THE NEAR EAST/SOUTH ASIA COUNCIL OF OVERSEAS SCHOOLS, INCORPORATED

Finding 2019-002: Timesheets Federal Program: CFDA 19.023 Criteria or Specific Requirement: Title 2 CFR 200.430 ?Compensation ? personal services? requires that charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed, and that these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Additionally, these records must comply with established accounting policies and practices of the non-Federal entity. Condition: We noted all payroll transactions lacked a timesheet or other evidence of proper record-keeping to support the program allocations of salaries and related expenses in the general ledger. Cause: NESA?s current policies do not require employees to complete timesheets for each pay period, and thus do not document the time worked per day allocating to departments, projects and affiliates, as applicable. Effect or Potential Effect: NESA could inadvertently misallocate salaries and wages between its various programs. Questioned Costs: Undetermined. Context: NESA failed to keep adequate time records to support the amounts recorded in its accounting records. Our audit testing in this area consisted of a random sample selection of payroll periods and employees. We consider our sample to be representative of the population, and thus, is a statistically valid sample. The issue is deemed to be systemic. Identification as a Repeat Finding: This is not a repeat finding. Recommendation: We recommend that management enforce its payroll policies, ensure each employee completes a timesheet that pertains to each payroll period, and which documents the allocation of time worked on departments, projects and affiliates (per its policy), and obtain the appropriate supervisory approval. Furthermore, the finance department should prepare and maintain a reconciliation between the program allocations (as documented in the approved timesheets) and the general ledger in order to ensure a full and accurate audit trail of payroll expenditures.

Finding 2019-003: Tracking of Federal Expenses and Preparation of the Schedule of Expenditures of Federal Awards Federal Program: CFDA 19.023 Criteria or Specific Requirement: Title 2 CFR 200.510 ?Financial Statements? requires recipients of Federal funds to 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. Additionally, in accordance with CFR 200.303, the non-Federal entity must "establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework? issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: We experienced significant difficulty in obtaining a SEFA with a reconciliation to Federal support/revenue (as reported in the Statement of Activities). It is management?s responsibility to prepare its SEFA, which contains all required information and appropriately summarizes all Federal expense activity during any given fiscal year. This condition is considered to be a systemic issue. Cause: The significant number of awards received and the complexities related to its cost allocations were contributing factors to the errors noted. Effect or Potential Effect: The SEFA prepared by management contained errors in the allocation of costs to the grants. Questioned Costs: Undetermined. Context: The SEFA was not accurately completed by management. Identification as a Repeat Finding, if Applicable: This is not a repeat finding. Recommendation: We recommend NESA prepare its SEFA on a quarterly basis. It should be prepared by the appropriate accounting personnel, then reviewed and approved by an individual in a supervisory capacity; the SEFA should also be prepared in accordance with the regulations under Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance).

Finding 2019-004: Procurement Federal Program: CFDA 19.023 Criteria or Specific Requirement: Title 2 CFR 200.318 ?General Procurement Standards? states that "the non-Federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided that the procurements conform to applicable Federal law and standards". Furthermore, Title 2 CFR 200 Section 200.319 ?Competition? states that "all procurement transactions must be conducted in a manner providing full and open competition consistent with these standards". Condition: NESA does not maintain a procurement policy. NESA should establish a policy which requires full and open competition for purchases of goods and services of $10,000 (Federal micropurchase threshold) or greater. Throughout our audit, we noted no evidence of procurement procedures performed on any transactions during the fiscal year. Cause: NESA did not have a procurement policy and thus did not perform the prescribed procurement procedures throughout the fiscal year. Effect or Potential Effect: Purchases of goods and services could be made above the prevailing market rates if the prescribed procurement procedures are not adhered to, and thus, there lies the potential that NESA will not receive the best value for its purchases. The procurement process should also allow for an evaluation of potential conflicts of interest with prospective vendors and contractors. Furthermore, failure to perform the proper procurement procedures could result in disallowance of federal expenditures based on lack of fair competition. Questioned Costs: Undetermined. Context: NESA failed to adopt a procurement policy and did not perform any procedures over this area, accordingly, NESA was not in compliance with federal standards. Our audit work in this area consisted of internal control testwork over a random sample of expenditures, as well as substantive testwork over transactions above a defined threshold from select expense accounts that were charged to Federal programs. We consider our samples to be representative of the respective populations, and thus, are statistically valid samples. The issue is considered systemic in nature. Identification as a Repeat Finding: This is not a repeat finding. Recommendation: We recommend NESA draft and implement a procurement policy and consider establishing a threshold to an amount that is reasonable for NESA, with consideration given to the Federal micro-purchase threshold of $10,000. We also recommend that NESA ensure its policy is communicated in a formal manner to all employees, and that management properly enforce compliance with its policy. All procurement actions should be clearly documented in writing (or electronic format), and maintained in the selected vendor/contractor files.

Finding 2019-005 Suspension and Debarment Federal Program: CFDA 19.023 Criteria or Specific Requirement: Title 2 CFR 200.313 ?Suspension and Debarment? states that "non-federal entities are subject to the non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, 2 CFR part 180. These regulations restrict awards, subawards, and contracts with certain parties that are debarred, suspended, or otherwise excluded from or ineligible for participation in Federal assistance programs or activities". Recipients of U.S. Government funds must adhere to specific requirements on screening all potential vendors, suppliers and sub-contractors/grantees to ensure the organization is not conducting business with excluded parties (as defined by the U.S. Government); policies and procedures must be developed, and all screening activities must be documented in writing. Condition: NESA does not maintain policies and procedures with respect to suspension and debarment; we also noted that NESA did not perform any screening activities during the year under audit. Our audit procedures consisted of substantive testwork over a sample of expenditures paid during the year that were selected based on a representative sample of the population. The condition appeared to be systemic in nature. Cause: NESA did not have polices and procedures in place throughout the year to perform the screening process. Effect or Potential Effect: Failure to screen potential vendors, suppliers, employees, fellows or other non-contracted payees increases the possibility that U.S. Government funds may inadvertently be provided to individuals or organizations deemed to be excluded parties by the U.S. Government. Questioned Costs: Undetermined. Context: Payments were made throughout the year by NESA without performing the screening process. Our audit work in this area consisted of internal control testwork over a random sample of expenditures, as well as substantive testwork over transactions above a defined threshold from select expense accounts that were charged to Federal programs. We consider our samples to be representative of the respective populations, and thus, are statistically valid samples. The issue is considered systemic in nature. Identification as a Repeat Finding: This is not a repeat finding. Recommendation: We recommend management of NESA develop a policy to address the screening process for all contracted and non-contracted transactions including, but not limited to, with vendors, suppliers, employees, and fellows. Furthermore, we recommend that management communicate these policies and procedures to employees of the organization, and it should stress the importance of documenting compliance with the ?Suspension and Debarment? provisions. Finally, the screening of potential vendors and suppliers should be completed (and documented) prior to entering into relationships with third parties and/or making payments.