 200.502, the determination of when a federal award is expended should be based on when the activity related to the federal award occurs. Generally, the activity pertains to events that require the non-Federal entity to comply with federal statutes, regulations, and the terms and conditions of federal awards, such as: expenditure/expense transactions associated with awards. In addition, 2 CFR Part 200.303 requires the program establish and maintain effective internal controls over federal awards that provide reasonable assurance of compliance with federal statutes, regulations, and the terms and conditions of federal awards. Condition: SEE did not include an existing federally funded contract during the preparation of the SEFA for the year ended December 31, 2023. Cause: SEE was not aware that the contract should be included in the SEFA. Effect or Potential Effect: Due to the control deficiencies described above, if not for auditor assistance, inaccurate expenditures would have been reported to the Federal government. In addition, these errors could result in improper selections of major program(s) for the single audit. Questioned costs: No questioned costs were identified as a result of this compliance finding. Recommendation: We recommend that SEE establish formal procedures to ensure federally funded contracts are included in the SEFA as expenditures. Views of responsible officials and planned corrective actions: Management acknowledges the omission of the federally contract from the auditee’s prepared SEFA. Management is committed to properly preparing the SEFA, and to address this oversight, management will identify trainings for accounting personnel related to SEFA reporting and for those reviewing the schedule, to ensure its accuracy.

Information on the Federal Program: Assistance Listing Number: 93.686—Ending the HIV Epidemic: A Plan for America—Ryan White HIV/AIDS Program Parts A and B. Pass‐Through Entity: State of Mississippi. Award Number: SG‐2199 R2. Compliance Requirements: Activities Allowed or Unallowed Type of Finding: Material Noncompliance and Material Weakness in Internal Control over Compliance. Criteria: As stated in 2 CFR 200.430, part g, subsection 1, line vii, “budget estimates (meaning, estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards.” 2 CFR 200.430 specifies that charges must be based on records that accurately reflect the work performed. 2 CFR 200.430, part g, subsection 1, line iii further specifies that “these records must reasonably reflect the total activity for which the employee is compensated by the recipient or subrecipient, not exceeding 100 percent of compensated activities.” Condition: SEE charged personnel service cost to the contract based on budgeted estimates and did not track actual hours spent on the federally funded contract for the year ended December 31, 2023. Cause: Exempt employees need to track hours similar to non-exempt employees for federal grants. Effect or Potential Effect: As a result of the identified control deficiencies, there is a risk that personnel service costs charged to federal awards may not accurately reflect the actual work performed. This could lead to unallowable or unsupported costs being billed to federal contracts, potentially resulting in questioned costs or noncompliance with federal regulations. Questioned costs: $72,765 Recommendation: We recommend that SEE establish and implement standardized timekeeping procedures requiring all employees whose salaries are charged to federal contracts to submit accurate and complete timecards that reflect the actual hours worked. Views of responsible officials and planned corrective actions: Management acknowledges the oversight in not utilizing timecards for salaried employees whose compensation is charged to federal contracts. To strengthen internal controls and ensure compliance with applicable federal regulations, management is committed to implementing corrective measures. As part of this effort, management will update existing policies and procedures, and will identify and provide targeted training for accounting personnel responsible for allocating salary charges to federal contracts.