CrossPurpose

Finding number: 2024-003 AL Number:10.561 AL Title: Supplemental Nutrition Assistance Program Name of federal agency: U.S. Department of Agriculture Repeat Finding:Yes - 2023-002 Criteria: The Code of Federal Regulations 2 CFR 200.3 1 8(a) states, "the non-Federal entity must have and use docwnent procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward." In addition, per the Code of Federal Regulations 2 CFR 200.214, non-Federal entities are subject to the non-procurement debarment and suspension regulations. The 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. Condition: During our prior year testing, we noted the Organization had not adopted a procurement policy and no procurement procedures were performed in selecting contractors. In the summer of 2024, the Organization adopted a procurement policy compliant with the Code of Federal Regulations 2 CFR 200.214. The policy was formalized, announced, and implemented with the entire Organization's staff. At this time, all current contractors of federal grants were reviewed for eligibility by reviewing them against the debarred, suspended and otherwise excluded list. Management also hired a procurement officer in December 2024. Due to the changes not being in effect for approximately half of 2024, which is the year under audit, this is considered a current year finding. Cause: Procurement policies and procedures were not adopted by the Organization. Possible effect: The Organization may not have received a competitive bid for services, and may have engaged a suspended or debarred contractor. Questioned cost: None Recommendation: We recommend the Organization implement necessary internal controls to ensure a competitive bid process is performed and all vendors are reviewed for suspension and debarment, prior to entering into contracts utilizing federal awards. These internal controls should also include a conflict-of- interest clause with all vendors within contract language. Management agrees with the finding. In the summer of 2024, the Organization adopted a procurement policy compliant with the Code of Federal Regulations 2 CFR 200.214. The policy was formalized, announced, and implemented with the entire Organization's staff. At this time, all current contractors of federal grants were reviewed for eligibility by reviewing them against the debarred, suspended and otherwise excluded list. Views of responsible officials:Management recruited a procurement officer in December 2024 to design and implement best practice procurement processes effective the first quarter 2025. Procurement policies will ensure full compliance with Federal and State requirements. Procurement policies will incorporate clearly defined procedures around all contractors ensuring appropriate selection processes and contractual terms.

Finding number:2024-004 AL number:10.561 and 21.027 AL title:Supplemental Nutrition Assistance Program and Coronavirus State and Local Fiscal Recovery Funds Name of federal agency:U.S. Department of Agriculture and U.S. Department of Treasury Repeat Finding: No Criteria:The Code of Federal Regulations 2 CFR 200.344 states, "the recipient and subrecipient must retain all Federal award records for three years from the date of submission of their final financial report. For awards that are renewed quarterly or annually, the recipient and subrecipient must retain records for three years from the date of submission of their quarterly or annual financial report, respectively. Records to be retained include but are not limited to, financial records, supporting documentation, and statistical records. Condition:During audit testing, it was noted that the Organization had charged expenditures to a federal grant without obtaining or retaining the appropriate underlying support for the transactions. The absence of this documentation represents a failure to meet the record retention and documentation standards required under federal regulations. This gap in documentation undermines the audit trail and raises concerns about the eligibility and allowability of the expenditures. Cause:The deficiency was attributed to ineffective internal controls over the documentation and review process for grant-related disbursements. Specifically, the Organization's formalized procedure was not effectively operating to ensure all expenditures submitted for reimbursement were supported by current and complete documentation. This control lapse allowed unsupported expenditures to be processed without adequate scrutiny. Effect or potential effect:Without proper documentation, the expenditures submitted for reimbursement may be deemed ineligible under federal cost principles. This could result in: - Disallowed costs during audit or federal review, - Reimbursement delays or denials, and - Potential reputational risk or future funding implications.Although no questioned costs were identified, the lack of documentation exposes the Organization to future audit findings and financial risk. Questioned Cost: None Recommendation:We recommend the Organization strengthen its internal controls by implementing a formal documentation review protocol for all expenditures submitted for federal reimbursement. This protocol should include: - Verification that current and complete supporting documentation (e.g., lease agreements, contracts, signed affidavits from participants, etc.) is retained and reviewed prior to submission. - Integration of this review into the monthly and year-end close processes to ensure compliance with 2 CPR§ 200.334 and§ 200.403. - Staff training on federal documentation standards and the importance of maintaining a robust audit trail.By ensuring that all expenses are properly supported, the Organization will enhance compliance, reduce audit risk, and uphold the integrity of its financial reporting. Views of responsible officials:Management agrees with the finding. Management has reinforced the effective execution of existing controls around proper documentation of all expenditures and record retention for these expenditures. Monthly and year-end procedures have been updated to ensure compliance with these procedures.

Finding number: 2023-001 AL number: 10.561 AL title: Supplemental Nutrition Assistance Program Award term: October 29, 2021 through September 30, 2024 Name of federal agency: U.S. Department of Agriculture Name of pass-through entity: Colorado Department of Human Services Repeat finding: Yes - 2022-001 Criteria: The Code of Federal Regulations 2 CFR 200.4 13(a) requires that direct costs be identified specifically with a particular final cost objective, such as a federal award, or other internally or externally funded activity, or be directly assigned to such activities relatively easily with a high degree of accuracy. Condition: During our testing, we noted reimbursement requests were prepared using grant budgets rather than direct costs incurred. Management was unable to determine direct costs related to general and payroll disbursements. As a result, proper revenue recognition could not be determined for financial reporting purposes. Cause: Internal controls have not been implemented to specifically track direct costs incurred under specific grant agreements. Possible effect: The Organization cannot determine direct costs incurred under the grant with a high degree of accuracy. Reimbursement requests do not accurately reflect direct costs incurred by the Organization. Questioned cost: $1,433,992. Recommendation: We recommend the Organization develop procedures to track expenditures of federal awards using the class system within thin their ERP. All invoices for general disbursements paid with federal awards should be reviewed and approved by a grants manager prior to payment and coded to the general ledger by the accounting department. In addition, we recommend implementing procedures to ensure that payroll expenses charged to the grant are based on actual time and effort. Timesheets should be prepared by staff performing grant functions, reviewed and approved by a grants manager, and coded to the general ledger by the accounting department. Views of responsible officials: Effective October 1, 2023, management implemented extensive accounting and documentation controls to ensure full accounting and reporting compliance on direct costs incurred for all federal grants and expenditures. These controls are reviewed and monitored for compliance by management on a periodic basis during the year. Anticipated completion date: December 31, 2023.

AL number: 10.561 AL title: Supplemental Nutrition Assistance Program Award term: October 29, 2021 through September 30, 2024 Name of federal agency: U.S. Department of Agriculture Name of pass-through entity: Colorado Department of Human Services Repeat finding: Yes - 2022-002 & 2022-003 Criteria: The Code of Federal Regulations 2 CFR 200.3 l 8(a) states, "the non- Federal entity must have and use document procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward." In addition, per the Code of Federal Regulations 2 CFR 200.214, non- Federal entities are subject to the non-procurement debarment and suspension regulations. The 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. Condition: During our testing, we noted the Organization had not adopted a procurement policy and no procurement procedures were performed in selecting contractors. Cause: Procurement policies and procedures were not adopted by the Organization. Possible effect: The Organization may not have received a competitive bid for services, and may have engaged a suspended or debarred contractor. Questioned cost: None Recommendation: We recommend the Organization implement necessary internal controls to ensure a competitive bid process is performed and all vendors are reviewed for suspension and debarment, prior to entering into contracts utilizing federal awards. These internal controls should also include a conflict-of- interest clause with all vendors within contract language. Views of responsible officials: Management recruited a procurement officer in December 2024 to design and implement best practice procurement processes effective the first quarter 2025. Procurement policies will ensure full compliance with Federal and State requirements. Procurement policies will incorporate clearly defined procedures around all contractors ensuring appropriate selection processes and contractual terms. Anticipated completion date: March 31, 2025.