COUNCIL OF WESTERN STATE FORESTERS

Criteria Title 2, Code of Federal Regulations (CFR), Subtitle A, Chapter II, Part 200, Subpart D, Cost Principles for Non-Profit Organizations, Section 200.303 states “The non-Federal entity must: (a) 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). (b) Comply with Federal statues, regulations, and the terms and conditions of the Federal awards. (c) Evaluate and monitor the non-Federal entity’s compliance with statues, regulations and the terms and conditions of Federal awards. (d) Take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings. (e) Take reasonable measures to safeguard protected personally identifiable information and other information the Federal awarding agency or pass-through entity designates as sensitive or the non-Federal entity considers sensitive consistent with applicable Federal, state, local, and tribal laws regarding privacy and obligations of confidentiality.” Condition During our testing of the Organization’s expenditures, we noted the following deficiencies in internal controls: 1. 4 of the 50 transactions selected for testing did not include evidence of approval. 2. 3 of the 50 transactions selected for testing were reimbursed to employees at incorrect rates. 3. 2 of the 27 payroll transactions selected for testing were paychecks to employees at the incorrect rate. 4. 4 of the 4 payroll periods Payroll testing, noted in each of the 4 pay periods selected for testing the hours allocated per time sheets did not tie to the GL Cause of Condition The Organization’s internal controls are not properly designed to be in line with Federal guidelines, particularly, CFR 200.303. Repeat Finding Yes. Effect of Conditions The Organization used Federal Awards for expenditures without proper supporting documentation and without obtaining and maintaining adequate approvals. Recommendation We recommend the Organization establish and maintain effective internal control over Federal Awards in order to provide reasonable assurance that the Organization is managing the Awards in compliance with Federal statutes and regulations, as well as the terms and conditions set forth in the specific Federal Award.

Criteria Title 2, Code of Federal Regulations (CFR), Subtitle A, Chapter II, Part 200, Subpart D, Cost Principles for Non-Profit Organizations, Section 200.305 (b1) states “Advance payments to a recipient or subrecipient must be limited to the minimum amounts needed and be timed with actual, immediate cash requirements of the recipient or subrecipient in carrying out the purpose of the approved program or project. The timing and amount of advance payments must be as close is administratively feasible to the actual disbursements by the recipient or subrecipient for direct program or project costs and the proportionate share of any allowable indirect costs.” Additionally, as noted in the terms of the grant agreements, “requests for payment must be submitted on Standard Form 270 (SF-270) Request for Advance or Reimbursement, and must be submitted no more than monthly.” Condition We noted several instances throughout the audit where management had drawn advances on federal awards which exceeded actual federal award expenditures in the same period. Also, while the Organization did submit requests for funds using the SF-270, each SF-270 was submitted as requesting reimbursement, when several were actually requesting advances. Cause of Condition The Organization’s internal controls are not properly designed to be in line with Federal guidelines, particularly, CFR 200.305. Additionally, the Organization lacked proper internal controls to review and approve each SF-270. Repeat Finding No. Effect of Condition The Organization was not in compliance with cash management compliance requirements as stated in 2 CFR 200.305. Recommendation We recommend management implement processes and procedures to adhere to Federal guidelines and only draw funds immediately needed. We also recommend management implement processes and procedures to review each SF-270 form and verify whether the request is an advancement or reimbursement request. We recommend management document the expenditures associated with each reimbursement request, when applicable.

Criteria Nonfederal entities are prohibited from contracting with or making subawards under covered transactions to parties that are suspended or debarred. Condition While the Organization’s internal control policies do not allow for contracting with suspended or debarred entities, the Organization does not document its review or determination as to whether a procurement is or is not awarded to a suspended or debarred business. Cause of Condition The Organization’s internal controls are not properly designed to be in line with Federal guidelines. Repeat Finding No. Effect of Condition The Organization’s lack of internal controls allows for the Organization to enter into procurement contracts with suspended or debarred entities. Recommendation We recommend management update the Organization’s procurement policy so that the Organization reviews and documents to ensure each procurement contract is awarded to an organization which is neither suspended or debarred.