Audit 10641

Failure to inform auditors of the need for a single audit. Federal programs impacted: All ALNs, see SEFA. (General) Questioned Costs: None, NA Condition: The Clinic expended more than $750,000 in federal awards, triggering a single audit requirement and did not bring this to the auditors attention during the audit. The Clininc failed to properly maintain appropriate records to determine the need for a single audit as required by Uniform Guidance. Criteria: 2 CFR section 200.508(b)&(d) states that one responsibility of the auditee is to prepare appropriate financial statements, including the SEFA in accordance with 200.510. Part (d) states they must provide auditor with information as needed to perform the audit required. See also section 99.300(a). Cause: The Clinic did not have proper controls in place to determine the need for a single audit as required by the Uniform Guidance. Effect: Engagement letter and fees had to be reevaluated, and the nature, timing, and extent of the audit were impacted by the additional requirement. Recommendation: We recommend that the Clinic develops and implements policies and procedures to properly prepare the SEFA. Management Response: Management stated they will do a better job of tracking federal expenditures for the next audit year as they do not want to trigger a single audit again knowingly or otherwise and do not want any delays in the audit like this year.

Failure to properly track grant expenditures. Federal programs impacted: 93.958 Block grants for community mental health services, 93.558 TANF DYS Questioned Costs: None Condition: The Clinic expended more than $750,000 in federal awards, triggering a single audit requirement, however when asked to prepare a SEFA/SESA multiple attempts were made and numbers changed numerous times throughout the audit. Client is unable to distinguish co-mingled federal and state funding and expenditures for DYS grants, one of the major programs tested. Client is able to maintain overall expenditures, but not on a segregated level. Appears tracking was done in the same manner as other program expenses. Client failed to maintain proper records to segregate federal and state funding as required by the Uniform Guidance. Criteria: 2 CFR section 200.329 states that one responsibility of the auditee is to monitor its activities under Federal awards. See also 200.332. Cause: Funding for the TANF DYS grant is received on a state and federal level. DHS is able to segregate in their tracking software but the Clinic belives they did not have the ability to separate these payements as they come from the same source and are often received in tandem, they did not have proper internal controls in place to segregate the funding received and related expenditures as required by the Uniform Guidance. Effect: Difficulty in establishing the SEFA/SESA, causing a delay in single audit testing. Co-mingling of federal and state funding used could present the possibility that expenses tested in single audit were paid for with the state portion of the grant. Recommendation: We recommend that the Clinic maintains an effort to track federal and state funding and expenditures separate from regular program expenditures, inquiring of granting agencies if needed by developing and implementing internal control policies related to grant funding and expenditure tracking. Management Response: Management believes it will be very difficult to segregate the fundings for the reasons listed above, but they mentioned they would request clarification from awarding agencies on which portion is federal and which is state in order to properly track.

Failure to inform auditors of the need for a single audit. Federal programs impacted: All ALNs, see SEFA. (General) Questioned Costs: None, NA Condition: The Clinic expended more than $750,000 in federal awards, triggering a single audit requirement and did not bring this to the auditors attention during the audit. The Clininc failed to properly maintain appropriate records to determine the need for a single audit as required by Uniform Guidance. Criteria: 2 CFR section 200.508(b)&(d) states that one responsibility of the auditee is to prepare appropriate financial statements, including the SEFA in accordance with 200.510. Part (d) states they must provide auditor with information as needed to perform the audit required. See also section 99.300(a). Cause: The Clinic did not have proper controls in place to determine the need for a single audit as required by the Uniform Guidance. Effect: Engagement letter and fees had to be reevaluated, and the nature, timing, and extent of the audit were impacted by the additional requirement. Recommendation: We recommend that the Clinic develops and implements policies and procedures to properly prepare the SEFA. Management Response: Management stated they will do a better job of tracking federal expenditures for the next audit year as they do not want to trigger a single audit again knowingly or otherwise and do not want any delays in the audit like this year.

Failure to properly track grant expenditures. Federal programs impacted: 93.958 Block grants for community mental health services, 93.558 TANF DYS Questioned Costs: None Condition: The Clinic expended more than $750,000 in federal awards, triggering a single audit requirement, however when asked to prepare a SEFA/SESA multiple attempts were made and numbers changed numerous times throughout the audit. Client is unable to distinguish co-mingled federal and state funding and expenditures for DYS grants, one of the major programs tested. Client is able to maintain overall expenditures, but not on a segregated level. Appears tracking was done in the same manner as other program expenses. Client failed to maintain proper records to segregate federal and state funding as required by the Uniform Guidance. Criteria: 2 CFR section 200.329 states that one responsibility of the auditee is to monitor its activities under Federal awards. See also 200.332. Cause: Funding for the TANF DYS grant is received on a state and federal level. DHS is able to segregate in their tracking software but the Clinic belives they did not have the ability to separate these payements as they come from the same source and are often received in tandem, they did not have proper internal controls in place to segregate the funding received and related expenditures as required by the Uniform Guidance. Effect: Difficulty in establishing the SEFA/SESA, causing a delay in single audit testing. Co-mingling of federal and state funding used could present the possibility that expenses tested in single audit were paid for with the state portion of the grant. Recommendation: We recommend that the Clinic maintains an effort to track federal and state funding and expenditures separate from regular program expenditures, inquiring of granting agencies if needed by developing and implementing internal control policies related to grant funding and expenditure tracking. Management Response: Management believes it will be very difficult to segregate the fundings for the reasons listed above, but they mentioned they would request clarification from awarding agencies on which portion is federal and which is state in order to properly track.

Failure to inform auditors of the need for a single audit. Federal programs impacted: All ALNs, see SEFA. (General) Questioned Costs: None, NA Condition: The Clinic expended more than $750,000 in federal awards, triggering a single audit requirement and did not bring this to the auditors attention during the audit. The Clininc failed to properly maintain appropriate records to determine the need for a single audit as required by Uniform Guidance. Criteria: 2 CFR section 200.508(b)&(d) states that one responsibility of the auditee is to prepare appropriate financial statements, including the SEFA in accordance with 200.510. Part (d) states they must provide auditor with information as needed to perform the audit required. See also section 99.300(a). Cause: The Clinic did not have proper controls in place to determine the need for a single audit as required by the Uniform Guidance. Effect: Engagement letter and fees had to be reevaluated, and the nature, timing, and extent of the audit were impacted by the additional requirement. Recommendation: We recommend that the Clinic develops and implements policies and procedures to properly prepare the SEFA. Management Response: Management stated they will do a better job of tracking federal expenditures for the next audit year as they do not want to trigger a single audit again knowingly or otherwise and do not want any delays in the audit like this year.

Failure to properly track grant expenditures. Federal programs impacted: 93.958 Block grants for community mental health services, 93.558 TANF DYS Questioned Costs: None Condition: The Clinic expended more than $750,000 in federal awards, triggering a single audit requirement, however when asked to prepare a SEFA/SESA multiple attempts were made and numbers changed numerous times throughout the audit. Client is unable to distinguish co-mingled federal and state funding and expenditures for DYS grants, one of the major programs tested. Client is able to maintain overall expenditures, but not on a segregated level. Appears tracking was done in the same manner as other program expenses. Client failed to maintain proper records to segregate federal and state funding as required by the Uniform Guidance. Criteria: 2 CFR section 200.329 states that one responsibility of the auditee is to monitor its activities under Federal awards. See also 200.332. Cause: Funding for the TANF DYS grant is received on a state and federal level. DHS is able to segregate in their tracking software but the Clinic belives they did not have the ability to separate these payements as they come from the same source and are often received in tandem, they did not have proper internal controls in place to segregate the funding received and related expenditures as required by the Uniform Guidance. Effect: Difficulty in establishing the SEFA/SESA, causing a delay in single audit testing. Co-mingling of federal and state funding used could present the possibility that expenses tested in single audit were paid for with the state portion of the grant. Recommendation: We recommend that the Clinic maintains an effort to track federal and state funding and expenditures separate from regular program expenditures, inquiring of granting agencies if needed by developing and implementing internal control policies related to grant funding and expenditure tracking. Management Response: Management believes it will be very difficult to segregate the fundings for the reasons listed above, but they mentioned they would request clarification from awarding agencies on which portion is federal and which is state in order to properly track.

Failure to inform auditors of the need for a single audit. Federal programs impacted: All ALNs, see SEFA. (General) Questioned Costs: None, NA Condition: The Clinic expended more than $750,000 in federal awards, triggering a single audit requirement and did not bring this to the auditors attention during the audit. The Clininc failed to properly maintain appropriate records to determine the need for a single audit as required by Uniform Guidance. Criteria: 2 CFR section 200.508(b)&(d) states that one responsibility of the auditee is to prepare appropriate financial statements, including the SEFA in accordance with 200.510. Part (d) states they must provide auditor with information as needed to perform the audit required. See also section 99.300(a). Cause: The Clinic did not have proper controls in place to determine the need for a single audit as required by the Uniform Guidance. Effect: Engagement letter and fees had to be reevaluated, and the nature, timing, and extent of the audit were impacted by the additional requirement. Recommendation: We recommend that the Clinic develops and implements policies and procedures to properly prepare the SEFA. Management Response: Management stated they will do a better job of tracking federal expenditures for the next audit year as they do not want to trigger a single audit again knowingly or otherwise and do not want any delays in the audit like this year.

Failure to properly track grant expenditures. Federal programs impacted: 93.958 Block grants for community mental health services, 93.558 TANF DYS Questioned Costs: None Condition: The Clinic expended more than $750,000 in federal awards, triggering a single audit requirement, however when asked to prepare a SEFA/SESA multiple attempts were made and numbers changed numerous times throughout the audit. Client is unable to distinguish co-mingled federal and state funding and expenditures for DYS grants, one of the major programs tested. Client is able to maintain overall expenditures, but not on a segregated level. Appears tracking was done in the same manner as other program expenses. Client failed to maintain proper records to segregate federal and state funding as required by the Uniform Guidance. Criteria: 2 CFR section 200.329 states that one responsibility of the auditee is to monitor its activities under Federal awards. See also 200.332. Cause: Funding for the TANF DYS grant is received on a state and federal level. DHS is able to segregate in their tracking software but the Clinic belives they did not have the ability to separate these payements as they come from the same source and are often received in tandem, they did not have proper internal controls in place to segregate the funding received and related expenditures as required by the Uniform Guidance. Effect: Difficulty in establishing the SEFA/SESA, causing a delay in single audit testing. Co-mingling of federal and state funding used could present the possibility that expenses tested in single audit were paid for with the state portion of the grant. Recommendation: We recommend that the Clinic maintains an effort to track federal and state funding and expenditures separate from regular program expenditures, inquiring of granting agencies if needed by developing and implementing internal control policies related to grant funding and expenditure tracking. Management Response: Management believes it will be very difficult to segregate the fundings for the reasons listed above, but they mentioned they would request clarification from awarding agencies on which portion is federal and which is state in order to properly track.