HUMAN SERVICES CAMPUS, INC

Criteria: The Uniform Guidance requires nonfederal entities that receive federal funding to identify in its general ledger accounts the specific expenses that are paid for by each federal assistance program. To help ensure that grants receivable, deferred revenue and the expenses reported on the Schedule of Expenditures of Federal Awards are accurate, all expenses charged to federal and state contracts should be specifically identified in the general ledger system, through the use of funds or QuickBooks classes, and these specific identified expenses should be reconciled to the amounts reported to the grantor and reimbursed and further reconciled to the full award to ensure any grants receivable will ultimately be reimbursed from the grantor. Condition: The Organization tracks its federal and state contract expenses through a combination of classes within QuickBooks and spreadsheets outside of the accounting system but does not fully allocate costs specifically identified to a contract to a separate class or other distinguishing account code specific to each contract. As a result, significant effort was required by the organization during the audit process to reconcile specific expenses with the reimbursement requests and errors were made in the originally provided Schedule of Expenditures of Federal Awards. The originally provided Schedule of Expenditures of Federal Awards indicated $1,530,003 for the Coronavirus State and Local Fiscal Recovery Funds program, passed through Maricopa County, Arizona, assistance listing number 21.027 and $288,532 for the Continuum of Care Program, Assistance Listing Number 14.267 whereas the amounts reported to the grantor, the total expenses, and the corresponding drawdowns

for fiscal year 2023, and what therefore should be included on the Schedule of Expenditures of Federal Awards, totaled $1,996,449 and $552,598 for these programs, respectively. In addition, a total of $73,978 was recorded as a grant receivable, but not reimbursed by the grantor or requested for reimbursement for the HUD Continuum of Care program that was in excess of the total federal award and therefore should not have been recorded as a grant receivable. Cause and Effect: The organization does not fully utilize its accounting system to track federal and state contract expenses on an ongoing basis throughout the fiscal year. In addition, reports submitted to the grantor are not periodically reconciled to a complete list of allowable expenses incurred and to the total award and required match. If a specific account code structure is utilized to track specific program expenses, then reimbursement and other reports should be reconciled directly to the underlying general ledger accounts. Without tracking these expenses within the general ledger by program, errors in reporting to the grantor could be made and amounts reported as grants receivable and deferred revenue, and amounts reported on the Schedule of Expenditures of Federal Awards may not be accurate.

Auditors’ Recommendations: The Organization should establish separate classes within QuickBooks for each federal and state contract and each request for reimbursement should be reconciled to the total of all expenses within this class. Further, an overall reconciliation should be performed where the total award amounts are compared to total reimbursements requested and to any required match.

Criteria: The Uniform Guidance requires nonfederal entities that receive federal funding to identify in its general ledger accounts the specific expenses that are paid for by each federal assistance program. To help ensure that grants receivable, deferred revenue and the expenses reported on the Schedule of Expenditures of Federal Awards are accurate, all expenses charged to federal and state contracts should be specifically identified in the general ledger system, through the use of funds or QuickBooks classes, and these specific identified expenses should be reconciled to the amounts reported to the grantor and reimbursed and further reconciled to the full award to ensure any grants receivable will ultimately be reimbursed from the grantor. Condition: The Organization tracks its federal and state contract expenses through a combination of classes within QuickBooks and spreadsheets outside of the accounting system but does not fully allocate costs specifically identified to a contract to a separate class or other distinguishing account code specific to each contract. As a result, significant effort was required by the organization during the audit process to reconcile specific expenses with the reimbursement requests and errors were made in the originally provided Schedule of Expenditures of Federal Awards. The originally provided Schedule of Expenditures of Federal Awards indicated $2,813,323 for the Emergency Solutions Grant Program passed through the City of Phoenix, Assistance Listing Number 14.231 and zero for the Coronavirus State and Local Fiscal Recover Funds, passed through the City of Phoenix, Assistance Listing Number 21.027, Upon submission of the fiscal year ending June 30, 2023 Single Audit Reporting Package to the City of Phoenix, the Organization was informed that the amounts billed to and paid by the City of Phoenix for the Emergency Solutions Grant Program and the Coronavirus State and Local Fiscal Recovery Funds were $297,395 and $2,563,446, respectively. As a result of this error, the Single Audit reports and Schedule of Expenditures of Federal Award required resubmission by the external auditors.Cause and Effect: The organization does not fully utilize its accounting system to track federal and state contract expenses on an ongoing basis throughout the fiscal year. In addition, reports submitted to the grantor are not periodically reconciled to a complete list of allowable expenses incurred and to the total award and required match. If a specific account code structure is utilized to track specific program expenses, then reimbursement and other reports should be reconciled directly to the underlying general ledger accounts. Without tracking these expenses within the general ledger by program, errors in reporting to the grantor could be made and amounts reported as grants receivable and deferred revenue, and amounts reported on the Schedule of Expenditures of Federal Awards may not be accurate. In addition, the Single Audit required resubmission to correct for these errors. Auditors’ Recommendations: The Organization should establish separate classes within QuickBooks for each federal and state contract and each request for reimbursement should be reconciled to the total of all expenses within this class. Further, an overall reconciliation should be performed where the total award amounts are compared to total reimbursements requested and to any required match.

Criteria: The Uniform Guidance, 2 CFR 200.430, requires that payroll charges be based on actual costs incurred and accurately reflects the work performed. Further, documentation must be maintained that supports payroll related costs that are allocated to more than one federal program or to a federal program and nonfederal programs.

Condition: We selected thirty-five payroll transactions charged to the program with thirty-five different employees. Of these thirty-five transactions, the Organization did not charge 100% of the employees’ payroll to the program for fourteen employees, indicating that the remaining amount was charged to other federal and nonfederal programs. The Organization did not maintain detailed timesheets or time studies to support the actual time spent on the activities funded by the Coronavirus State and Local Fiscal Recovery Funds program that corresponded to the percentage of time charged to this program for each employee. Our sample of payroll transactions totaled $41,701 charged to the program of the total wages of these employees for these pay periods selected of $59,886. Cause and Effect: The Organization has not implemented procedures that require payroll costs that are allocated to multiple programs be supported by detailed documentation (such as timesheets or recent time studies) supporting the allocation. As a result, costs could be charged to federal programs that do not coincide with actual work performed by the employee.

Auditors’ Recommendations: The Organization should establish policies to ensure that payroll costs charged to multiple departments or programs be based on actual time incurred by each employee and that the allocation be supported by time and attendance records.