Audit of the Corporation for National and Community Service’s (CNCS) Fiscal Year 2019 Consolidated Financial Statements

Tracking the sequence of SVs/JVs for completeness;

Determining and maintaining relevant documentation to support each SV/JV;

Timely review and approval of SVs/JVs for accuracy and propriety. (modified repeat)

Develop for a more standardized, secure, and automated method to estimate the Trust obligations and Trust Service Award Liability that ensures minimal human errors. As part of the ongoing CNCS’s transition to shared service, coordinate with the service provider to determine methods that would enhance the security and quality of the existing estimation models. (new)

Conduct detailed analysis and validation of data sources.

Compare estimates with subsequent results to assess the reliability of the assumptions and data used to develop estimates.

Establish a thorough and robust quality control process to ensure that the Trust Obligation and Liability Model (TOLM) and Monthly Obligation and Liability Calculator (Calculator) are reviewed by qualified CNCS personnel prior to relying on its outputs to record transactions. All errors identified for which management ultimately decided against making updates to the TOLM or Calculator should be documented along with an explanation as to how management arrived at the final decision;

Review obligation amounts to ensure amounts accurately reflect the status of the obligation;

Ensure obligations are sufficiently supported (i.e., by documentary evidence); and

Coordinate with the Office of the Chief Risk Officer (OCRO) to properly identify the National Service Trust Fund’s financial reporting risks and incorporate those risks into the OCRO’s annual testing of key controls. (modified repeat)

Train, mentor, and work to retain qualified employees;

Implement a peer review process to carry out the necessary quality control reviews of the Trust Obligation and Liability Model and the Monthly Obligation and Liability Calculator. (repeat)

Percentage of CNCS grantees who drawdown funds in advance versus those on a reimbursable basis and their related grant amounts to its grant spending as a whole. If different key programs have different spending patterns, perform this analysis at the program level;

Grantees' incurred but not reported (IBNR) reporting pattern from when the expenses have been incurred to the time those expenses are included the grantees' Federal Financial Reports (FFR). Grantee surveys may be conducted to confirm the reasonableness of an IBNR estimate methodology. When alternative procedures are used, management should provide its data-based analysis to validate its assertion; and

A validation process is established for management to verify the accuracy of the grant accrual, so that management can make any necessary adjustments to improve the precision of the grant accrual and to account for grant advances and payables to ensure the resulting amounts are materially consistent with grantees’ drawdown and spending patterns;

Develop a process to validate grant advances, incurred but not reported and payable estimates. Such validation should be performed for all program elements included in the estimation process and over a few years to show a trend of the estimates. Unusual fluctuations, if any, should be investigated and the research conclusions documented. (modified repeat)

Analyze procurement undelivered orders balances quarterly to verify that balances are still valid for those without financial activities for an extended period. (repeat)

Conduct validation assessment of amounts accrued for the incurred but not reported on a periodic basis. As part of the validation, CNCS should consider the following:

Trend the validation results and adjust the incurred but not reported estimation process to address any recurring significant fluctuations; and

Evaluate the materiality thresholds used in the accrual estimation to ensure it is appropriate to prevent misstatements. The materiality threshold used should be appropriate that, in the aggregate, identified misstatements would not rise to a level that will significantly impact management’s assertions on the financial statements. (new)

Update CNCS policy to recognize and record capitalized costs in the period incurred. (repeat)

Consult with the future shared service provider and other stakeholders to determine the feasibility of procuring and using project management software to track project costs from the inception to completion. The results of the analysis should be documented and made readily available. (new)

Determine the root causes and resolve discrepancies in the grant award amounts recorded in the NGA in eGrants and in Momentum to prevent such differences from occurring in the future. (repeat)

Strengthen controls around the review of expired grant obligations by ensuring that:

Document justifications for all required reports submission extensions granted to the grantee. (repeat)

Establish a requirement for Grant Officer/Portfolio Managers to provided documented certification that all required grantee information has been received, accepted, and documented before the grant is closed out. (repeat)

Inform all Grant Officers/Portfolio Managers to ensure that a reduction in funding to the award of a grant should be documented in eGrants which would result in modified Notice of Grant Awards. (new)

Strengthen financial reporting internal controls and ensure that financial statements accounting line items are reviewed and reconciled to supporting documents prior to recording. The internal control activities should ensure proper posting of Member Payroll related liabilities on the Balance Sheet. (modified repeat)

Strengthen and refine the process for communicating CNCS facility-specific control deficiencies to CNCS facility personnel, and coordinate remediation of the control deficiencies. (repeat)

Strengthen and refine the process for holding contractors accountable for remediation of control deficiencies in CNCS information systems. (repeat)

Develop, implement and document procedures to identify all CNCS grantees that are required to submit single audit reports with their due dates. (new)

Develop a practice to capture the single audit data to assess the effectiveness of the single audit report submission for all its grantees. (new)

Update the Single Audit Resolution Policy to: Reflect the current monitoring process to track all audit findings related to CNCS-funded grants, and   Address CNCS’s responsibilities as the cognizant/oversight agency and how these responsibilities would be carried out. (new)

Consider changes in conditions or programs that require further research and analysis. Update the assumptions when necessary.