Audit 349831

Finding Number: 2024-001 Federal Agency: U.S. Department of Health and Human Services Pass-through Agency: State of Vermont, Division of Alcohol and Drug Abuse Program: Block Grants for Prevention and Treatment of Substance Abuse Assistance Listing Number: 93.959 Award Number: 03420-09722 Award Year: 2024 Finding: Internal controls over financial reporting Prior Year Finding: N/A Type of Finding: Significant Deficiency Criteria In accordance with 2 CFR §200.303, the non-federal entity must: (1) 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). (2) Comply with U.S. Constitution, federal statutes, regulations, and the terms and conditions of the federal awards. (3) Evaluate and monitor the non-federal entity's compliance with statutes, regulations, and the terms and conditions of the federal awards. (4) Take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings. (5) 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 responsibility over confidentiality. Condition Management did not have effective internal controls over financial reporting. A large number of material audit adjustments were required and ending balances were not correct. This creates a higher risk of material misstatement of federal award expenditures. Cause It appears that these were isolated incidents. The causes were due to a one-time grant transfer from another organization which created confusion and some accidental oversight. Effect Poor internal controls over financial reporting create the opportunity for fraud or abuse and can cause the financial statements or the schedule of federal expenditures to be materially misstated. Whether Sampling was Statistically Valid The sample was not intended to be, and was not, a statistically valid sample. Questioned Costs: None Recommendation: We recommend that the Organization implement stronger internal controls over financial reporting and to strengthen the fiscal year end accounting close process. We also recommend that the Organization adopt a formal policy for month and year end accounting. View of Responsible Officals from the Auditee: Management agrees with this finding and recommendation. The Organization is going to strenghten their internal controls in many different ways. Proper segregation of duties will be implemented for all significant accounting functions and strictly followed so that no one single individual has complete control over all aspects of a financial transaction. Clear approval processes will be established so that workflows are reviewed and approved. Finally, periodic reconciliations will be performed and documented so that ending balances are correct going forward.

Finding Number: 2024-001 Federal Agency: U.S. Department of Health and Human Services Pass-through Agency: State of Vermont, Division of Alcohol and Drug Abuse Program: Block Grants for Prevention and Treatment of Substance Abuse Assistance Listing Number: 93.959 Award Number: 03420-09722 Award Year: 2024 Finding: Internal controls over financial reporting Prior Year Finding: N/A Type of Finding: Significant Deficiency Criteria In accordance with 2 CFR §200.303, the non-federal entity must: (1) 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). (2) Comply with U.S. Constitution, federal statutes, regulations, and the terms and conditions of the federal awards. (3) Evaluate and monitor the non-federal entity's compliance with statutes, regulations, and the terms and conditions of the federal awards. (4) Take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings. (5) 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 responsibility over confidentiality. Condition Management did not have effective internal controls over financial reporting. A large number of material audit adjustments were required and ending balances were not correct. This creates a higher risk of material misstatement of federal award expenditures. Cause It appears that these were isolated incidents. The causes were due to a one-time grant transfer from another organization which created confusion and some accidental oversight. Effect Poor internal controls over financial reporting create the opportunity for fraud or abuse and can cause the financial statements or the schedule of federal expenditures to be materially misstated. Whether Sampling was Statistically Valid The sample was not intended to be, and was not, a statistically valid sample. Questioned Costs: None Recommendation: We recommend that the Organization implement stronger internal controls over financial reporting and to strengthen the fiscal year end accounting close process. We also recommend that the Organization adopt a formal policy for month and year end accounting. View of Responsible Officals from the Auditee: Management agrees with this finding and recommendation. The Organization is going to strenghten their internal controls in many different ways. Proper segregation of duties will be implemented for all significant accounting functions and strictly followed so that no one single individual has complete control over all aspects of a financial transaction. Clear approval processes will be established so that workflows are reviewed and approved. Finally, periodic reconciliations will be performed and documented so that ending balances are correct going forward.