Finding number: 2023-004 – Material Weakness in Internal Control Over Preparation,
Reconciliation, and Retention of the Schedule of Expenditures of Federal
Awards (SEFA)
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number: 93.914
Federal Program #2 HIV Care Formula Grants): CFDA Number: 93.917
Federal Program #3: HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
Name of pass-through
entity:
Multiple
Repeat finding: No
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Criteria: Under 2 CFR §200.510(b), recipients of federal funds are required to prepare a
Schedule of Expenditures of Federal Awards (SEFA) that fairly presents federal
expenditures for each grant program and is derived from and supported by the
entity's accounting records. Additionally, 2 CFR §200.302 requires that financial
management systems adequately identify and account for federal awards to
ensure accuracy and compliance with applicable federal requirements. Best
practices dictate that federal expenditures should be reconciled regularly to the
general ledger, and supporting documentation should be maintained to
substantiate amounts reported on the SEFA.
Condition: The Organization lacked adequate controls over the preparation, reconciliation,
and retention of records related to the SEFA. Specifically:
The SEFA incorrectly reported certain federal awards as non-federal awards.
The SEFA is prepared based on amounts requested for reimbursement
instead of directly based on expenditures incurred.
Reconciliation schedules that tied SEFA expenditures directly back to the
expenses recorded in the general ledger could not be located.
Expenses recorded in the general ledger represent expenses incurred to
operate the program in addition to direct grant expenditures; the
Organization only requests reimbursement for direct program expenditures
allowable under the program.
Documentation of Excel-based reconciliations did not agree to reported
monthly expenditures, indicating manual reclassification entries between
program codes that were not clearly supported.
Cause: The deficiencies noted were primarily due to:
Lack of system controls to ensure that state and federal expenditures were
separately tracked from non-grant funds spent within the same source codes.
Turnover in grants management personnel, which resulted in missing,
incomplete, or inaccurate reconciling records.
Possible effect: Without a complete and accurate SEFA, the Organization risks noncompliance
with Uniform Guidance reporting requirements, which could impact its ability to
receive and administer federal funds in the future. Additionally, inaccurate
SEFA reporting increases the risk of errors in administering funds, questioned
costs, and over or under expenditure of grants.
Questioned cost: None identified at this time.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Recommendation: We recommend that the Organization implement the following measures to
improve SEFA preparation and record retention:
1. Develop a Standardized SEFA Reconciliation Process – Implement formal
policies and procedures requiring that SEFA expenditures be reconciled to
the general ledger on a monthly basis, with documentation maintained for
audit purposes.
2. Enhance System Controls for Grant Expenditures – Modify the financial
system to allow for the proper segregation of state and federal expenditures
from non-grant funds, ensuring that expenditures are properly classified at
the time of entry.
3. Require Monthly Documentation Reviews – Establish a control requiring
management to review and approve SEFA reconciliation schedules on a
monthly or quarterly basis to ensure accuracy and completeness.
4. Implement a Centralized Documentation Retention Policy – Require that all
SEFA-related reconciliation records, including general ledger tie-outs and
manual adjustments, be retained in a centralized, accessible location.
5. Provide Grants Management Training – Conduct training for grants
management and accounting personnel on SEFA preparation requirements,
including Uniform Guidance compliance and best practices for
documentation and reconciliation.
6. By implementing these measures, the Organization can improve its internal
controls over SEFA preparation, ensure compliance with Uniform Guidance,
and reduce the risk of reporting inaccuracies.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management partially agrees with the finding. While we acknowledge that
documentation supporting SEFA reconciliation was incomplete, we believe that
federal expenditures were properly accounted for. We would like to address
some of the auditors' points individually:
"The SEFA is prepared based on amounts requested for reimbursement instead
of directly based on expenditures incurred." Most grant awards do not fully fund
the programs they support, most grant awards do not run concurrently with Prism
Health North Texas' fiscal year (i.e., with the Calendar Year), and most grant
awards are not spent in equal monthly amounts. It is correct that the 2023 SEFA
was based on grant-appropriate expenditures that occurred during Calendar Year
2023 and were submitted to those grant sponsors for reimbursement. This will
not necessarily reach the full cost to Prism for each grant-supported program, nor
is it likely to exactly match any annual grant award amount.
"Expenses recorded in the general ledger represent expenses incurred to operate
the program in addition to direct grant expenditures; the Organization only
requests reimbursement for direct program expenditures allowable under the
program." As we confirmed verbally with the audit partner on April 25, 2025,
this statement is intended to provide information and context and is not a
criticism or intended to point out any problem. As stated above, most grant
awards do not fully fund the programs they support; therefore, the general ledger
necessarily includes both expenses the sponsor will reimburse and expenses the
sponsor will not reimburse.
Nonetheless, we are enhancing our reconciliation procedures and documentation
practices to fully meet audit requirements. Finding 2023-004 refers to the
auditors' assessment of the SEFA preparation and reconciliation processes that
occurred in Calendar Year 2023. As of this writing, Prism Health North Texas
has already changed its SEFA preparation and reconciliation processes and
meets many of the recommendations above.
Action Taken:
Documentation Retention – On April 25, 2025, management created a structured
and easily accessible system for storing all relevant information for all grants
management personnel.
A logical naming system for files identifying the SEFA period, the
funding agency and identified general ledger expenditures claimed on
the SEFA.
We are now documenting the difference between all GL transactions and
those submitted for sponsor reimbursement (i.e., SEFA
components) in a single document per fund code, arranged by
fiscal year. Previously this documentation was kept by invoice and
arranged by grant year.
Management will continue to ensure all expenditure-related support,
such as invoices and purchase orders, is saved electronically to all
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
financial transactions.
SEFA Reconciliation – Management has decided to move from an annual to
quarterly SEFA reconciliation process to enhance the frequency of management
oversight in SEFA draft preparation. VP of Finance will prepare the SEFA for
independent review by the CFO. This will be put into a written
policy/procedure.
System Enhancements – Prism's current accounting system does not
accommodate this. However, Prism is already in the later stages of selecting a
new Enterprise Resource Planning (ERP) solution, with this as one of our key
selection criteria. Our new ERP should allow for expenditures within the same
cost center to be identified as grant-reimbursable or non-grant-reimbursable at
the time of entry. We have identified opportunities in new financial
management software solutions that we are scheduled to demo May 12th and the
16th of 2025. Opportunities such as:
The ability to tag grant-reimbursable transactions, to segment our award
cost center into two important categories.
The full cost to manage a specific program.
Identified cost claimed on the SEFA.
Dedicated grant modules that will allow us to establish business rules
and workflows to streamline and digitize critical aspects of grant
management.
Staff Engagement – Cross department coordination meetings occur monthly
between the Finance organization and the Grants Management team to continue
to foster alignment and collaboration in our grant cycles. A general overview of
SEFA, including how to prepare and organize the monthly reconciliations, has
already occurred with some of the grants accountants.
_________________________________________________________
Finding number: 2023-005 Significant Deficiency in Internal Control Over Compliance:
Allowable Costs and Activities
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914
Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917
Federal Program #3 HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
Name of pass-through
entity:
Multiple
Repeat finding: No
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Criteria: Under 2 CFR §200.303, recipients of federal funds must establish and maintain
effective internal controls to ensure compliance with federal statutes,
regulations, and the terms of grant agreements. 2 CFR §200.403 specifies that
costs charged to federal programs must be allowable, necessary, reasonable, and
allocable to the respective award. Additionally, 2 CFR §200.302 requires
financial management systems to provide effective control and accountability
over federal funds, including documented approval of expenditures.
A best practice for grant compliance is to implement a documented approval
process for expenditures charged to federal programs, ensuring that all costs are
reviewed and supported by adequate documentation before reimbursement
requests are submitted.
Condition: The Organization did not have readily-available documented evidence of review
and approval for expenditures charged to federal grants during the fiscal year.
Specifically:
The financial system did not capture or document approval of expenditures
before they were charged to federal programs.
No formalized system existed to retain evidence of grant-related expenditure
reviews.
While the prior Chief Financial Officer (CFO) manually reviewed each
invoice, there was no indication of approval on the supporting
documentation, making it impossible to verify that an appropriate review
occurred before costs were charged to the grants.
Cause: The issue arose due to the Organization's reliance on a manual review process
conducted by the previous CFO, without requiring a formal approval signature or
electronic system control to document review. This lack of a structured approval
process resulted in insufficient evidence to support compliance with federal
allowable cost requirements.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Possible effect: Without a documented approval process, the Organization cannot demonstrate
that expenditures charged to the grants were properly reviewed for allowability,
reasonableness, and allocability in accordance with federal regulations. This
increases the risk that:
Unallowable or misclassified expenditures could be charged to the grants
without detection.
Noncompliance with federal grant requirements could result in questioned
costs or additional oversight from funding agencies.
Financial statement and grant reporting inaccuracies may occur if
expenditures are not properly reviewed and approved.
Although no specific unallowable costs were identified during the audit, the lack
of documented review represents a significant deficiency in internal control over
compliance.
Questioned cost: None identified at this time.
Recommendation: We recommend that the Organization strengthen its internal controls over grant
expenditures by implementing the following measures:
1. Implement a Formal Expenditure Review and Approval Policy – Establish a
policy requiring that all expenditures charged to grants be reviewed and
approved by an appropriate individual before being recorded in the system.
2. Require Documentation of Review and Approval – Ensure that invoices,
payroll allocations, and other cost support documents include a signature,
initials, or system-generated approval to confirm review.
3. Utilize System-Based Controls – If possible, configure the financial system
to require electronic approval for all grant-related expenditures before costs
are recorded.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management partially agrees with the finding. While we acknowledge that
documentation of expenditure approval was not always retrievable, we believe
the expenditures reviewed were all appropriate. Finding 2023-005 refers to the
auditors' assessment of expenditure review and approval processes that occurred
in Calendar Year 2023. During Calendar Year 2023, Prism relied on email
routing of expenditures for review and approval. As of this writing, Prism
Health North Texas' expenditure review and approval processes already meet or
exceed the recommendations above.
Action Taken:
Expenditure Review – All expenditures charged to grants are reviewed and
approved by two qualified individuals.
Documentation of Review and Approval –
Such review and approval for non-payroll expenditures occur in and are
documented in the SAP Concur software before the costs are recorded in
the accounting system (Abila).
Such review and approval for payroll-related expenditures occur via and
are documented via a combination of methods, also before they are
recorded in Abila.
Employees report their time, including how much time was
devoted to grant activities, in the ExponentHR payroll system,
and their supervisors approve both the time and the allocation in
that system.
Programmatic measures that also support grant billing ("units")
are calculated from activity documented in the athenaOne
electronic health record (EHR).
Payroll allocation is calculated by one person, based on the
ExponentHR documentation and the units, then reviewed and
imported into Abila by a second person. The unposted
transactions are reviewed again before posting.
Utilize System-Based Controls – In place as above.
_________________________________________________________
Finding number: 2023-006 Significant Deficiency in Internal Control Over Compliance:
Allowable Costs and Activities
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914
Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917
Federal Program #2 HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Name of pass-through
entity:
Multiple
Repeat finding: No
Criteria: 2 CFR §200.405 requires that costs be allocable to the federal program based on
relative benefits received and be supported by appropriate documentation.
For personnel costs, 2 CFR §200.430(i) requires that compensation for
employees whose time is charged to federal awards be based on records that
accurately reflect the work performed, such as time and effort reporting or
equivalent documentation. For shared costs, 2 CFR §200.412-200.414 requires
that cost allocations be based on documented methodologies that are reasonable
and supported by underlying calculations.
Condition: The Organization does not have formalized internal controls to support the
rationale for allocation of shared costs and employee time across federal
programs. Specifically:
Time and effort is being tracked and maintained by employees, including
hours charged to the specific efforts for the programs. Often, employees
charge hours to specific programs in excess of amounts allocated to the
program as expenditures. The specific amount of employee salaries and
wages that are allocated to specific federal programs for reimbursement, and
which are less than the amounts reflected in the time and effort records, are
determined by members of the finance staff. The rationale for the amount
actually allocated for reimbursement, if less than the amount reflected in the
time and effort records, is not documented.
Review and approval of the allocation of employee compensation to specific
federal programs reimbursement requests is not maintained.
Cause: The deficiency exists because the Organization has not implemented a structured
process for documenting the extent to which allowable compensation costs will
be allocated for reimbursement to specific federal programs in instances where
the allowable compensation cost exceeds the amount allocated for
reimbursement.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Possible effect: The absence of documented allocation methodologies in instances where
allowable compensation costs exceed the amount allocated for reimbursement
increases the risk that:
Costs may be improperly allocated between federal programs, resulting in
potential noncompliance with federal cost principles.
Federal expenditures may be misstated, impacting financial and grant
reporting.
Although questioned costs were not identified, the lack of specific supporting
documentation and controls represents a significant deficiency in internal control
over compliance.
Questioned cost: None identified at this time.
Recommendation: We recommend that the Organization implement the following corrective
actions:
1. Develop and Implement a Written Cost Allocation Policy – Establish a
formal policy outlining the methodology for allocating shared costs and
personnel time across programs, especially in instances where allowable
costs exceed amounts allocated for reimbursement, ensuring compliance
with 2 CFR Part 200 cost principles.
2. Document Allocation Methodologies for Shared Costs – Ensure that
allocations for shared costs (e.g., rent, utilities, and administrative expenses)
are based on a reasonable and documented methodology that can be
reviewed and reperformed.
3. Retain Evidence of Implementation of Internal Controls - Implement review
and approval controls over all requests for reimbursement, including review
and approval of allocation of personnel and shared costs to specific funding
sources. In circumstances where costs can be appropriately allocated to
multiple funding sources, document the rationale for allocating the specific
amount to each funding source.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management respectfully disagrees with this Finding.
Under Condition, the finding states, “Time and effort is being tracked and
maintained by employees, including hours charged to the specific efforts for the
programs.…” This is not accurate. Employees report their time worked each
day, including the amount of time they worked on different projects if
applicable. Employees report this in our commercial HRIS/Payroll system,
where it is maintained and where it is reviewed and approved by the employee’s
manager. The employees report the time they worked and which project(s) they
worked on, their managers review and approve the time and the distribution, and
the data is tracked and maintained in our HRIS/Payroll system (ExponentHR).
Also under Condition, the finding states, “The specific amount of employee
salaries and wages that are allocated to specific federal programs for
reimbursement, and which are less than the amounts reflected in time and effort
records, are determined by members of the finance staff.” It is correct that we
would have to invoice sponsors for less than the total cost of an employee’s
allocated time and effort if a sponsor’s budget is not sufficient to cover that full
amount. This is the correct procedure to follow. Employees correctly continue
documenting their hours worked on a specific project even if the budget is
expended and the accounting staff can no longer bill the sponsor. If a particular
grant does not have sufficient sponsor funds, then the Grants Accounting staff
reduce the bill accordingly.
Also under Condition, the finding states, “The rationale for the amount actually
allocated for reimbursement, if less than the amount reflected in time and effort
records, is not documented”. This is incorrect. Our monthly invoices to each
sponsor accumulate, with each invoice clearly showing not only that month’s
expense but also the year-to-date expense and remaining balance, which forces
the sponsor invoice to stop at an amount less than the total cost of employees’
time and effort when the budget is exhausted.
Also under Condition, the finding states, “Review and approval of the allocation
of employee compensation to specific federal programs reimbursement requests
is not maintained.” Each employee records their hours worked, and the
project(s) on which they worked those hours, in our HRIS/Payroll system. The
employee’s manager reviews and approves both the hours worked and the
projects on which the hours were worked. This review and approval is
maintained in our HRIS/Payroll system. Financial staff calculate the amount to
allocate to specific federal programs based on these HRIS/Payroll system records
(or other records such as clinical units produced, based on the terms of each
grant). Separate accounting staff review the sponsor invoice and post the
Receivable once they deem the invoice correct.
Under Cause, the finding states, “…..the Organization has not implemented a
structured process for documenting the extent to which allowable [emphasis
added] compensation costs will be allocated for reimbursement to specific
federal programs in instances where the allowable compensation cost exceeds
the amount allocated for reimbursement.” This means that we do not have a
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
process for documenting how much of a payroll expense already deemed
allowable on a particular grant will actually be invoiced there. We disagree and
believe that the presence and documentation of a limited sponsor budget, along
with cumulative tracking and documentation of compensation expenses against
that budget, proves and documents why sometimes full compensation costs are
not charged to a grant.
Under Possible Effect, the finding addresses possible effects of “the absence of
documented allocation methodologies.” We don’t agree that our process could
lead to improper allocation between federal programs (as the finding states) nor
to misstating federal expenditures (as the finding states). When a sponsor’s
budget is insufficient to cover its appropriately allocated compensation costs,
those costs are paid from unrestricted, non-federal funds. As also noted in the
finding, no questioned costs were identified.
Finding number: 2023-004 – Material Weakness in Internal Control Over Preparation,
Reconciliation, and Retention of the Schedule of Expenditures of Federal
Awards (SEFA)
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number: 93.914
Federal Program #2 HIV Care Formula Grants): CFDA Number: 93.917
Federal Program #3: HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
Name of pass-through
entity:
Multiple
Repeat finding: No
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Criteria: Under 2 CFR §200.510(b), recipients of federal funds are required to prepare a
Schedule of Expenditures of Federal Awards (SEFA) that fairly presents federal
expenditures for each grant program and is derived from and supported by the
entity's accounting records. Additionally, 2 CFR §200.302 requires that financial
management systems adequately identify and account for federal awards to
ensure accuracy and compliance with applicable federal requirements. Best
practices dictate that federal expenditures should be reconciled regularly to the
general ledger, and supporting documentation should be maintained to
substantiate amounts reported on the SEFA.
Condition: The Organization lacked adequate controls over the preparation, reconciliation,
and retention of records related to the SEFA. Specifically:
The SEFA incorrectly reported certain federal awards as non-federal awards.
The SEFA is prepared based on amounts requested for reimbursement
instead of directly based on expenditures incurred.
Reconciliation schedules that tied SEFA expenditures directly back to the
expenses recorded in the general ledger could not be located.
Expenses recorded in the general ledger represent expenses incurred to
operate the program in addition to direct grant expenditures; the
Organization only requests reimbursement for direct program expenditures
allowable under the program.
Documentation of Excel-based reconciliations did not agree to reported
monthly expenditures, indicating manual reclassification entries between
program codes that were not clearly supported.
Cause: The deficiencies noted were primarily due to:
Lack of system controls to ensure that state and federal expenditures were
separately tracked from non-grant funds spent within the same source codes.
Turnover in grants management personnel, which resulted in missing,
incomplete, or inaccurate reconciling records.
Possible effect: Without a complete and accurate SEFA, the Organization risks noncompliance
with Uniform Guidance reporting requirements, which could impact its ability to
receive and administer federal funds in the future. Additionally, inaccurate
SEFA reporting increases the risk of errors in administering funds, questioned
costs, and over or under expenditure of grants.
Questioned cost: None identified at this time.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Recommendation: We recommend that the Organization implement the following measures to
improve SEFA preparation and record retention:
1. Develop a Standardized SEFA Reconciliation Process – Implement formal
policies and procedures requiring that SEFA expenditures be reconciled to
the general ledger on a monthly basis, with documentation maintained for
audit purposes.
2. Enhance System Controls for Grant Expenditures – Modify the financial
system to allow for the proper segregation of state and federal expenditures
from non-grant funds, ensuring that expenditures are properly classified at
the time of entry.
3. Require Monthly Documentation Reviews – Establish a control requiring
management to review and approve SEFA reconciliation schedules on a
monthly or quarterly basis to ensure accuracy and completeness.
4. Implement a Centralized Documentation Retention Policy – Require that all
SEFA-related reconciliation records, including general ledger tie-outs and
manual adjustments, be retained in a centralized, accessible location.
5. Provide Grants Management Training – Conduct training for grants
management and accounting personnel on SEFA preparation requirements,
including Uniform Guidance compliance and best practices for
documentation and reconciliation.
6. By implementing these measures, the Organization can improve its internal
controls over SEFA preparation, ensure compliance with Uniform Guidance,
and reduce the risk of reporting inaccuracies.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management partially agrees with the finding. While we acknowledge that
documentation supporting SEFA reconciliation was incomplete, we believe that
federal expenditures were properly accounted for. We would like to address
some of the auditors' points individually:
"The SEFA is prepared based on amounts requested for reimbursement instead
of directly based on expenditures incurred." Most grant awards do not fully fund
the programs they support, most grant awards do not run concurrently with Prism
Health North Texas' fiscal year (i.e., with the Calendar Year), and most grant
awards are not spent in equal monthly amounts. It is correct that the 2023 SEFA
was based on grant-appropriate expenditures that occurred during Calendar Year
2023 and were submitted to those grant sponsors for reimbursement. This will
not necessarily reach the full cost to Prism for each grant-supported program, nor
is it likely to exactly match any annual grant award amount.
"Expenses recorded in the general ledger represent expenses incurred to operate
the program in addition to direct grant expenditures; the Organization only
requests reimbursement for direct program expenditures allowable under the
program." As we confirmed verbally with the audit partner on April 25, 2025,
this statement is intended to provide information and context and is not a
criticism or intended to point out any problem. As stated above, most grant
awards do not fully fund the programs they support; therefore, the general ledger
necessarily includes both expenses the sponsor will reimburse and expenses the
sponsor will not reimburse.
Nonetheless, we are enhancing our reconciliation procedures and documentation
practices to fully meet audit requirements. Finding 2023-004 refers to the
auditors' assessment of the SEFA preparation and reconciliation processes that
occurred in Calendar Year 2023. As of this writing, Prism Health North Texas
has already changed its SEFA preparation and reconciliation processes and
meets many of the recommendations above.
Action Taken:
Documentation Retention – On April 25, 2025, management created a structured
and easily accessible system for storing all relevant information for all grants
management personnel.
A logical naming system for files identifying the SEFA period, the
funding agency and identified general ledger expenditures claimed on
the SEFA.
We are now documenting the difference between all GL transactions and
those submitted for sponsor reimbursement (i.e., SEFA
components) in a single document per fund code, arranged by
fiscal year. Previously this documentation was kept by invoice and
arranged by grant year.
Management will continue to ensure all expenditure-related support,
such as invoices and purchase orders, is saved electronically to all
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
financial transactions.
SEFA Reconciliation – Management has decided to move from an annual to
quarterly SEFA reconciliation process to enhance the frequency of management
oversight in SEFA draft preparation. VP of Finance will prepare the SEFA for
independent review by the CFO. This will be put into a written
policy/procedure.
System Enhancements – Prism's current accounting system does not
accommodate this. However, Prism is already in the later stages of selecting a
new Enterprise Resource Planning (ERP) solution, with this as one of our key
selection criteria. Our new ERP should allow for expenditures within the same
cost center to be identified as grant-reimbursable or non-grant-reimbursable at
the time of entry. We have identified opportunities in new financial
management software solutions that we are scheduled to demo May 12th and the
16th of 2025. Opportunities such as:
The ability to tag grant-reimbursable transactions, to segment our award
cost center into two important categories.
The full cost to manage a specific program.
Identified cost claimed on the SEFA.
Dedicated grant modules that will allow us to establish business rules
and workflows to streamline and digitize critical aspects of grant
management.
Staff Engagement – Cross department coordination meetings occur monthly
between the Finance organization and the Grants Management team to continue
to foster alignment and collaboration in our grant cycles. A general overview of
SEFA, including how to prepare and organize the monthly reconciliations, has
already occurred with some of the grants accountants.
_________________________________________________________
Finding number: 2023-005 Significant Deficiency in Internal Control Over Compliance:
Allowable Costs and Activities
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914
Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917
Federal Program #3 HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
Name of pass-through
entity:
Multiple
Repeat finding: No
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Criteria: Under 2 CFR §200.303, recipients of federal funds must establish and maintain
effective internal controls to ensure compliance with federal statutes,
regulations, and the terms of grant agreements. 2 CFR §200.403 specifies that
costs charged to federal programs must be allowable, necessary, reasonable, and
allocable to the respective award. Additionally, 2 CFR §200.302 requires
financial management systems to provide effective control and accountability
over federal funds, including documented approval of expenditures.
A best practice for grant compliance is to implement a documented approval
process for expenditures charged to federal programs, ensuring that all costs are
reviewed and supported by adequate documentation before reimbursement
requests are submitted.
Condition: The Organization did not have readily-available documented evidence of review
and approval for expenditures charged to federal grants during the fiscal year.
Specifically:
The financial system did not capture or document approval of expenditures
before they were charged to federal programs.
No formalized system existed to retain evidence of grant-related expenditure
reviews.
While the prior Chief Financial Officer (CFO) manually reviewed each
invoice, there was no indication of approval on the supporting
documentation, making it impossible to verify that an appropriate review
occurred before costs were charged to the grants.
Cause: The issue arose due to the Organization's reliance on a manual review process
conducted by the previous CFO, without requiring a formal approval signature or
electronic system control to document review. This lack of a structured approval
process resulted in insufficient evidence to support compliance with federal
allowable cost requirements.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Possible effect: Without a documented approval process, the Organization cannot demonstrate
that expenditures charged to the grants were properly reviewed for allowability,
reasonableness, and allocability in accordance with federal regulations. This
increases the risk that:
Unallowable or misclassified expenditures could be charged to the grants
without detection.
Noncompliance with federal grant requirements could result in questioned
costs or additional oversight from funding agencies.
Financial statement and grant reporting inaccuracies may occur if
expenditures are not properly reviewed and approved.
Although no specific unallowable costs were identified during the audit, the lack
of documented review represents a significant deficiency in internal control over
compliance.
Questioned cost: None identified at this time.
Recommendation: We recommend that the Organization strengthen its internal controls over grant
expenditures by implementing the following measures:
1. Implement a Formal Expenditure Review and Approval Policy – Establish a
policy requiring that all expenditures charged to grants be reviewed and
approved by an appropriate individual before being recorded in the system.
2. Require Documentation of Review and Approval – Ensure that invoices,
payroll allocations, and other cost support documents include a signature,
initials, or system-generated approval to confirm review.
3. Utilize System-Based Controls – If possible, configure the financial system
to require electronic approval for all grant-related expenditures before costs
are recorded.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management partially agrees with the finding. While we acknowledge that
documentation of expenditure approval was not always retrievable, we believe
the expenditures reviewed were all appropriate. Finding 2023-005 refers to the
auditors' assessment of expenditure review and approval processes that occurred
in Calendar Year 2023. During Calendar Year 2023, Prism relied on email
routing of expenditures for review and approval. As of this writing, Prism
Health North Texas' expenditure review and approval processes already meet or
exceed the recommendations above.
Action Taken:
Expenditure Review – All expenditures charged to grants are reviewed and
approved by two qualified individuals.
Documentation of Review and Approval –
Such review and approval for non-payroll expenditures occur in and are
documented in the SAP Concur software before the costs are recorded in
the accounting system (Abila).
Such review and approval for payroll-related expenditures occur via and
are documented via a combination of methods, also before they are
recorded in Abila.
Employees report their time, including how much time was
devoted to grant activities, in the ExponentHR payroll system,
and their supervisors approve both the time and the allocation in
that system.
Programmatic measures that also support grant billing ("units")
are calculated from activity documented in the athenaOne
electronic health record (EHR).
Payroll allocation is calculated by one person, based on the
ExponentHR documentation and the units, then reviewed and
imported into Abila by a second person. The unposted
transactions are reviewed again before posting.
Utilize System-Based Controls – In place as above.
_________________________________________________________
Finding number: 2023-006 Significant Deficiency in Internal Control Over Compliance:
Allowable Costs and Activities
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914
Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917
Federal Program #2 HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Name of pass-through
entity:
Multiple
Repeat finding: No
Criteria: 2 CFR §200.405 requires that costs be allocable to the federal program based on
relative benefits received and be supported by appropriate documentation.
For personnel costs, 2 CFR §200.430(i) requires that compensation for
employees whose time is charged to federal awards be based on records that
accurately reflect the work performed, such as time and effort reporting or
equivalent documentation. For shared costs, 2 CFR §200.412-200.414 requires
that cost allocations be based on documented methodologies that are reasonable
and supported by underlying calculations.
Condition: The Organization does not have formalized internal controls to support the
rationale for allocation of shared costs and employee time across federal
programs. Specifically:
Time and effort is being tracked and maintained by employees, including
hours charged to the specific efforts for the programs. Often, employees
charge hours to specific programs in excess of amounts allocated to the
program as expenditures. The specific amount of employee salaries and
wages that are allocated to specific federal programs for reimbursement, and
which are less than the amounts reflected in the time and effort records, are
determined by members of the finance staff. The rationale for the amount
actually allocated for reimbursement, if less than the amount reflected in the
time and effort records, is not documented.
Review and approval of the allocation of employee compensation to specific
federal programs reimbursement requests is not maintained.
Cause: The deficiency exists because the Organization has not implemented a structured
process for documenting the extent to which allowable compensation costs will
be allocated for reimbursement to specific federal programs in instances where
the allowable compensation cost exceeds the amount allocated for
reimbursement.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Possible effect: The absence of documented allocation methodologies in instances where
allowable compensation costs exceed the amount allocated for reimbursement
increases the risk that:
Costs may be improperly allocated between federal programs, resulting in
potential noncompliance with federal cost principles.
Federal expenditures may be misstated, impacting financial and grant
reporting.
Although questioned costs were not identified, the lack of specific supporting
documentation and controls represents a significant deficiency in internal control
over compliance.
Questioned cost: None identified at this time.
Recommendation: We recommend that the Organization implement the following corrective
actions:
1. Develop and Implement a Written Cost Allocation Policy – Establish a
formal policy outlining the methodology for allocating shared costs and
personnel time across programs, especially in instances where allowable
costs exceed amounts allocated for reimbursement, ensuring compliance
with 2 CFR Part 200 cost principles.
2. Document Allocation Methodologies for Shared Costs – Ensure that
allocations for shared costs (e.g., rent, utilities, and administrative expenses)
are based on a reasonable and documented methodology that can be
reviewed and reperformed.
3. Retain Evidence of Implementation of Internal Controls - Implement review
and approval controls over all requests for reimbursement, including review
and approval of allocation of personnel and shared costs to specific funding
sources. In circumstances where costs can be appropriately allocated to
multiple funding sources, document the rationale for allocating the specific
amount to each funding source.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management respectfully disagrees with this Finding.
Under Condition, the finding states, “Time and effort is being tracked and
maintained by employees, including hours charged to the specific efforts for the
programs.…” This is not accurate. Employees report their time worked each
day, including the amount of time they worked on different projects if
applicable. Employees report this in our commercial HRIS/Payroll system,
where it is maintained and where it is reviewed and approved by the employee’s
manager. The employees report the time they worked and which project(s) they
worked on, their managers review and approve the time and the distribution, and
the data is tracked and maintained in our HRIS/Payroll system (ExponentHR).
Also under Condition, the finding states, “The specific amount of employee
salaries and wages that are allocated to specific federal programs for
reimbursement, and which are less than the amounts reflected in time and effort
records, are determined by members of the finance staff.” It is correct that we
would have to invoice sponsors for less than the total cost of an employee’s
allocated time and effort if a sponsor’s budget is not sufficient to cover that full
amount. This is the correct procedure to follow. Employees correctly continue
documenting their hours worked on a specific project even if the budget is
expended and the accounting staff can no longer bill the sponsor. If a particular
grant does not have sufficient sponsor funds, then the Grants Accounting staff
reduce the bill accordingly.
Also under Condition, the finding states, “The rationale for the amount actually
allocated for reimbursement, if less than the amount reflected in time and effort
records, is not documented”. This is incorrect. Our monthly invoices to each
sponsor accumulate, with each invoice clearly showing not only that month’s
expense but also the year-to-date expense and remaining balance, which forces
the sponsor invoice to stop at an amount less than the total cost of employees’
time and effort when the budget is exhausted.
Also under Condition, the finding states, “Review and approval of the allocation
of employee compensation to specific federal programs reimbursement requests
is not maintained.” Each employee records their hours worked, and the
project(s) on which they worked those hours, in our HRIS/Payroll system. The
employee’s manager reviews and approves both the hours worked and the
projects on which the hours were worked. This review and approval is
maintained in our HRIS/Payroll system. Financial staff calculate the amount to
allocate to specific federal programs based on these HRIS/Payroll system records
(or other records such as clinical units produced, based on the terms of each
grant). Separate accounting staff review the sponsor invoice and post the
Receivable once they deem the invoice correct.
Under Cause, the finding states, “…..the Organization has not implemented a
structured process for documenting the extent to which allowable [emphasis
added] compensation costs will be allocated for reimbursement to specific
federal programs in instances where the allowable compensation cost exceeds
the amount allocated for reimbursement.” This means that we do not have a
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
process for documenting how much of a payroll expense already deemed
allowable on a particular grant will actually be invoiced there. We disagree and
believe that the presence and documentation of a limited sponsor budget, along
with cumulative tracking and documentation of compensation expenses against
that budget, proves and documents why sometimes full compensation costs are
not charged to a grant.
Under Possible Effect, the finding addresses possible effects of “the absence of
documented allocation methodologies.” We don’t agree that our process could
lead to improper allocation between federal programs (as the finding states) nor
to misstating federal expenditures (as the finding states). When a sponsor’s
budget is insufficient to cover its appropriately allocated compensation costs,
those costs are paid from unrestricted, non-federal funds. As also noted in the
finding, no questioned costs were identified.
Finding number: 2023-004 – Material Weakness in Internal Control Over Preparation,
Reconciliation, and Retention of the Schedule of Expenditures of Federal
Awards (SEFA)
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number: 93.914
Federal Program #2 HIV Care Formula Grants): CFDA Number: 93.917
Federal Program #3: HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
Name of pass-through
entity:
Multiple
Repeat finding: No
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Criteria: Under 2 CFR §200.510(b), recipients of federal funds are required to prepare a
Schedule of Expenditures of Federal Awards (SEFA) that fairly presents federal
expenditures for each grant program and is derived from and supported by the
entity's accounting records. Additionally, 2 CFR §200.302 requires that financial
management systems adequately identify and account for federal awards to
ensure accuracy and compliance with applicable federal requirements. Best
practices dictate that federal expenditures should be reconciled regularly to the
general ledger, and supporting documentation should be maintained to
substantiate amounts reported on the SEFA.
Condition: The Organization lacked adequate controls over the preparation, reconciliation,
and retention of records related to the SEFA. Specifically:
The SEFA incorrectly reported certain federal awards as non-federal awards.
The SEFA is prepared based on amounts requested for reimbursement
instead of directly based on expenditures incurred.
Reconciliation schedules that tied SEFA expenditures directly back to the
expenses recorded in the general ledger could not be located.
Expenses recorded in the general ledger represent expenses incurred to
operate the program in addition to direct grant expenditures; the
Organization only requests reimbursement for direct program expenditures
allowable under the program.
Documentation of Excel-based reconciliations did not agree to reported
monthly expenditures, indicating manual reclassification entries between
program codes that were not clearly supported.
Cause: The deficiencies noted were primarily due to:
Lack of system controls to ensure that state and federal expenditures were
separately tracked from non-grant funds spent within the same source codes.
Turnover in grants management personnel, which resulted in missing,
incomplete, or inaccurate reconciling records.
Possible effect: Without a complete and accurate SEFA, the Organization risks noncompliance
with Uniform Guidance reporting requirements, which could impact its ability to
receive and administer federal funds in the future. Additionally, inaccurate
SEFA reporting increases the risk of errors in administering funds, questioned
costs, and over or under expenditure of grants.
Questioned cost: None identified at this time.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Recommendation: We recommend that the Organization implement the following measures to
improve SEFA preparation and record retention:
1. Develop a Standardized SEFA Reconciliation Process – Implement formal
policies and procedures requiring that SEFA expenditures be reconciled to
the general ledger on a monthly basis, with documentation maintained for
audit purposes.
2. Enhance System Controls for Grant Expenditures – Modify the financial
system to allow for the proper segregation of state and federal expenditures
from non-grant funds, ensuring that expenditures are properly classified at
the time of entry.
3. Require Monthly Documentation Reviews – Establish a control requiring
management to review and approve SEFA reconciliation schedules on a
monthly or quarterly basis to ensure accuracy and completeness.
4. Implement a Centralized Documentation Retention Policy – Require that all
SEFA-related reconciliation records, including general ledger tie-outs and
manual adjustments, be retained in a centralized, accessible location.
5. Provide Grants Management Training – Conduct training for grants
management and accounting personnel on SEFA preparation requirements,
including Uniform Guidance compliance and best practices for
documentation and reconciliation.
6. By implementing these measures, the Organization can improve its internal
controls over SEFA preparation, ensure compliance with Uniform Guidance,
and reduce the risk of reporting inaccuracies.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management partially agrees with the finding. While we acknowledge that
documentation supporting SEFA reconciliation was incomplete, we believe that
federal expenditures were properly accounted for. We would like to address
some of the auditors' points individually:
"The SEFA is prepared based on amounts requested for reimbursement instead
of directly based on expenditures incurred." Most grant awards do not fully fund
the programs they support, most grant awards do not run concurrently with Prism
Health North Texas' fiscal year (i.e., with the Calendar Year), and most grant
awards are not spent in equal monthly amounts. It is correct that the 2023 SEFA
was based on grant-appropriate expenditures that occurred during Calendar Year
2023 and were submitted to those grant sponsors for reimbursement. This will
not necessarily reach the full cost to Prism for each grant-supported program, nor
is it likely to exactly match any annual grant award amount.
"Expenses recorded in the general ledger represent expenses incurred to operate
the program in addition to direct grant expenditures; the Organization only
requests reimbursement for direct program expenditures allowable under the
program." As we confirmed verbally with the audit partner on April 25, 2025,
this statement is intended to provide information and context and is not a
criticism or intended to point out any problem. As stated above, most grant
awards do not fully fund the programs they support; therefore, the general ledger
necessarily includes both expenses the sponsor will reimburse and expenses the
sponsor will not reimburse.
Nonetheless, we are enhancing our reconciliation procedures and documentation
practices to fully meet audit requirements. Finding 2023-004 refers to the
auditors' assessment of the SEFA preparation and reconciliation processes that
occurred in Calendar Year 2023. As of this writing, Prism Health North Texas
has already changed its SEFA preparation and reconciliation processes and
meets many of the recommendations above.
Action Taken:
Documentation Retention – On April 25, 2025, management created a structured
and easily accessible system for storing all relevant information for all grants
management personnel.
A logical naming system for files identifying the SEFA period, the
funding agency and identified general ledger expenditures claimed on
the SEFA.
We are now documenting the difference between all GL transactions and
those submitted for sponsor reimbursement (i.e., SEFA
components) in a single document per fund code, arranged by
fiscal year. Previously this documentation was kept by invoice and
arranged by grant year.
Management will continue to ensure all expenditure-related support,
such as invoices and purchase orders, is saved electronically to all
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
financial transactions.
SEFA Reconciliation – Management has decided to move from an annual to
quarterly SEFA reconciliation process to enhance the frequency of management
oversight in SEFA draft preparation. VP of Finance will prepare the SEFA for
independent review by the CFO. This will be put into a written
policy/procedure.
System Enhancements – Prism's current accounting system does not
accommodate this. However, Prism is already in the later stages of selecting a
new Enterprise Resource Planning (ERP) solution, with this as one of our key
selection criteria. Our new ERP should allow for expenditures within the same
cost center to be identified as grant-reimbursable or non-grant-reimbursable at
the time of entry. We have identified opportunities in new financial
management software solutions that we are scheduled to demo May 12th and the
16th of 2025. Opportunities such as:
The ability to tag grant-reimbursable transactions, to segment our award
cost center into two important categories.
The full cost to manage a specific program.
Identified cost claimed on the SEFA.
Dedicated grant modules that will allow us to establish business rules
and workflows to streamline and digitize critical aspects of grant
management.
Staff Engagement – Cross department coordination meetings occur monthly
between the Finance organization and the Grants Management team to continue
to foster alignment and collaboration in our grant cycles. A general overview of
SEFA, including how to prepare and organize the monthly reconciliations, has
already occurred with some of the grants accountants.
_________________________________________________________
Finding number: 2023-005 Significant Deficiency in Internal Control Over Compliance:
Allowable Costs and Activities
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914
Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917
Federal Program #3 HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
Name of pass-through
entity:
Multiple
Repeat finding: No
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Criteria: Under 2 CFR §200.303, recipients of federal funds must establish and maintain
effective internal controls to ensure compliance with federal statutes,
regulations, and the terms of grant agreements. 2 CFR §200.403 specifies that
costs charged to federal programs must be allowable, necessary, reasonable, and
allocable to the respective award. Additionally, 2 CFR §200.302 requires
financial management systems to provide effective control and accountability
over federal funds, including documented approval of expenditures.
A best practice for grant compliance is to implement a documented approval
process for expenditures charged to federal programs, ensuring that all costs are
reviewed and supported by adequate documentation before reimbursement
requests are submitted.
Condition: The Organization did not have readily-available documented evidence of review
and approval for expenditures charged to federal grants during the fiscal year.
Specifically:
The financial system did not capture or document approval of expenditures
before they were charged to federal programs.
No formalized system existed to retain evidence of grant-related expenditure
reviews.
While the prior Chief Financial Officer (CFO) manually reviewed each
invoice, there was no indication of approval on the supporting
documentation, making it impossible to verify that an appropriate review
occurred before costs were charged to the grants.
Cause: The issue arose due to the Organization's reliance on a manual review process
conducted by the previous CFO, without requiring a formal approval signature or
electronic system control to document review. This lack of a structured approval
process resulted in insufficient evidence to support compliance with federal
allowable cost requirements.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Possible effect: Without a documented approval process, the Organization cannot demonstrate
that expenditures charged to the grants were properly reviewed for allowability,
reasonableness, and allocability in accordance with federal regulations. This
increases the risk that:
Unallowable or misclassified expenditures could be charged to the grants
without detection.
Noncompliance with federal grant requirements could result in questioned
costs or additional oversight from funding agencies.
Financial statement and grant reporting inaccuracies may occur if
expenditures are not properly reviewed and approved.
Although no specific unallowable costs were identified during the audit, the lack
of documented review represents a significant deficiency in internal control over
compliance.
Questioned cost: None identified at this time.
Recommendation: We recommend that the Organization strengthen its internal controls over grant
expenditures by implementing the following measures:
1. Implement a Formal Expenditure Review and Approval Policy – Establish a
policy requiring that all expenditures charged to grants be reviewed and
approved by an appropriate individual before being recorded in the system.
2. Require Documentation of Review and Approval – Ensure that invoices,
payroll allocations, and other cost support documents include a signature,
initials, or system-generated approval to confirm review.
3. Utilize System-Based Controls – If possible, configure the financial system
to require electronic approval for all grant-related expenditures before costs
are recorded.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management partially agrees with the finding. While we acknowledge that
documentation of expenditure approval was not always retrievable, we believe
the expenditures reviewed were all appropriate. Finding 2023-005 refers to the
auditors' assessment of expenditure review and approval processes that occurred
in Calendar Year 2023. During Calendar Year 2023, Prism relied on email
routing of expenditures for review and approval. As of this writing, Prism
Health North Texas' expenditure review and approval processes already meet or
exceed the recommendations above.
Action Taken:
Expenditure Review – All expenditures charged to grants are reviewed and
approved by two qualified individuals.
Documentation of Review and Approval –
Such review and approval for non-payroll expenditures occur in and are
documented in the SAP Concur software before the costs are recorded in
the accounting system (Abila).
Such review and approval for payroll-related expenditures occur via and
are documented via a combination of methods, also before they are
recorded in Abila.
Employees report their time, including how much time was
devoted to grant activities, in the ExponentHR payroll system,
and their supervisors approve both the time and the allocation in
that system.
Programmatic measures that also support grant billing ("units")
are calculated from activity documented in the athenaOne
electronic health record (EHR).
Payroll allocation is calculated by one person, based on the
ExponentHR documentation and the units, then reviewed and
imported into Abila by a second person. The unposted
transactions are reviewed again before posting.
Utilize System-Based Controls – In place as above.
_________________________________________________________
Finding number: 2023-006 Significant Deficiency in Internal Control Over Compliance:
Allowable Costs and Activities
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914
Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917
Federal Program #2 HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Name of pass-through
entity:
Multiple
Repeat finding: No
Criteria: 2 CFR §200.405 requires that costs be allocable to the federal program based on
relative benefits received and be supported by appropriate documentation.
For personnel costs, 2 CFR §200.430(i) requires that compensation for
employees whose time is charged to federal awards be based on records that
accurately reflect the work performed, such as time and effort reporting or
equivalent documentation. For shared costs, 2 CFR §200.412-200.414 requires
that cost allocations be based on documented methodologies that are reasonable
and supported by underlying calculations.
Condition: The Organization does not have formalized internal controls to support the
rationale for allocation of shared costs and employee time across federal
programs. Specifically:
Time and effort is being tracked and maintained by employees, including
hours charged to the specific efforts for the programs. Often, employees
charge hours to specific programs in excess of amounts allocated to the
program as expenditures. The specific amount of employee salaries and
wages that are allocated to specific federal programs for reimbursement, and
which are less than the amounts reflected in the time and effort records, are
determined by members of the finance staff. The rationale for the amount
actually allocated for reimbursement, if less than the amount reflected in the
time and effort records, is not documented.
Review and approval of the allocation of employee compensation to specific
federal programs reimbursement requests is not maintained.
Cause: The deficiency exists because the Organization has not implemented a structured
process for documenting the extent to which allowable compensation costs will
be allocated for reimbursement to specific federal programs in instances where
the allowable compensation cost exceeds the amount allocated for
reimbursement.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Possible effect: The absence of documented allocation methodologies in instances where
allowable compensation costs exceed the amount allocated for reimbursement
increases the risk that:
Costs may be improperly allocated between federal programs, resulting in
potential noncompliance with federal cost principles.
Federal expenditures may be misstated, impacting financial and grant
reporting.
Although questioned costs were not identified, the lack of specific supporting
documentation and controls represents a significant deficiency in internal control
over compliance.
Questioned cost: None identified at this time.
Recommendation: We recommend that the Organization implement the following corrective
actions:
1. Develop and Implement a Written Cost Allocation Policy – Establish a
formal policy outlining the methodology for allocating shared costs and
personnel time across programs, especially in instances where allowable
costs exceed amounts allocated for reimbursement, ensuring compliance
with 2 CFR Part 200 cost principles.
2. Document Allocation Methodologies for Shared Costs – Ensure that
allocations for shared costs (e.g., rent, utilities, and administrative expenses)
are based on a reasonable and documented methodology that can be
reviewed and reperformed.
3. Retain Evidence of Implementation of Internal Controls - Implement review
and approval controls over all requests for reimbursement, including review
and approval of allocation of personnel and shared costs to specific funding
sources. In circumstances where costs can be appropriately allocated to
multiple funding sources, document the rationale for allocating the specific
amount to each funding source.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management respectfully disagrees with this Finding.
Under Condition, the finding states, “Time and effort is being tracked and
maintained by employees, including hours charged to the specific efforts for the
programs.…” This is not accurate. Employees report their time worked each
day, including the amount of time they worked on different projects if
applicable. Employees report this in our commercial HRIS/Payroll system,
where it is maintained and where it is reviewed and approved by the employee’s
manager. The employees report the time they worked and which project(s) they
worked on, their managers review and approve the time and the distribution, and
the data is tracked and maintained in our HRIS/Payroll system (ExponentHR).
Also under Condition, the finding states, “The specific amount of employee
salaries and wages that are allocated to specific federal programs for
reimbursement, and which are less than the amounts reflected in time and effort
records, are determined by members of the finance staff.” It is correct that we
would have to invoice sponsors for less than the total cost of an employee’s
allocated time and effort if a sponsor’s budget is not sufficient to cover that full
amount. This is the correct procedure to follow. Employees correctly continue
documenting their hours worked on a specific project even if the budget is
expended and the accounting staff can no longer bill the sponsor. If a particular
grant does not have sufficient sponsor funds, then the Grants Accounting staff
reduce the bill accordingly.
Also under Condition, the finding states, “The rationale for the amount actually
allocated for reimbursement, if less than the amount reflected in time and effort
records, is not documented”. This is incorrect. Our monthly invoices to each
sponsor accumulate, with each invoice clearly showing not only that month’s
expense but also the year-to-date expense and remaining balance, which forces
the sponsor invoice to stop at an amount less than the total cost of employees’
time and effort when the budget is exhausted.
Also under Condition, the finding states, “Review and approval of the allocation
of employee compensation to specific federal programs reimbursement requests
is not maintained.” Each employee records their hours worked, and the
project(s) on which they worked those hours, in our HRIS/Payroll system. The
employee’s manager reviews and approves both the hours worked and the
projects on which the hours were worked. This review and approval is
maintained in our HRIS/Payroll system. Financial staff calculate the amount to
allocate to specific federal programs based on these HRIS/Payroll system records
(or other records such as clinical units produced, based on the terms of each
grant). Separate accounting staff review the sponsor invoice and post the
Receivable once they deem the invoice correct.
Under Cause, the finding states, “…..the Organization has not implemented a
structured process for documenting the extent to which allowable [emphasis
added] compensation costs will be allocated for reimbursement to specific
federal programs in instances where the allowable compensation cost exceeds
the amount allocated for reimbursement.” This means that we do not have a
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
process for documenting how much of a payroll expense already deemed
allowable on a particular grant will actually be invoiced there. We disagree and
believe that the presence and documentation of a limited sponsor budget, along
with cumulative tracking and documentation of compensation expenses against
that budget, proves and documents why sometimes full compensation costs are
not charged to a grant.
Under Possible Effect, the finding addresses possible effects of “the absence of
documented allocation methodologies.” We don’t agree that our process could
lead to improper allocation between federal programs (as the finding states) nor
to misstating federal expenditures (as the finding states). When a sponsor’s
budget is insufficient to cover its appropriately allocated compensation costs,
those costs are paid from unrestricted, non-federal funds. As also noted in the
finding, no questioned costs were identified.
Finding number: 2023-004 – Material Weakness in Internal Control Over Preparation,
Reconciliation, and Retention of the Schedule of Expenditures of Federal
Awards (SEFA)
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number: 93.914
Federal Program #2 HIV Care Formula Grants): CFDA Number: 93.917
Federal Program #3: HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
Name of pass-through
entity:
Multiple
Repeat finding: No
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Criteria: Under 2 CFR §200.510(b), recipients of federal funds are required to prepare a
Schedule of Expenditures of Federal Awards (SEFA) that fairly presents federal
expenditures for each grant program and is derived from and supported by the
entity's accounting records. Additionally, 2 CFR §200.302 requires that financial
management systems adequately identify and account for federal awards to
ensure accuracy and compliance with applicable federal requirements. Best
practices dictate that federal expenditures should be reconciled regularly to the
general ledger, and supporting documentation should be maintained to
substantiate amounts reported on the SEFA.
Condition: The Organization lacked adequate controls over the preparation, reconciliation,
and retention of records related to the SEFA. Specifically:
The SEFA incorrectly reported certain federal awards as non-federal awards.
The SEFA is prepared based on amounts requested for reimbursement
instead of directly based on expenditures incurred.
Reconciliation schedules that tied SEFA expenditures directly back to the
expenses recorded in the general ledger could not be located.
Expenses recorded in the general ledger represent expenses incurred to
operate the program in addition to direct grant expenditures; the
Organization only requests reimbursement for direct program expenditures
allowable under the program.
Documentation of Excel-based reconciliations did not agree to reported
monthly expenditures, indicating manual reclassification entries between
program codes that were not clearly supported.
Cause: The deficiencies noted were primarily due to:
Lack of system controls to ensure that state and federal expenditures were
separately tracked from non-grant funds spent within the same source codes.
Turnover in grants management personnel, which resulted in missing,
incomplete, or inaccurate reconciling records.
Possible effect: Without a complete and accurate SEFA, the Organization risks noncompliance
with Uniform Guidance reporting requirements, which could impact its ability to
receive and administer federal funds in the future. Additionally, inaccurate
SEFA reporting increases the risk of errors in administering funds, questioned
costs, and over or under expenditure of grants.
Questioned cost: None identified at this time.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Recommendation: We recommend that the Organization implement the following measures to
improve SEFA preparation and record retention:
1. Develop a Standardized SEFA Reconciliation Process – Implement formal
policies and procedures requiring that SEFA expenditures be reconciled to
the general ledger on a monthly basis, with documentation maintained for
audit purposes.
2. Enhance System Controls for Grant Expenditures – Modify the financial
system to allow for the proper segregation of state and federal expenditures
from non-grant funds, ensuring that expenditures are properly classified at
the time of entry.
3. Require Monthly Documentation Reviews – Establish a control requiring
management to review and approve SEFA reconciliation schedules on a
monthly or quarterly basis to ensure accuracy and completeness.
4. Implement a Centralized Documentation Retention Policy – Require that all
SEFA-related reconciliation records, including general ledger tie-outs and
manual adjustments, be retained in a centralized, accessible location.
5. Provide Grants Management Training – Conduct training for grants
management and accounting personnel on SEFA preparation requirements,
including Uniform Guidance compliance and best practices for
documentation and reconciliation.
6. By implementing these measures, the Organization can improve its internal
controls over SEFA preparation, ensure compliance with Uniform Guidance,
and reduce the risk of reporting inaccuracies.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management partially agrees with the finding. While we acknowledge that
documentation supporting SEFA reconciliation was incomplete, we believe that
federal expenditures were properly accounted for. We would like to address
some of the auditors' points individually:
"The SEFA is prepared based on amounts requested for reimbursement instead
of directly based on expenditures incurred." Most grant awards do not fully fund
the programs they support, most grant awards do not run concurrently with Prism
Health North Texas' fiscal year (i.e., with the Calendar Year), and most grant
awards are not spent in equal monthly amounts. It is correct that the 2023 SEFA
was based on grant-appropriate expenditures that occurred during Calendar Year
2023 and were submitted to those grant sponsors for reimbursement. This will
not necessarily reach the full cost to Prism for each grant-supported program, nor
is it likely to exactly match any annual grant award amount.
"Expenses recorded in the general ledger represent expenses incurred to operate
the program in addition to direct grant expenditures; the Organization only
requests reimbursement for direct program expenditures allowable under the
program." As we confirmed verbally with the audit partner on April 25, 2025,
this statement is intended to provide information and context and is not a
criticism or intended to point out any problem. As stated above, most grant
awards do not fully fund the programs they support; therefore, the general ledger
necessarily includes both expenses the sponsor will reimburse and expenses the
sponsor will not reimburse.
Nonetheless, we are enhancing our reconciliation procedures and documentation
practices to fully meet audit requirements. Finding 2023-004 refers to the
auditors' assessment of the SEFA preparation and reconciliation processes that
occurred in Calendar Year 2023. As of this writing, Prism Health North Texas
has already changed its SEFA preparation and reconciliation processes and
meets many of the recommendations above.
Action Taken:
Documentation Retention – On April 25, 2025, management created a structured
and easily accessible system for storing all relevant information for all grants
management personnel.
A logical naming system for files identifying the SEFA period, the
funding agency and identified general ledger expenditures claimed on
the SEFA.
We are now documenting the difference between all GL transactions and
those submitted for sponsor reimbursement (i.e., SEFA
components) in a single document per fund code, arranged by
fiscal year. Previously this documentation was kept by invoice and
arranged by grant year.
Management will continue to ensure all expenditure-related support,
such as invoices and purchase orders, is saved electronically to all
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
financial transactions.
SEFA Reconciliation – Management has decided to move from an annual to
quarterly SEFA reconciliation process to enhance the frequency of management
oversight in SEFA draft preparation. VP of Finance will prepare the SEFA for
independent review by the CFO. This will be put into a written
policy/procedure.
System Enhancements – Prism's current accounting system does not
accommodate this. However, Prism is already in the later stages of selecting a
new Enterprise Resource Planning (ERP) solution, with this as one of our key
selection criteria. Our new ERP should allow for expenditures within the same
cost center to be identified as grant-reimbursable or non-grant-reimbursable at
the time of entry. We have identified opportunities in new financial
management software solutions that we are scheduled to demo May 12th and the
16th of 2025. Opportunities such as:
The ability to tag grant-reimbursable transactions, to segment our award
cost center into two important categories.
The full cost to manage a specific program.
Identified cost claimed on the SEFA.
Dedicated grant modules that will allow us to establish business rules
and workflows to streamline and digitize critical aspects of grant
management.
Staff Engagement – Cross department coordination meetings occur monthly
between the Finance organization and the Grants Management team to continue
to foster alignment and collaboration in our grant cycles. A general overview of
SEFA, including how to prepare and organize the monthly reconciliations, has
already occurred with some of the grants accountants.
_________________________________________________________
Finding number: 2023-005 Significant Deficiency in Internal Control Over Compliance:
Allowable Costs and Activities
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914
Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917
Federal Program #3 HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
Name of pass-through
entity:
Multiple
Repeat finding: No
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Criteria: Under 2 CFR §200.303, recipients of federal funds must establish and maintain
effective internal controls to ensure compliance with federal statutes,
regulations, and the terms of grant agreements. 2 CFR §200.403 specifies that
costs charged to federal programs must be allowable, necessary, reasonable, and
allocable to the respective award. Additionally, 2 CFR §200.302 requires
financial management systems to provide effective control and accountability
over federal funds, including documented approval of expenditures.
A best practice for grant compliance is to implement a documented approval
process for expenditures charged to federal programs, ensuring that all costs are
reviewed and supported by adequate documentation before reimbursement
requests are submitted.
Condition: The Organization did not have readily-available documented evidence of review
and approval for expenditures charged to federal grants during the fiscal year.
Specifically:
The financial system did not capture or document approval of expenditures
before they were charged to federal programs.
No formalized system existed to retain evidence of grant-related expenditure
reviews.
While the prior Chief Financial Officer (CFO) manually reviewed each
invoice, there was no indication of approval on the supporting
documentation, making it impossible to verify that an appropriate review
occurred before costs were charged to the grants.
Cause: The issue arose due to the Organization's reliance on a manual review process
conducted by the previous CFO, without requiring a formal approval signature or
electronic system control to document review. This lack of a structured approval
process resulted in insufficient evidence to support compliance with federal
allowable cost requirements.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Possible effect: Without a documented approval process, the Organization cannot demonstrate
that expenditures charged to the grants were properly reviewed for allowability,
reasonableness, and allocability in accordance with federal regulations. This
increases the risk that:
Unallowable or misclassified expenditures could be charged to the grants
without detection.
Noncompliance with federal grant requirements could result in questioned
costs or additional oversight from funding agencies.
Financial statement and grant reporting inaccuracies may occur if
expenditures are not properly reviewed and approved.
Although no specific unallowable costs were identified during the audit, the lack
of documented review represents a significant deficiency in internal control over
compliance.
Questioned cost: None identified at this time.
Recommendation: We recommend that the Organization strengthen its internal controls over grant
expenditures by implementing the following measures:
1. Implement a Formal Expenditure Review and Approval Policy – Establish a
policy requiring that all expenditures charged to grants be reviewed and
approved by an appropriate individual before being recorded in the system.
2. Require Documentation of Review and Approval – Ensure that invoices,
payroll allocations, and other cost support documents include a signature,
initials, or system-generated approval to confirm review.
3. Utilize System-Based Controls – If possible, configure the financial system
to require electronic approval for all grant-related expenditures before costs
are recorded.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management partially agrees with the finding. While we acknowledge that
documentation of expenditure approval was not always retrievable, we believe
the expenditures reviewed were all appropriate. Finding 2023-005 refers to the
auditors' assessment of expenditure review and approval processes that occurred
in Calendar Year 2023. During Calendar Year 2023, Prism relied on email
routing of expenditures for review and approval. As of this writing, Prism
Health North Texas' expenditure review and approval processes already meet or
exceed the recommendations above.
Action Taken:
Expenditure Review – All expenditures charged to grants are reviewed and
approved by two qualified individuals.
Documentation of Review and Approval –
Such review and approval for non-payroll expenditures occur in and are
documented in the SAP Concur software before the costs are recorded in
the accounting system (Abila).
Such review and approval for payroll-related expenditures occur via and
are documented via a combination of methods, also before they are
recorded in Abila.
Employees report their time, including how much time was
devoted to grant activities, in the ExponentHR payroll system,
and their supervisors approve both the time and the allocation in
that system.
Programmatic measures that also support grant billing ("units")
are calculated from activity documented in the athenaOne
electronic health record (EHR).
Payroll allocation is calculated by one person, based on the
ExponentHR documentation and the units, then reviewed and
imported into Abila by a second person. The unposted
transactions are reviewed again before posting.
Utilize System-Based Controls – In place as above.
_________________________________________________________
Finding number: 2023-006 Significant Deficiency in Internal Control Over Compliance:
Allowable Costs and Activities
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914
Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917
Federal Program #2 HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Name of pass-through
entity:
Multiple
Repeat finding: No
Criteria: 2 CFR §200.405 requires that costs be allocable to the federal program based on
relative benefits received and be supported by appropriate documentation.
For personnel costs, 2 CFR §200.430(i) requires that compensation for
employees whose time is charged to federal awards be based on records that
accurately reflect the work performed, such as time and effort reporting or
equivalent documentation. For shared costs, 2 CFR §200.412-200.414 requires
that cost allocations be based on documented methodologies that are reasonable
and supported by underlying calculations.
Condition: The Organization does not have formalized internal controls to support the
rationale for allocation of shared costs and employee time across federal
programs. Specifically:
Time and effort is being tracked and maintained by employees, including
hours charged to the specific efforts for the programs. Often, employees
charge hours to specific programs in excess of amounts allocated to the
program as expenditures. The specific amount of employee salaries and
wages that are allocated to specific federal programs for reimbursement, and
which are less than the amounts reflected in the time and effort records, are
determined by members of the finance staff. The rationale for the amount
actually allocated for reimbursement, if less than the amount reflected in the
time and effort records, is not documented.
Review and approval of the allocation of employee compensation to specific
federal programs reimbursement requests is not maintained.
Cause: The deficiency exists because the Organization has not implemented a structured
process for documenting the extent to which allowable compensation costs will
be allocated for reimbursement to specific federal programs in instances where
the allowable compensation cost exceeds the amount allocated for
reimbursement.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Possible effect: The absence of documented allocation methodologies in instances where
allowable compensation costs exceed the amount allocated for reimbursement
increases the risk that:
Costs may be improperly allocated between federal programs, resulting in
potential noncompliance with federal cost principles.
Federal expenditures may be misstated, impacting financial and grant
reporting.
Although questioned costs were not identified, the lack of specific supporting
documentation and controls represents a significant deficiency in internal control
over compliance.
Questioned cost: None identified at this time.
Recommendation: We recommend that the Organization implement the following corrective
actions:
1. Develop and Implement a Written Cost Allocation Policy – Establish a
formal policy outlining the methodology for allocating shared costs and
personnel time across programs, especially in instances where allowable
costs exceed amounts allocated for reimbursement, ensuring compliance
with 2 CFR Part 200 cost principles.
2. Document Allocation Methodologies for Shared Costs – Ensure that
allocations for shared costs (e.g., rent, utilities, and administrative expenses)
are based on a reasonable and documented methodology that can be
reviewed and reperformed.
3. Retain Evidence of Implementation of Internal Controls - Implement review
and approval controls over all requests for reimbursement, including review
and approval of allocation of personnel and shared costs to specific funding
sources. In circumstances where costs can be appropriately allocated to
multiple funding sources, document the rationale for allocating the specific
amount to each funding source.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management respectfully disagrees with this Finding.
Under Condition, the finding states, “Time and effort is being tracked and
maintained by employees, including hours charged to the specific efforts for the
programs.…” This is not accurate. Employees report their time worked each
day, including the amount of time they worked on different projects if
applicable. Employees report this in our commercial HRIS/Payroll system,
where it is maintained and where it is reviewed and approved by the employee’s
manager. The employees report the time they worked and which project(s) they
worked on, their managers review and approve the time and the distribution, and
the data is tracked and maintained in our HRIS/Payroll system (ExponentHR).
Also under Condition, the finding states, “The specific amount of employee
salaries and wages that are allocated to specific federal programs for
reimbursement, and which are less than the amounts reflected in time and effort
records, are determined by members of the finance staff.” It is correct that we
would have to invoice sponsors for less than the total cost of an employee’s
allocated time and effort if a sponsor’s budget is not sufficient to cover that full
amount. This is the correct procedure to follow. Employees correctly continue
documenting their hours worked on a specific project even if the budget is
expended and the accounting staff can no longer bill the sponsor. If a particular
grant does not have sufficient sponsor funds, then the Grants Accounting staff
reduce the bill accordingly.
Also under Condition, the finding states, “The rationale for the amount actually
allocated for reimbursement, if less than the amount reflected in time and effort
records, is not documented”. This is incorrect. Our monthly invoices to each
sponsor accumulate, with each invoice clearly showing not only that month’s
expense but also the year-to-date expense and remaining balance, which forces
the sponsor invoice to stop at an amount less than the total cost of employees’
time and effort when the budget is exhausted.
Also under Condition, the finding states, “Review and approval of the allocation
of employee compensation to specific federal programs reimbursement requests
is not maintained.” Each employee records their hours worked, and the
project(s) on which they worked those hours, in our HRIS/Payroll system. The
employee’s manager reviews and approves both the hours worked and the
projects on which the hours were worked. This review and approval is
maintained in our HRIS/Payroll system. Financial staff calculate the amount to
allocate to specific federal programs based on these HRIS/Payroll system records
(or other records such as clinical units produced, based on the terms of each
grant). Separate accounting staff review the sponsor invoice and post the
Receivable once they deem the invoice correct.
Under Cause, the finding states, “…..the Organization has not implemented a
structured process for documenting the extent to which allowable [emphasis
added] compensation costs will be allocated for reimbursement to specific
federal programs in instances where the allowable compensation cost exceeds
the amount allocated for reimbursement.” This means that we do not have a
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
process for documenting how much of a payroll expense already deemed
allowable on a particular grant will actually be invoiced there. We disagree and
believe that the presence and documentation of a limited sponsor budget, along
with cumulative tracking and documentation of compensation expenses against
that budget, proves and documents why sometimes full compensation costs are
not charged to a grant.
Under Possible Effect, the finding addresses possible effects of “the absence of
documented allocation methodologies.” We don’t agree that our process could
lead to improper allocation between federal programs (as the finding states) nor
to misstating federal expenditures (as the finding states). When a sponsor’s
budget is insufficient to cover its appropriately allocated compensation costs,
those costs are paid from unrestricted, non-federal funds. As also noted in the
finding, no questioned costs were identified.
Finding number: 2023-004 – Material Weakness in Internal Control Over Preparation,
Reconciliation, and Retention of the Schedule of Expenditures of Federal
Awards (SEFA)
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number: 93.914
Federal Program #2 HIV Care Formula Grants): CFDA Number: 93.917
Federal Program #3: HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
Name of pass-through
entity:
Multiple
Repeat finding: No
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Criteria: Under 2 CFR §200.510(b), recipients of federal funds are required to prepare a
Schedule of Expenditures of Federal Awards (SEFA) that fairly presents federal
expenditures for each grant program and is derived from and supported by the
entity's accounting records. Additionally, 2 CFR §200.302 requires that financial
management systems adequately identify and account for federal awards to
ensure accuracy and compliance with applicable federal requirements. Best
practices dictate that federal expenditures should be reconciled regularly to the
general ledger, and supporting documentation should be maintained to
substantiate amounts reported on the SEFA.
Condition: The Organization lacked adequate controls over the preparation, reconciliation,
and retention of records related to the SEFA. Specifically:
The SEFA incorrectly reported certain federal awards as non-federal awards.
The SEFA is prepared based on amounts requested for reimbursement
instead of directly based on expenditures incurred.
Reconciliation schedules that tied SEFA expenditures directly back to the
expenses recorded in the general ledger could not be located.
Expenses recorded in the general ledger represent expenses incurred to
operate the program in addition to direct grant expenditures; the
Organization only requests reimbursement for direct program expenditures
allowable under the program.
Documentation of Excel-based reconciliations did not agree to reported
monthly expenditures, indicating manual reclassification entries between
program codes that were not clearly supported.
Cause: The deficiencies noted were primarily due to:
Lack of system controls to ensure that state and federal expenditures were
separately tracked from non-grant funds spent within the same source codes.
Turnover in grants management personnel, which resulted in missing,
incomplete, or inaccurate reconciling records.
Possible effect: Without a complete and accurate SEFA, the Organization risks noncompliance
with Uniform Guidance reporting requirements, which could impact its ability to
receive and administer federal funds in the future. Additionally, inaccurate
SEFA reporting increases the risk of errors in administering funds, questioned
costs, and over or under expenditure of grants.
Questioned cost: None identified at this time.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Recommendation: We recommend that the Organization implement the following measures to
improve SEFA preparation and record retention:
1. Develop a Standardized SEFA Reconciliation Process – Implement formal
policies and procedures requiring that SEFA expenditures be reconciled to
the general ledger on a monthly basis, with documentation maintained for
audit purposes.
2. Enhance System Controls for Grant Expenditures – Modify the financial
system to allow for the proper segregation of state and federal expenditures
from non-grant funds, ensuring that expenditures are properly classified at
the time of entry.
3. Require Monthly Documentation Reviews – Establish a control requiring
management to review and approve SEFA reconciliation schedules on a
monthly or quarterly basis to ensure accuracy and completeness.
4. Implement a Centralized Documentation Retention Policy – Require that all
SEFA-related reconciliation records, including general ledger tie-outs and
manual adjustments, be retained in a centralized, accessible location.
5. Provide Grants Management Training – Conduct training for grants
management and accounting personnel on SEFA preparation requirements,
including Uniform Guidance compliance and best practices for
documentation and reconciliation.
6. By implementing these measures, the Organization can improve its internal
controls over SEFA preparation, ensure compliance with Uniform Guidance,
and reduce the risk of reporting inaccuracies.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management partially agrees with the finding. While we acknowledge that
documentation supporting SEFA reconciliation was incomplete, we believe that
federal expenditures were properly accounted for. We would like to address
some of the auditors' points individually:
"The SEFA is prepared based on amounts requested for reimbursement instead
of directly based on expenditures incurred." Most grant awards do not fully fund
the programs they support, most grant awards do not run concurrently with Prism
Health North Texas' fiscal year (i.e., with the Calendar Year), and most grant
awards are not spent in equal monthly amounts. It is correct that the 2023 SEFA
was based on grant-appropriate expenditures that occurred during Calendar Year
2023 and were submitted to those grant sponsors for reimbursement. This will
not necessarily reach the full cost to Prism for each grant-supported program, nor
is it likely to exactly match any annual grant award amount.
"Expenses recorded in the general ledger represent expenses incurred to operate
the program in addition to direct grant expenditures; the Organization only
requests reimbursement for direct program expenditures allowable under the
program." As we confirmed verbally with the audit partner on April 25, 2025,
this statement is intended to provide information and context and is not a
criticism or intended to point out any problem. As stated above, most grant
awards do not fully fund the programs they support; therefore, the general ledger
necessarily includes both expenses the sponsor will reimburse and expenses the
sponsor will not reimburse.
Nonetheless, we are enhancing our reconciliation procedures and documentation
practices to fully meet audit requirements. Finding 2023-004 refers to the
auditors' assessment of the SEFA preparation and reconciliation processes that
occurred in Calendar Year 2023. As of this writing, Prism Health North Texas
has already changed its SEFA preparation and reconciliation processes and
meets many of the recommendations above.
Action Taken:
Documentation Retention – On April 25, 2025, management created a structured
and easily accessible system for storing all relevant information for all grants
management personnel.
A logical naming system for files identifying the SEFA period, the
funding agency and identified general ledger expenditures claimed on
the SEFA.
We are now documenting the difference between all GL transactions and
those submitted for sponsor reimbursement (i.e., SEFA
components) in a single document per fund code, arranged by
fiscal year. Previously this documentation was kept by invoice and
arranged by grant year.
Management will continue to ensure all expenditure-related support,
such as invoices and purchase orders, is saved electronically to all
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
financial transactions.
SEFA Reconciliation – Management has decided to move from an annual to
quarterly SEFA reconciliation process to enhance the frequency of management
oversight in SEFA draft preparation. VP of Finance will prepare the SEFA for
independent review by the CFO. This will be put into a written
policy/procedure.
System Enhancements – Prism's current accounting system does not
accommodate this. However, Prism is already in the later stages of selecting a
new Enterprise Resource Planning (ERP) solution, with this as one of our key
selection criteria. Our new ERP should allow for expenditures within the same
cost center to be identified as grant-reimbursable or non-grant-reimbursable at
the time of entry. We have identified opportunities in new financial
management software solutions that we are scheduled to demo May 12th and the
16th of 2025. Opportunities such as:
The ability to tag grant-reimbursable transactions, to segment our award
cost center into two important categories.
The full cost to manage a specific program.
Identified cost claimed on the SEFA.
Dedicated grant modules that will allow us to establish business rules
and workflows to streamline and digitize critical aspects of grant
management.
Staff Engagement – Cross department coordination meetings occur monthly
between the Finance organization and the Grants Management team to continue
to foster alignment and collaboration in our grant cycles. A general overview of
SEFA, including how to prepare and organize the monthly reconciliations, has
already occurred with some of the grants accountants.
_________________________________________________________
Finding number: 2023-005 Significant Deficiency in Internal Control Over Compliance:
Allowable Costs and Activities
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914
Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917
Federal Program #3 HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
Name of pass-through
entity:
Multiple
Repeat finding: No
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Criteria: Under 2 CFR §200.303, recipients of federal funds must establish and maintain
effective internal controls to ensure compliance with federal statutes,
regulations, and the terms of grant agreements. 2 CFR §200.403 specifies that
costs charged to federal programs must be allowable, necessary, reasonable, and
allocable to the respective award. Additionally, 2 CFR §200.302 requires
financial management systems to provide effective control and accountability
over federal funds, including documented approval of expenditures.
A best practice for grant compliance is to implement a documented approval
process for expenditures charged to federal programs, ensuring that all costs are
reviewed and supported by adequate documentation before reimbursement
requests are submitted.
Condition: The Organization did not have readily-available documented evidence of review
and approval for expenditures charged to federal grants during the fiscal year.
Specifically:
The financial system did not capture or document approval of expenditures
before they were charged to federal programs.
No formalized system existed to retain evidence of grant-related expenditure
reviews.
While the prior Chief Financial Officer (CFO) manually reviewed each
invoice, there was no indication of approval on the supporting
documentation, making it impossible to verify that an appropriate review
occurred before costs were charged to the grants.
Cause: The issue arose due to the Organization's reliance on a manual review process
conducted by the previous CFO, without requiring a formal approval signature or
electronic system control to document review. This lack of a structured approval
process resulted in insufficient evidence to support compliance with federal
allowable cost requirements.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Possible effect: Without a documented approval process, the Organization cannot demonstrate
that expenditures charged to the grants were properly reviewed for allowability,
reasonableness, and allocability in accordance with federal regulations. This
increases the risk that:
Unallowable or misclassified expenditures could be charged to the grants
without detection.
Noncompliance with federal grant requirements could result in questioned
costs or additional oversight from funding agencies.
Financial statement and grant reporting inaccuracies may occur if
expenditures are not properly reviewed and approved.
Although no specific unallowable costs were identified during the audit, the lack
of documented review represents a significant deficiency in internal control over
compliance.
Questioned cost: None identified at this time.
Recommendation: We recommend that the Organization strengthen its internal controls over grant
expenditures by implementing the following measures:
1. Implement a Formal Expenditure Review and Approval Policy – Establish a
policy requiring that all expenditures charged to grants be reviewed and
approved by an appropriate individual before being recorded in the system.
2. Require Documentation of Review and Approval – Ensure that invoices,
payroll allocations, and other cost support documents include a signature,
initials, or system-generated approval to confirm review.
3. Utilize System-Based Controls – If possible, configure the financial system
to require electronic approval for all grant-related expenditures before costs
are recorded.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management partially agrees with the finding. While we acknowledge that
documentation of expenditure approval was not always retrievable, we believe
the expenditures reviewed were all appropriate. Finding 2023-005 refers to the
auditors' assessment of expenditure review and approval processes that occurred
in Calendar Year 2023. During Calendar Year 2023, Prism relied on email
routing of expenditures for review and approval. As of this writing, Prism
Health North Texas' expenditure review and approval processes already meet or
exceed the recommendations above.
Action Taken:
Expenditure Review – All expenditures charged to grants are reviewed and
approved by two qualified individuals.
Documentation of Review and Approval –
Such review and approval for non-payroll expenditures occur in and are
documented in the SAP Concur software before the costs are recorded in
the accounting system (Abila).
Such review and approval for payroll-related expenditures occur via and
are documented via a combination of methods, also before they are
recorded in Abila.
Employees report their time, including how much time was
devoted to grant activities, in the ExponentHR payroll system,
and their supervisors approve both the time and the allocation in
that system.
Programmatic measures that also support grant billing ("units")
are calculated from activity documented in the athenaOne
electronic health record (EHR).
Payroll allocation is calculated by one person, based on the
ExponentHR documentation and the units, then reviewed and
imported into Abila by a second person. The unposted
transactions are reviewed again before posting.
Utilize System-Based Controls – In place as above.
_________________________________________________________
Finding number: 2023-006 Significant Deficiency in Internal Control Over Compliance:
Allowable Costs and Activities
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914
Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917
Federal Program #2 HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Name of pass-through
entity:
Multiple
Repeat finding: No
Criteria: 2 CFR §200.405 requires that costs be allocable to the federal program based on
relative benefits received and be supported by appropriate documentation.
For personnel costs, 2 CFR §200.430(i) requires that compensation for
employees whose time is charged to federal awards be based on records that
accurately reflect the work performed, such as time and effort reporting or
equivalent documentation. For shared costs, 2 CFR §200.412-200.414 requires
that cost allocations be based on documented methodologies that are reasonable
and supported by underlying calculations.
Condition: The Organization does not have formalized internal controls to support the
rationale for allocation of shared costs and employee time across federal
programs. Specifically:
Time and effort is being tracked and maintained by employees, including
hours charged to the specific efforts for the programs. Often, employees
charge hours to specific programs in excess of amounts allocated to the
program as expenditures. The specific amount of employee salaries and
wages that are allocated to specific federal programs for reimbursement, and
which are less than the amounts reflected in the time and effort records, are
determined by members of the finance staff. The rationale for the amount
actually allocated for reimbursement, if less than the amount reflected in the
time and effort records, is not documented.
Review and approval of the allocation of employee compensation to specific
federal programs reimbursement requests is not maintained.
Cause: The deficiency exists because the Organization has not implemented a structured
process for documenting the extent to which allowable compensation costs will
be allocated for reimbursement to specific federal programs in instances where
the allowable compensation cost exceeds the amount allocated for
reimbursement.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Possible effect: The absence of documented allocation methodologies in instances where
allowable compensation costs exceed the amount allocated for reimbursement
increases the risk that:
Costs may be improperly allocated between federal programs, resulting in
potential noncompliance with federal cost principles.
Federal expenditures may be misstated, impacting financial and grant
reporting.
Although questioned costs were not identified, the lack of specific supporting
documentation and controls represents a significant deficiency in internal control
over compliance.
Questioned cost: None identified at this time.
Recommendation: We recommend that the Organization implement the following corrective
actions:
1. Develop and Implement a Written Cost Allocation Policy – Establish a
formal policy outlining the methodology for allocating shared costs and
personnel time across programs, especially in instances where allowable
costs exceed amounts allocated for reimbursement, ensuring compliance
with 2 CFR Part 200 cost principles.
2. Document Allocation Methodologies for Shared Costs – Ensure that
allocations for shared costs (e.g., rent, utilities, and administrative expenses)
are based on a reasonable and documented methodology that can be
reviewed and reperformed.
3. Retain Evidence of Implementation of Internal Controls - Implement review
and approval controls over all requests for reimbursement, including review
and approval of allocation of personnel and shared costs to specific funding
sources. In circumstances where costs can be appropriately allocated to
multiple funding sources, document the rationale for allocating the specific
amount to each funding source.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management respectfully disagrees with this Finding.
Under Condition, the finding states, “Time and effort is being tracked and
maintained by employees, including hours charged to the specific efforts for the
programs.…” This is not accurate. Employees report their time worked each
day, including the amount of time they worked on different projects if
applicable. Employees report this in our commercial HRIS/Payroll system,
where it is maintained and where it is reviewed and approved by the employee’s
manager. The employees report the time they worked and which project(s) they
worked on, their managers review and approve the time and the distribution, and
the data is tracked and maintained in our HRIS/Payroll system (ExponentHR).
Also under Condition, the finding states, “The specific amount of employee
salaries and wages that are allocated to specific federal programs for
reimbursement, and which are less than the amounts reflected in time and effort
records, are determined by members of the finance staff.” It is correct that we
would have to invoice sponsors for less than the total cost of an employee’s
allocated time and effort if a sponsor’s budget is not sufficient to cover that full
amount. This is the correct procedure to follow. Employees correctly continue
documenting their hours worked on a specific project even if the budget is
expended and the accounting staff can no longer bill the sponsor. If a particular
grant does not have sufficient sponsor funds, then the Grants Accounting staff
reduce the bill accordingly.
Also under Condition, the finding states, “The rationale for the amount actually
allocated for reimbursement, if less than the amount reflected in time and effort
records, is not documented”. This is incorrect. Our monthly invoices to each
sponsor accumulate, with each invoice clearly showing not only that month’s
expense but also the year-to-date expense and remaining balance, which forces
the sponsor invoice to stop at an amount less than the total cost of employees’
time and effort when the budget is exhausted.
Also under Condition, the finding states, “Review and approval of the allocation
of employee compensation to specific federal programs reimbursement requests
is not maintained.” Each employee records their hours worked, and the
project(s) on which they worked those hours, in our HRIS/Payroll system. The
employee’s manager reviews and approves both the hours worked and the
projects on which the hours were worked. This review and approval is
maintained in our HRIS/Payroll system. Financial staff calculate the amount to
allocate to specific federal programs based on these HRIS/Payroll system records
(or other records such as clinical units produced, based on the terms of each
grant). Separate accounting staff review the sponsor invoice and post the
Receivable once they deem the invoice correct.
Under Cause, the finding states, “…..the Organization has not implemented a
structured process for documenting the extent to which allowable [emphasis
added] compensation costs will be allocated for reimbursement to specific
federal programs in instances where the allowable compensation cost exceeds
the amount allocated for reimbursement.” This means that we do not have a
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
process for documenting how much of a payroll expense already deemed
allowable on a particular grant will actually be invoiced there. We disagree and
believe that the presence and documentation of a limited sponsor budget, along
with cumulative tracking and documentation of compensation expenses against
that budget, proves and documents why sometimes full compensation costs are
not charged to a grant.
Under Possible Effect, the finding addresses possible effects of “the absence of
documented allocation methodologies.” We don’t agree that our process could
lead to improper allocation between federal programs (as the finding states) nor
to misstating federal expenditures (as the finding states). When a sponsor’s
budget is insufficient to cover its appropriately allocated compensation costs,
those costs are paid from unrestricted, non-federal funds. As also noted in the
finding, no questioned costs were identified.
Finding number: 2023-004 – Material Weakness in Internal Control Over Preparation,
Reconciliation, and Retention of the Schedule of Expenditures of Federal
Awards (SEFA)
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number: 93.914
Federal Program #2 HIV Care Formula Grants): CFDA Number: 93.917
Federal Program #3: HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
Name of pass-through
entity:
Multiple
Repeat finding: No
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Criteria: Under 2 CFR §200.510(b), recipients of federal funds are required to prepare a
Schedule of Expenditures of Federal Awards (SEFA) that fairly presents federal
expenditures for each grant program and is derived from and supported by the
entity's accounting records. Additionally, 2 CFR §200.302 requires that financial
management systems adequately identify and account for federal awards to
ensure accuracy and compliance with applicable federal requirements. Best
practices dictate that federal expenditures should be reconciled regularly to the
general ledger, and supporting documentation should be maintained to
substantiate amounts reported on the SEFA.
Condition: The Organization lacked adequate controls over the preparation, reconciliation,
and retention of records related to the SEFA. Specifically:
The SEFA incorrectly reported certain federal awards as non-federal awards.
The SEFA is prepared based on amounts requested for reimbursement
instead of directly based on expenditures incurred.
Reconciliation schedules that tied SEFA expenditures directly back to the
expenses recorded in the general ledger could not be located.
Expenses recorded in the general ledger represent expenses incurred to
operate the program in addition to direct grant expenditures; the
Organization only requests reimbursement for direct program expenditures
allowable under the program.
Documentation of Excel-based reconciliations did not agree to reported
monthly expenditures, indicating manual reclassification entries between
program codes that were not clearly supported.
Cause: The deficiencies noted were primarily due to:
Lack of system controls to ensure that state and federal expenditures were
separately tracked from non-grant funds spent within the same source codes.
Turnover in grants management personnel, which resulted in missing,
incomplete, or inaccurate reconciling records.
Possible effect: Without a complete and accurate SEFA, the Organization risks noncompliance
with Uniform Guidance reporting requirements, which could impact its ability to
receive and administer federal funds in the future. Additionally, inaccurate
SEFA reporting increases the risk of errors in administering funds, questioned
costs, and over or under expenditure of grants.
Questioned cost: None identified at this time.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Recommendation: We recommend that the Organization implement the following measures to
improve SEFA preparation and record retention:
1. Develop a Standardized SEFA Reconciliation Process – Implement formal
policies and procedures requiring that SEFA expenditures be reconciled to
the general ledger on a monthly basis, with documentation maintained for
audit purposes.
2. Enhance System Controls for Grant Expenditures – Modify the financial
system to allow for the proper segregation of state and federal expenditures
from non-grant funds, ensuring that expenditures are properly classified at
the time of entry.
3. Require Monthly Documentation Reviews – Establish a control requiring
management to review and approve SEFA reconciliation schedules on a
monthly or quarterly basis to ensure accuracy and completeness.
4. Implement a Centralized Documentation Retention Policy – Require that all
SEFA-related reconciliation records, including general ledger tie-outs and
manual adjustments, be retained in a centralized, accessible location.
5. Provide Grants Management Training – Conduct training for grants
management and accounting personnel on SEFA preparation requirements,
including Uniform Guidance compliance and best practices for
documentation and reconciliation.
6. By implementing these measures, the Organization can improve its internal
controls over SEFA preparation, ensure compliance with Uniform Guidance,
and reduce the risk of reporting inaccuracies.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management partially agrees with the finding. While we acknowledge that
documentation supporting SEFA reconciliation was incomplete, we believe that
federal expenditures were properly accounted for. We would like to address
some of the auditors' points individually:
"The SEFA is prepared based on amounts requested for reimbursement instead
of directly based on expenditures incurred." Most grant awards do not fully fund
the programs they support, most grant awards do not run concurrently with Prism
Health North Texas' fiscal year (i.e., with the Calendar Year), and most grant
awards are not spent in equal monthly amounts. It is correct that the 2023 SEFA
was based on grant-appropriate expenditures that occurred during Calendar Year
2023 and were submitted to those grant sponsors for reimbursement. This will
not necessarily reach the full cost to Prism for each grant-supported program, nor
is it likely to exactly match any annual grant award amount.
"Expenses recorded in the general ledger represent expenses incurred to operate
the program in addition to direct grant expenditures; the Organization only
requests reimbursement for direct program expenditures allowable under the
program." As we confirmed verbally with the audit partner on April 25, 2025,
this statement is intended to provide information and context and is not a
criticism or intended to point out any problem. As stated above, most grant
awards do not fully fund the programs they support; therefore, the general ledger
necessarily includes both expenses the sponsor will reimburse and expenses the
sponsor will not reimburse.
Nonetheless, we are enhancing our reconciliation procedures and documentation
practices to fully meet audit requirements. Finding 2023-004 refers to the
auditors' assessment of the SEFA preparation and reconciliation processes that
occurred in Calendar Year 2023. As of this writing, Prism Health North Texas
has already changed its SEFA preparation and reconciliation processes and
meets many of the recommendations above.
Action Taken:
Documentation Retention – On April 25, 2025, management created a structured
and easily accessible system for storing all relevant information for all grants
management personnel.
A logical naming system for files identifying the SEFA period, the
funding agency and identified general ledger expenditures claimed on
the SEFA.
We are now documenting the difference between all GL transactions and
those submitted for sponsor reimbursement (i.e., SEFA
components) in a single document per fund code, arranged by
fiscal year. Previously this documentation was kept by invoice and
arranged by grant year.
Management will continue to ensure all expenditure-related support,
such as invoices and purchase orders, is saved electronically to all
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
financial transactions.
SEFA Reconciliation – Management has decided to move from an annual to
quarterly SEFA reconciliation process to enhance the frequency of management
oversight in SEFA draft preparation. VP of Finance will prepare the SEFA for
independent review by the CFO. This will be put into a written
policy/procedure.
System Enhancements – Prism's current accounting system does not
accommodate this. However, Prism is already in the later stages of selecting a
new Enterprise Resource Planning (ERP) solution, with this as one of our key
selection criteria. Our new ERP should allow for expenditures within the same
cost center to be identified as grant-reimbursable or non-grant-reimbursable at
the time of entry. We have identified opportunities in new financial
management software solutions that we are scheduled to demo May 12th and the
16th of 2025. Opportunities such as:
The ability to tag grant-reimbursable transactions, to segment our award
cost center into two important categories.
The full cost to manage a specific program.
Identified cost claimed on the SEFA.
Dedicated grant modules that will allow us to establish business rules
and workflows to streamline and digitize critical aspects of grant
management.
Staff Engagement – Cross department coordination meetings occur monthly
between the Finance organization and the Grants Management team to continue
to foster alignment and collaboration in our grant cycles. A general overview of
SEFA, including how to prepare and organize the monthly reconciliations, has
already occurred with some of the grants accountants.
_________________________________________________________
Finding number: 2023-005 Significant Deficiency in Internal Control Over Compliance:
Allowable Costs and Activities
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914
Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917
Federal Program #3 HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
Name of pass-through
entity:
Multiple
Repeat finding: No
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Criteria: Under 2 CFR §200.303, recipients of federal funds must establish and maintain
effective internal controls to ensure compliance with federal statutes,
regulations, and the terms of grant agreements. 2 CFR §200.403 specifies that
costs charged to federal programs must be allowable, necessary, reasonable, and
allocable to the respective award. Additionally, 2 CFR §200.302 requires
financial management systems to provide effective control and accountability
over federal funds, including documented approval of expenditures.
A best practice for grant compliance is to implement a documented approval
process for expenditures charged to federal programs, ensuring that all costs are
reviewed and supported by adequate documentation before reimbursement
requests are submitted.
Condition: The Organization did not have readily-available documented evidence of review
and approval for expenditures charged to federal grants during the fiscal year.
Specifically:
The financial system did not capture or document approval of expenditures
before they were charged to federal programs.
No formalized system existed to retain evidence of grant-related expenditure
reviews.
While the prior Chief Financial Officer (CFO) manually reviewed each
invoice, there was no indication of approval on the supporting
documentation, making it impossible to verify that an appropriate review
occurred before costs were charged to the grants.
Cause: The issue arose due to the Organization's reliance on a manual review process
conducted by the previous CFO, without requiring a formal approval signature or
electronic system control to document review. This lack of a structured approval
process resulted in insufficient evidence to support compliance with federal
allowable cost requirements.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Possible effect: Without a documented approval process, the Organization cannot demonstrate
that expenditures charged to the grants were properly reviewed for allowability,
reasonableness, and allocability in accordance with federal regulations. This
increases the risk that:
Unallowable or misclassified expenditures could be charged to the grants
without detection.
Noncompliance with federal grant requirements could result in questioned
costs or additional oversight from funding agencies.
Financial statement and grant reporting inaccuracies may occur if
expenditures are not properly reviewed and approved.
Although no specific unallowable costs were identified during the audit, the lack
of documented review represents a significant deficiency in internal control over
compliance.
Questioned cost: None identified at this time.
Recommendation: We recommend that the Organization strengthen its internal controls over grant
expenditures by implementing the following measures:
1. Implement a Formal Expenditure Review and Approval Policy – Establish a
policy requiring that all expenditures charged to grants be reviewed and
approved by an appropriate individual before being recorded in the system.
2. Require Documentation of Review and Approval – Ensure that invoices,
payroll allocations, and other cost support documents include a signature,
initials, or system-generated approval to confirm review.
3. Utilize System-Based Controls – If possible, configure the financial system
to require electronic approval for all grant-related expenditures before costs
are recorded.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management partially agrees with the finding. While we acknowledge that
documentation of expenditure approval was not always retrievable, we believe
the expenditures reviewed were all appropriate. Finding 2023-005 refers to the
auditors' assessment of expenditure review and approval processes that occurred
in Calendar Year 2023. During Calendar Year 2023, Prism relied on email
routing of expenditures for review and approval. As of this writing, Prism
Health North Texas' expenditure review and approval processes already meet or
exceed the recommendations above.
Action Taken:
Expenditure Review – All expenditures charged to grants are reviewed and
approved by two qualified individuals.
Documentation of Review and Approval –
Such review and approval for non-payroll expenditures occur in and are
documented in the SAP Concur software before the costs are recorded in
the accounting system (Abila).
Such review and approval for payroll-related expenditures occur via and
are documented via a combination of methods, also before they are
recorded in Abila.
Employees report their time, including how much time was
devoted to grant activities, in the ExponentHR payroll system,
and their supervisors approve both the time and the allocation in
that system.
Programmatic measures that also support grant billing ("units")
are calculated from activity documented in the athenaOne
electronic health record (EHR).
Payroll allocation is calculated by one person, based on the
ExponentHR documentation and the units, then reviewed and
imported into Abila by a second person. The unposted
transactions are reviewed again before posting.
Utilize System-Based Controls – In place as above.
_________________________________________________________
Finding number: 2023-006 Significant Deficiency in Internal Control Over Compliance:
Allowable Costs and Activities
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914
Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917
Federal Program #2 HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Name of pass-through
entity:
Multiple
Repeat finding: No
Criteria: 2 CFR §200.405 requires that costs be allocable to the federal program based on
relative benefits received and be supported by appropriate documentation.
For personnel costs, 2 CFR §200.430(i) requires that compensation for
employees whose time is charged to federal awards be based on records that
accurately reflect the work performed, such as time and effort reporting or
equivalent documentation. For shared costs, 2 CFR §200.412-200.414 requires
that cost allocations be based on documented methodologies that are reasonable
and supported by underlying calculations.
Condition: The Organization does not have formalized internal controls to support the
rationale for allocation of shared costs and employee time across federal
programs. Specifically:
Time and effort is being tracked and maintained by employees, including
hours charged to the specific efforts for the programs. Often, employees
charge hours to specific programs in excess of amounts allocated to the
program as expenditures. The specific amount of employee salaries and
wages that are allocated to specific federal programs for reimbursement, and
which are less than the amounts reflected in the time and effort records, are
determined by members of the finance staff. The rationale for the amount
actually allocated for reimbursement, if less than the amount reflected in the
time and effort records, is not documented.
Review and approval of the allocation of employee compensation to specific
federal programs reimbursement requests is not maintained.
Cause: The deficiency exists because the Organization has not implemented a structured
process for documenting the extent to which allowable compensation costs will
be allocated for reimbursement to specific federal programs in instances where
the allowable compensation cost exceeds the amount allocated for
reimbursement.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Possible effect: The absence of documented allocation methodologies in instances where
allowable compensation costs exceed the amount allocated for reimbursement
increases the risk that:
Costs may be improperly allocated between federal programs, resulting in
potential noncompliance with federal cost principles.
Federal expenditures may be misstated, impacting financial and grant
reporting.
Although questioned costs were not identified, the lack of specific supporting
documentation and controls represents a significant deficiency in internal control
over compliance.
Questioned cost: None identified at this time.
Recommendation: We recommend that the Organization implement the following corrective
actions:
1. Develop and Implement a Written Cost Allocation Policy – Establish a
formal policy outlining the methodology for allocating shared costs and
personnel time across programs, especially in instances where allowable
costs exceed amounts allocated for reimbursement, ensuring compliance
with 2 CFR Part 200 cost principles.
2. Document Allocation Methodologies for Shared Costs – Ensure that
allocations for shared costs (e.g., rent, utilities, and administrative expenses)
are based on a reasonable and documented methodology that can be
reviewed and reperformed.
3. Retain Evidence of Implementation of Internal Controls - Implement review
and approval controls over all requests for reimbursement, including review
and approval of allocation of personnel and shared costs to specific funding
sources. In circumstances where costs can be appropriately allocated to
multiple funding sources, document the rationale for allocating the specific
amount to each funding source.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management respectfully disagrees with this Finding.
Under Condition, the finding states, “Time and effort is being tracked and
maintained by employees, including hours charged to the specific efforts for the
programs.…” This is not accurate. Employees report their time worked each
day, including the amount of time they worked on different projects if
applicable. Employees report this in our commercial HRIS/Payroll system,
where it is maintained and where it is reviewed and approved by the employee’s
manager. The employees report the time they worked and which project(s) they
worked on, their managers review and approve the time and the distribution, and
the data is tracked and maintained in our HRIS/Payroll system (ExponentHR).
Also under Condition, the finding states, “The specific amount of employee
salaries and wages that are allocated to specific federal programs for
reimbursement, and which are less than the amounts reflected in time and effort
records, are determined by members of the finance staff.” It is correct that we
would have to invoice sponsors for less than the total cost of an employee’s
allocated time and effort if a sponsor’s budget is not sufficient to cover that full
amount. This is the correct procedure to follow. Employees correctly continue
documenting their hours worked on a specific project even if the budget is
expended and the accounting staff can no longer bill the sponsor. If a particular
grant does not have sufficient sponsor funds, then the Grants Accounting staff
reduce the bill accordingly.
Also under Condition, the finding states, “The rationale for the amount actually
allocated for reimbursement, if less than the amount reflected in time and effort
records, is not documented”. This is incorrect. Our monthly invoices to each
sponsor accumulate, with each invoice clearly showing not only that month’s
expense but also the year-to-date expense and remaining balance, which forces
the sponsor invoice to stop at an amount less than the total cost of employees’
time and effort when the budget is exhausted.
Also under Condition, the finding states, “Review and approval of the allocation
of employee compensation to specific federal programs reimbursement requests
is not maintained.” Each employee records their hours worked, and the
project(s) on which they worked those hours, in our HRIS/Payroll system. The
employee’s manager reviews and approves both the hours worked and the
projects on which the hours were worked. This review and approval is
maintained in our HRIS/Payroll system. Financial staff calculate the amount to
allocate to specific federal programs based on these HRIS/Payroll system records
(or other records such as clinical units produced, based on the terms of each
grant). Separate accounting staff review the sponsor invoice and post the
Receivable once they deem the invoice correct.
Under Cause, the finding states, “…..the Organization has not implemented a
structured process for documenting the extent to which allowable [emphasis
added] compensation costs will be allocated for reimbursement to specific
federal programs in instances where the allowable compensation cost exceeds
the amount allocated for reimbursement.” This means that we do not have a
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
process for documenting how much of a payroll expense already deemed
allowable on a particular grant will actually be invoiced there. We disagree and
believe that the presence and documentation of a limited sponsor budget, along
with cumulative tracking and documentation of compensation expenses against
that budget, proves and documents why sometimes full compensation costs are
not charged to a grant.
Under Possible Effect, the finding addresses possible effects of “the absence of
documented allocation methodologies.” We don’t agree that our process could
lead to improper allocation between federal programs (as the finding states) nor
to misstating federal expenditures (as the finding states). When a sponsor’s
budget is insufficient to cover its appropriately allocated compensation costs,
those costs are paid from unrestricted, non-federal funds. As also noted in the
finding, no questioned costs were identified.
Finding number: 2023-004 – Material Weakness in Internal Control Over Preparation,
Reconciliation, and Retention of the Schedule of Expenditures of Federal
Awards (SEFA)
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number: 93.914
Federal Program #2 HIV Care Formula Grants): CFDA Number: 93.917
Federal Program #3: HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
Name of pass-through
entity:
Multiple
Repeat finding: No
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Criteria: Under 2 CFR §200.510(b), recipients of federal funds are required to prepare a
Schedule of Expenditures of Federal Awards (SEFA) that fairly presents federal
expenditures for each grant program and is derived from and supported by the
entity's accounting records. Additionally, 2 CFR §200.302 requires that financial
management systems adequately identify and account for federal awards to
ensure accuracy and compliance with applicable federal requirements. Best
practices dictate that federal expenditures should be reconciled regularly to the
general ledger, and supporting documentation should be maintained to
substantiate amounts reported on the SEFA.
Condition: The Organization lacked adequate controls over the preparation, reconciliation,
and retention of records related to the SEFA. Specifically:
The SEFA incorrectly reported certain federal awards as non-federal awards.
The SEFA is prepared based on amounts requested for reimbursement
instead of directly based on expenditures incurred.
Reconciliation schedules that tied SEFA expenditures directly back to the
expenses recorded in the general ledger could not be located.
Expenses recorded in the general ledger represent expenses incurred to
operate the program in addition to direct grant expenditures; the
Organization only requests reimbursement for direct program expenditures
allowable under the program.
Documentation of Excel-based reconciliations did not agree to reported
monthly expenditures, indicating manual reclassification entries between
program codes that were not clearly supported.
Cause: The deficiencies noted were primarily due to:
Lack of system controls to ensure that state and federal expenditures were
separately tracked from non-grant funds spent within the same source codes.
Turnover in grants management personnel, which resulted in missing,
incomplete, or inaccurate reconciling records.
Possible effect: Without a complete and accurate SEFA, the Organization risks noncompliance
with Uniform Guidance reporting requirements, which could impact its ability to
receive and administer federal funds in the future. Additionally, inaccurate
SEFA reporting increases the risk of errors in administering funds, questioned
costs, and over or under expenditure of grants.
Questioned cost: None identified at this time.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Recommendation: We recommend that the Organization implement the following measures to
improve SEFA preparation and record retention:
1. Develop a Standardized SEFA Reconciliation Process – Implement formal
policies and procedures requiring that SEFA expenditures be reconciled to
the general ledger on a monthly basis, with documentation maintained for
audit purposes.
2. Enhance System Controls for Grant Expenditures – Modify the financial
system to allow for the proper segregation of state and federal expenditures
from non-grant funds, ensuring that expenditures are properly classified at
the time of entry.
3. Require Monthly Documentation Reviews – Establish a control requiring
management to review and approve SEFA reconciliation schedules on a
monthly or quarterly basis to ensure accuracy and completeness.
4. Implement a Centralized Documentation Retention Policy – Require that all
SEFA-related reconciliation records, including general ledger tie-outs and
manual adjustments, be retained in a centralized, accessible location.
5. Provide Grants Management Training – Conduct training for grants
management and accounting personnel on SEFA preparation requirements,
including Uniform Guidance compliance and best practices for
documentation and reconciliation.
6. By implementing these measures, the Organization can improve its internal
controls over SEFA preparation, ensure compliance with Uniform Guidance,
and reduce the risk of reporting inaccuracies.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management partially agrees with the finding. While we acknowledge that
documentation supporting SEFA reconciliation was incomplete, we believe that
federal expenditures were properly accounted for. We would like to address
some of the auditors' points individually:
"The SEFA is prepared based on amounts requested for reimbursement instead
of directly based on expenditures incurred." Most grant awards do not fully fund
the programs they support, most grant awards do not run concurrently with Prism
Health North Texas' fiscal year (i.e., with the Calendar Year), and most grant
awards are not spent in equal monthly amounts. It is correct that the 2023 SEFA
was based on grant-appropriate expenditures that occurred during Calendar Year
2023 and were submitted to those grant sponsors for reimbursement. This will
not necessarily reach the full cost to Prism for each grant-supported program, nor
is it likely to exactly match any annual grant award amount.
"Expenses recorded in the general ledger represent expenses incurred to operate
the program in addition to direct grant expenditures; the Organization only
requests reimbursement for direct program expenditures allowable under the
program." As we confirmed verbally with the audit partner on April 25, 2025,
this statement is intended to provide information and context and is not a
criticism or intended to point out any problem. As stated above, most grant
awards do not fully fund the programs they support; therefore, the general ledger
necessarily includes both expenses the sponsor will reimburse and expenses the
sponsor will not reimburse.
Nonetheless, we are enhancing our reconciliation procedures and documentation
practices to fully meet audit requirements. Finding 2023-004 refers to the
auditors' assessment of the SEFA preparation and reconciliation processes that
occurred in Calendar Year 2023. As of this writing, Prism Health North Texas
has already changed its SEFA preparation and reconciliation processes and
meets many of the recommendations above.
Action Taken:
Documentation Retention – On April 25, 2025, management created a structured
and easily accessible system for storing all relevant information for all grants
management personnel.
A logical naming system for files identifying the SEFA period, the
funding agency and identified general ledger expenditures claimed on
the SEFA.
We are now documenting the difference between all GL transactions and
those submitted for sponsor reimbursement (i.e., SEFA
components) in a single document per fund code, arranged by
fiscal year. Previously this documentation was kept by invoice and
arranged by grant year.
Management will continue to ensure all expenditure-related support,
such as invoices and purchase orders, is saved electronically to all
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
financial transactions.
SEFA Reconciliation – Management has decided to move from an annual to
quarterly SEFA reconciliation process to enhance the frequency of management
oversight in SEFA draft preparation. VP of Finance will prepare the SEFA for
independent review by the CFO. This will be put into a written
policy/procedure.
System Enhancements – Prism's current accounting system does not
accommodate this. However, Prism is already in the later stages of selecting a
new Enterprise Resource Planning (ERP) solution, with this as one of our key
selection criteria. Our new ERP should allow for expenditures within the same
cost center to be identified as grant-reimbursable or non-grant-reimbursable at
the time of entry. We have identified opportunities in new financial
management software solutions that we are scheduled to demo May 12th and the
16th of 2025. Opportunities such as:
The ability to tag grant-reimbursable transactions, to segment our award
cost center into two important categories.
The full cost to manage a specific program.
Identified cost claimed on the SEFA.
Dedicated grant modules that will allow us to establish business rules
and workflows to streamline and digitize critical aspects of grant
management.
Staff Engagement – Cross department coordination meetings occur monthly
between the Finance organization and the Grants Management team to continue
to foster alignment and collaboration in our grant cycles. A general overview of
SEFA, including how to prepare and organize the monthly reconciliations, has
already occurred with some of the grants accountants.
_________________________________________________________
Finding number: 2023-005 Significant Deficiency in Internal Control Over Compliance:
Allowable Costs and Activities
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914
Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917
Federal Program #3 HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
Name of pass-through
entity:
Multiple
Repeat finding: No
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Criteria: Under 2 CFR §200.303, recipients of federal funds must establish and maintain
effective internal controls to ensure compliance with federal statutes,
regulations, and the terms of grant agreements. 2 CFR §200.403 specifies that
costs charged to federal programs must be allowable, necessary, reasonable, and
allocable to the respective award. Additionally, 2 CFR §200.302 requires
financial management systems to provide effective control and accountability
over federal funds, including documented approval of expenditures.
A best practice for grant compliance is to implement a documented approval
process for expenditures charged to federal programs, ensuring that all costs are
reviewed and supported by adequate documentation before reimbursement
requests are submitted.
Condition: The Organization did not have readily-available documented evidence of review
and approval for expenditures charged to federal grants during the fiscal year.
Specifically:
The financial system did not capture or document approval of expenditures
before they were charged to federal programs.
No formalized system existed to retain evidence of grant-related expenditure
reviews.
While the prior Chief Financial Officer (CFO) manually reviewed each
invoice, there was no indication of approval on the supporting
documentation, making it impossible to verify that an appropriate review
occurred before costs were charged to the grants.
Cause: The issue arose due to the Organization's reliance on a manual review process
conducted by the previous CFO, without requiring a formal approval signature or
electronic system control to document review. This lack of a structured approval
process resulted in insufficient evidence to support compliance with federal
allowable cost requirements.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Possible effect: Without a documented approval process, the Organization cannot demonstrate
that expenditures charged to the grants were properly reviewed for allowability,
reasonableness, and allocability in accordance with federal regulations. This
increases the risk that:
Unallowable or misclassified expenditures could be charged to the grants
without detection.
Noncompliance with federal grant requirements could result in questioned
costs or additional oversight from funding agencies.
Financial statement and grant reporting inaccuracies may occur if
expenditures are not properly reviewed and approved.
Although no specific unallowable costs were identified during the audit, the lack
of documented review represents a significant deficiency in internal control over
compliance.
Questioned cost: None identified at this time.
Recommendation: We recommend that the Organization strengthen its internal controls over grant
expenditures by implementing the following measures:
1. Implement a Formal Expenditure Review and Approval Policy – Establish a
policy requiring that all expenditures charged to grants be reviewed and
approved by an appropriate individual before being recorded in the system.
2. Require Documentation of Review and Approval – Ensure that invoices,
payroll allocations, and other cost support documents include a signature,
initials, or system-generated approval to confirm review.
3. Utilize System-Based Controls – If possible, configure the financial system
to require electronic approval for all grant-related expenditures before costs
are recorded.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management partially agrees with the finding. While we acknowledge that
documentation of expenditure approval was not always retrievable, we believe
the expenditures reviewed were all appropriate. Finding 2023-005 refers to the
auditors' assessment of expenditure review and approval processes that occurred
in Calendar Year 2023. During Calendar Year 2023, Prism relied on email
routing of expenditures for review and approval. As of this writing, Prism
Health North Texas' expenditure review and approval processes already meet or
exceed the recommendations above.
Action Taken:
Expenditure Review – All expenditures charged to grants are reviewed and
approved by two qualified individuals.
Documentation of Review and Approval –
Such review and approval for non-payroll expenditures occur in and are
documented in the SAP Concur software before the costs are recorded in
the accounting system (Abila).
Such review and approval for payroll-related expenditures occur via and
are documented via a combination of methods, also before they are
recorded in Abila.
Employees report their time, including how much time was
devoted to grant activities, in the ExponentHR payroll system,
and their supervisors approve both the time and the allocation in
that system.
Programmatic measures that also support grant billing ("units")
are calculated from activity documented in the athenaOne
electronic health record (EHR).
Payroll allocation is calculated by one person, based on the
ExponentHR documentation and the units, then reviewed and
imported into Abila by a second person. The unposted
transactions are reviewed again before posting.
Utilize System-Based Controls – In place as above.
_________________________________________________________
Finding number: 2023-006 Significant Deficiency in Internal Control Over Compliance:
Allowable Costs and Activities
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914
Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917
Federal Program #2 HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Name of pass-through
entity:
Multiple
Repeat finding: No
Criteria: 2 CFR §200.405 requires that costs be allocable to the federal program based on
relative benefits received and be supported by appropriate documentation.
For personnel costs, 2 CFR §200.430(i) requires that compensation for
employees whose time is charged to federal awards be based on records that
accurately reflect the work performed, such as time and effort reporting or
equivalent documentation. For shared costs, 2 CFR §200.412-200.414 requires
that cost allocations be based on documented methodologies that are reasonable
and supported by underlying calculations.
Condition: The Organization does not have formalized internal controls to support the
rationale for allocation of shared costs and employee time across federal
programs. Specifically:
Time and effort is being tracked and maintained by employees, including
hours charged to the specific efforts for the programs. Often, employees
charge hours to specific programs in excess of amounts allocated to the
program as expenditures. The specific amount of employee salaries and
wages that are allocated to specific federal programs for reimbursement, and
which are less than the amounts reflected in the time and effort records, are
determined by members of the finance staff. The rationale for the amount
actually allocated for reimbursement, if less than the amount reflected in the
time and effort records, is not documented.
Review and approval of the allocation of employee compensation to specific
federal programs reimbursement requests is not maintained.
Cause: The deficiency exists because the Organization has not implemented a structured
process for documenting the extent to which allowable compensation costs will
be allocated for reimbursement to specific federal programs in instances where
the allowable compensation cost exceeds the amount allocated for
reimbursement.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Possible effect: The absence of documented allocation methodologies in instances where
allowable compensation costs exceed the amount allocated for reimbursement
increases the risk that:
Costs may be improperly allocated between federal programs, resulting in
potential noncompliance with federal cost principles.
Federal expenditures may be misstated, impacting financial and grant
reporting.
Although questioned costs were not identified, the lack of specific supporting
documentation and controls represents a significant deficiency in internal control
over compliance.
Questioned cost: None identified at this time.
Recommendation: We recommend that the Organization implement the following corrective
actions:
1. Develop and Implement a Written Cost Allocation Policy – Establish a
formal policy outlining the methodology for allocating shared costs and
personnel time across programs, especially in instances where allowable
costs exceed amounts allocated for reimbursement, ensuring compliance
with 2 CFR Part 200 cost principles.
2. Document Allocation Methodologies for Shared Costs – Ensure that
allocations for shared costs (e.g., rent, utilities, and administrative expenses)
are based on a reasonable and documented methodology that can be
reviewed and reperformed.
3. Retain Evidence of Implementation of Internal Controls - Implement review
and approval controls over all requests for reimbursement, including review
and approval of allocation of personnel and shared costs to specific funding
sources. In circumstances where costs can be appropriately allocated to
multiple funding sources, document the rationale for allocating the specific
amount to each funding source.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management respectfully disagrees with this Finding.
Under Condition, the finding states, “Time and effort is being tracked and
maintained by employees, including hours charged to the specific efforts for the
programs.…” This is not accurate. Employees report their time worked each
day, including the amount of time they worked on different projects if
applicable. Employees report this in our commercial HRIS/Payroll system,
where it is maintained and where it is reviewed and approved by the employee’s
manager. The employees report the time they worked and which project(s) they
worked on, their managers review and approve the time and the distribution, and
the data is tracked and maintained in our HRIS/Payroll system (ExponentHR).
Also under Condition, the finding states, “The specific amount of employee
salaries and wages that are allocated to specific federal programs for
reimbursement, and which are less than the amounts reflected in time and effort
records, are determined by members of the finance staff.” It is correct that we
would have to invoice sponsors for less than the total cost of an employee’s
allocated time and effort if a sponsor’s budget is not sufficient to cover that full
amount. This is the correct procedure to follow. Employees correctly continue
documenting their hours worked on a specific project even if the budget is
expended and the accounting staff can no longer bill the sponsor. If a particular
grant does not have sufficient sponsor funds, then the Grants Accounting staff
reduce the bill accordingly.
Also under Condition, the finding states, “The rationale for the amount actually
allocated for reimbursement, if less than the amount reflected in time and effort
records, is not documented”. This is incorrect. Our monthly invoices to each
sponsor accumulate, with each invoice clearly showing not only that month’s
expense but also the year-to-date expense and remaining balance, which forces
the sponsor invoice to stop at an amount less than the total cost of employees’
time and effort when the budget is exhausted.
Also under Condition, the finding states, “Review and approval of the allocation
of employee compensation to specific federal programs reimbursement requests
is not maintained.” Each employee records their hours worked, and the
project(s) on which they worked those hours, in our HRIS/Payroll system. The
employee’s manager reviews and approves both the hours worked and the
projects on which the hours were worked. This review and approval is
maintained in our HRIS/Payroll system. Financial staff calculate the amount to
allocate to specific federal programs based on these HRIS/Payroll system records
(or other records such as clinical units produced, based on the terms of each
grant). Separate accounting staff review the sponsor invoice and post the
Receivable once they deem the invoice correct.
Under Cause, the finding states, “…..the Organization has not implemented a
structured process for documenting the extent to which allowable [emphasis
added] compensation costs will be allocated for reimbursement to specific
federal programs in instances where the allowable compensation cost exceeds
the amount allocated for reimbursement.” This means that we do not have a
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
process for documenting how much of a payroll expense already deemed
allowable on a particular grant will actually be invoiced there. We disagree and
believe that the presence and documentation of a limited sponsor budget, along
with cumulative tracking and documentation of compensation expenses against
that budget, proves and documents why sometimes full compensation costs are
not charged to a grant.
Under Possible Effect, the finding addresses possible effects of “the absence of
documented allocation methodologies.” We don’t agree that our process could
lead to improper allocation between federal programs (as the finding states) nor
to misstating federal expenditures (as the finding states). When a sponsor’s
budget is insufficient to cover its appropriately allocated compensation costs,
those costs are paid from unrestricted, non-federal funds. As also noted in the
finding, no questioned costs were identified.
Finding number: 2023-004 – Material Weakness in Internal Control Over Preparation,
Reconciliation, and Retention of the Schedule of Expenditures of Federal
Awards (SEFA)
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number: 93.914
Federal Program #2 HIV Care Formula Grants): CFDA Number: 93.917
Federal Program #3: HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
Name of pass-through
entity:
Multiple
Repeat finding: No
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Criteria: Under 2 CFR §200.510(b), recipients of federal funds are required to prepare a
Schedule of Expenditures of Federal Awards (SEFA) that fairly presents federal
expenditures for each grant program and is derived from and supported by the
entity's accounting records. Additionally, 2 CFR §200.302 requires that financial
management systems adequately identify and account for federal awards to
ensure accuracy and compliance with applicable federal requirements. Best
practices dictate that federal expenditures should be reconciled regularly to the
general ledger, and supporting documentation should be maintained to
substantiate amounts reported on the SEFA.
Condition: The Organization lacked adequate controls over the preparation, reconciliation,
and retention of records related to the SEFA. Specifically:
The SEFA incorrectly reported certain federal awards as non-federal awards.
The SEFA is prepared based on amounts requested for reimbursement
instead of directly based on expenditures incurred.
Reconciliation schedules that tied SEFA expenditures directly back to the
expenses recorded in the general ledger could not be located.
Expenses recorded in the general ledger represent expenses incurred to
operate the program in addition to direct grant expenditures; the
Organization only requests reimbursement for direct program expenditures
allowable under the program.
Documentation of Excel-based reconciliations did not agree to reported
monthly expenditures, indicating manual reclassification entries between
program codes that were not clearly supported.
Cause: The deficiencies noted were primarily due to:
Lack of system controls to ensure that state and federal expenditures were
separately tracked from non-grant funds spent within the same source codes.
Turnover in grants management personnel, which resulted in missing,
incomplete, or inaccurate reconciling records.
Possible effect: Without a complete and accurate SEFA, the Organization risks noncompliance
with Uniform Guidance reporting requirements, which could impact its ability to
receive and administer federal funds in the future. Additionally, inaccurate
SEFA reporting increases the risk of errors in administering funds, questioned
costs, and over or under expenditure of grants.
Questioned cost: None identified at this time.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Recommendation: We recommend that the Organization implement the following measures to
improve SEFA preparation and record retention:
1. Develop a Standardized SEFA Reconciliation Process – Implement formal
policies and procedures requiring that SEFA expenditures be reconciled to
the general ledger on a monthly basis, with documentation maintained for
audit purposes.
2. Enhance System Controls for Grant Expenditures – Modify the financial
system to allow for the proper segregation of state and federal expenditures
from non-grant funds, ensuring that expenditures are properly classified at
the time of entry.
3. Require Monthly Documentation Reviews – Establish a control requiring
management to review and approve SEFA reconciliation schedules on a
monthly or quarterly basis to ensure accuracy and completeness.
4. Implement a Centralized Documentation Retention Policy – Require that all
SEFA-related reconciliation records, including general ledger tie-outs and
manual adjustments, be retained in a centralized, accessible location.
5. Provide Grants Management Training – Conduct training for grants
management and accounting personnel on SEFA preparation requirements,
including Uniform Guidance compliance and best practices for
documentation and reconciliation.
6. By implementing these measures, the Organization can improve its internal
controls over SEFA preparation, ensure compliance with Uniform Guidance,
and reduce the risk of reporting inaccuracies.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management partially agrees with the finding. While we acknowledge that
documentation supporting SEFA reconciliation was incomplete, we believe that
federal expenditures were properly accounted for. We would like to address
some of the auditors' points individually:
"The SEFA is prepared based on amounts requested for reimbursement instead
of directly based on expenditures incurred." Most grant awards do not fully fund
the programs they support, most grant awards do not run concurrently with Prism
Health North Texas' fiscal year (i.e., with the Calendar Year), and most grant
awards are not spent in equal monthly amounts. It is correct that the 2023 SEFA
was based on grant-appropriate expenditures that occurred during Calendar Year
2023 and were submitted to those grant sponsors for reimbursement. This will
not necessarily reach the full cost to Prism for each grant-supported program, nor
is it likely to exactly match any annual grant award amount.
"Expenses recorded in the general ledger represent expenses incurred to operate
the program in addition to direct grant expenditures; the Organization only
requests reimbursement for direct program expenditures allowable under the
program." As we confirmed verbally with the audit partner on April 25, 2025,
this statement is intended to provide information and context and is not a
criticism or intended to point out any problem. As stated above, most grant
awards do not fully fund the programs they support; therefore, the general ledger
necessarily includes both expenses the sponsor will reimburse and expenses the
sponsor will not reimburse.
Nonetheless, we are enhancing our reconciliation procedures and documentation
practices to fully meet audit requirements. Finding 2023-004 refers to the
auditors' assessment of the SEFA preparation and reconciliation processes that
occurred in Calendar Year 2023. As of this writing, Prism Health North Texas
has already changed its SEFA preparation and reconciliation processes and
meets many of the recommendations above.
Action Taken:
Documentation Retention – On April 25, 2025, management created a structured
and easily accessible system for storing all relevant information for all grants
management personnel.
A logical naming system for files identifying the SEFA period, the
funding agency and identified general ledger expenditures claimed on
the SEFA.
We are now documenting the difference between all GL transactions and
those submitted for sponsor reimbursement (i.e., SEFA
components) in a single document per fund code, arranged by
fiscal year. Previously this documentation was kept by invoice and
arranged by grant year.
Management will continue to ensure all expenditure-related support,
such as invoices and purchase orders, is saved electronically to all
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
financial transactions.
SEFA Reconciliation – Management has decided to move from an annual to
quarterly SEFA reconciliation process to enhance the frequency of management
oversight in SEFA draft preparation. VP of Finance will prepare the SEFA for
independent review by the CFO. This will be put into a written
policy/procedure.
System Enhancements – Prism's current accounting system does not
accommodate this. However, Prism is already in the later stages of selecting a
new Enterprise Resource Planning (ERP) solution, with this as one of our key
selection criteria. Our new ERP should allow for expenditures within the same
cost center to be identified as grant-reimbursable or non-grant-reimbursable at
the time of entry. We have identified opportunities in new financial
management software solutions that we are scheduled to demo May 12th and the
16th of 2025. Opportunities such as:
The ability to tag grant-reimbursable transactions, to segment our award
cost center into two important categories.
The full cost to manage a specific program.
Identified cost claimed on the SEFA.
Dedicated grant modules that will allow us to establish business rules
and workflows to streamline and digitize critical aspects of grant
management.
Staff Engagement – Cross department coordination meetings occur monthly
between the Finance organization and the Grants Management team to continue
to foster alignment and collaboration in our grant cycles. A general overview of
SEFA, including how to prepare and organize the monthly reconciliations, has
already occurred with some of the grants accountants.
_________________________________________________________
Finding number: 2023-005 Significant Deficiency in Internal Control Over Compliance:
Allowable Costs and Activities
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914
Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917
Federal Program #3 HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
Name of pass-through
entity:
Multiple
Repeat finding: No
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Criteria: Under 2 CFR §200.303, recipients of federal funds must establish and maintain
effective internal controls to ensure compliance with federal statutes,
regulations, and the terms of grant agreements. 2 CFR §200.403 specifies that
costs charged to federal programs must be allowable, necessary, reasonable, and
allocable to the respective award. Additionally, 2 CFR §200.302 requires
financial management systems to provide effective control and accountability
over federal funds, including documented approval of expenditures.
A best practice for grant compliance is to implement a documented approval
process for expenditures charged to federal programs, ensuring that all costs are
reviewed and supported by adequate documentation before reimbursement
requests are submitted.
Condition: The Organization did not have readily-available documented evidence of review
and approval for expenditures charged to federal grants during the fiscal year.
Specifically:
The financial system did not capture or document approval of expenditures
before they were charged to federal programs.
No formalized system existed to retain evidence of grant-related expenditure
reviews.
While the prior Chief Financial Officer (CFO) manually reviewed each
invoice, there was no indication of approval on the supporting
documentation, making it impossible to verify that an appropriate review
occurred before costs were charged to the grants.
Cause: The issue arose due to the Organization's reliance on a manual review process
conducted by the previous CFO, without requiring a formal approval signature or
electronic system control to document review. This lack of a structured approval
process resulted in insufficient evidence to support compliance with federal
allowable cost requirements.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Possible effect: Without a documented approval process, the Organization cannot demonstrate
that expenditures charged to the grants were properly reviewed for allowability,
reasonableness, and allocability in accordance with federal regulations. This
increases the risk that:
Unallowable or misclassified expenditures could be charged to the grants
without detection.
Noncompliance with federal grant requirements could result in questioned
costs or additional oversight from funding agencies.
Financial statement and grant reporting inaccuracies may occur if
expenditures are not properly reviewed and approved.
Although no specific unallowable costs were identified during the audit, the lack
of documented review represents a significant deficiency in internal control over
compliance.
Questioned cost: None identified at this time.
Recommendation: We recommend that the Organization strengthen its internal controls over grant
expenditures by implementing the following measures:
1. Implement a Formal Expenditure Review and Approval Policy – Establish a
policy requiring that all expenditures charged to grants be reviewed and
approved by an appropriate individual before being recorded in the system.
2. Require Documentation of Review and Approval – Ensure that invoices,
payroll allocations, and other cost support documents include a signature,
initials, or system-generated approval to confirm review.
3. Utilize System-Based Controls – If possible, configure the financial system
to require electronic approval for all grant-related expenditures before costs
are recorded.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management partially agrees with the finding. While we acknowledge that
documentation of expenditure approval was not always retrievable, we believe
the expenditures reviewed were all appropriate. Finding 2023-005 refers to the
auditors' assessment of expenditure review and approval processes that occurred
in Calendar Year 2023. During Calendar Year 2023, Prism relied on email
routing of expenditures for review and approval. As of this writing, Prism
Health North Texas' expenditure review and approval processes already meet or
exceed the recommendations above.
Action Taken:
Expenditure Review – All expenditures charged to grants are reviewed and
approved by two qualified individuals.
Documentation of Review and Approval –
Such review and approval for non-payroll expenditures occur in and are
documented in the SAP Concur software before the costs are recorded in
the accounting system (Abila).
Such review and approval for payroll-related expenditures occur via and
are documented via a combination of methods, also before they are
recorded in Abila.
Employees report their time, including how much time was
devoted to grant activities, in the ExponentHR payroll system,
and their supervisors approve both the time and the allocation in
that system.
Programmatic measures that also support grant billing ("units")
are calculated from activity documented in the athenaOne
electronic health record (EHR).
Payroll allocation is calculated by one person, based on the
ExponentHR documentation and the units, then reviewed and
imported into Abila by a second person. The unposted
transactions are reviewed again before posting.
Utilize System-Based Controls – In place as above.
_________________________________________________________
Finding number: 2023-006 Significant Deficiency in Internal Control Over Compliance:
Allowable Costs and Activities
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914
Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917
Federal Program #2 HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Name of pass-through
entity:
Multiple
Repeat finding: No
Criteria: 2 CFR §200.405 requires that costs be allocable to the federal program based on
relative benefits received and be supported by appropriate documentation.
For personnel costs, 2 CFR §200.430(i) requires that compensation for
employees whose time is charged to federal awards be based on records that
accurately reflect the work performed, such as time and effort reporting or
equivalent documentation. For shared costs, 2 CFR §200.412-200.414 requires
that cost allocations be based on documented methodologies that are reasonable
and supported by underlying calculations.
Condition: The Organization does not have formalized internal controls to support the
rationale for allocation of shared costs and employee time across federal
programs. Specifically:
Time and effort is being tracked and maintained by employees, including
hours charged to the specific efforts for the programs. Often, employees
charge hours to specific programs in excess of amounts allocated to the
program as expenditures. The specific amount of employee salaries and
wages that are allocated to specific federal programs for reimbursement, and
which are less than the amounts reflected in the time and effort records, are
determined by members of the finance staff. The rationale for the amount
actually allocated for reimbursement, if less than the amount reflected in the
time and effort records, is not documented.
Review and approval of the allocation of employee compensation to specific
federal programs reimbursement requests is not maintained.
Cause: The deficiency exists because the Organization has not implemented a structured
process for documenting the extent to which allowable compensation costs will
be allocated for reimbursement to specific federal programs in instances where
the allowable compensation cost exceeds the amount allocated for
reimbursement.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Possible effect: The absence of documented allocation methodologies in instances where
allowable compensation costs exceed the amount allocated for reimbursement
increases the risk that:
Costs may be improperly allocated between federal programs, resulting in
potential noncompliance with federal cost principles.
Federal expenditures may be misstated, impacting financial and grant
reporting.
Although questioned costs were not identified, the lack of specific supporting
documentation and controls represents a significant deficiency in internal control
over compliance.
Questioned cost: None identified at this time.
Recommendation: We recommend that the Organization implement the following corrective
actions:
1. Develop and Implement a Written Cost Allocation Policy – Establish a
formal policy outlining the methodology for allocating shared costs and
personnel time across programs, especially in instances where allowable
costs exceed amounts allocated for reimbursement, ensuring compliance
with 2 CFR Part 200 cost principles.
2. Document Allocation Methodologies for Shared Costs – Ensure that
allocations for shared costs (e.g., rent, utilities, and administrative expenses)
are based on a reasonable and documented methodology that can be
reviewed and reperformed.
3. Retain Evidence of Implementation of Internal Controls - Implement review
and approval controls over all requests for reimbursement, including review
and approval of allocation of personnel and shared costs to specific funding
sources. In circumstances where costs can be appropriately allocated to
multiple funding sources, document the rationale for allocating the specific
amount to each funding source.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management respectfully disagrees with this Finding.
Under Condition, the finding states, “Time and effort is being tracked and
maintained by employees, including hours charged to the specific efforts for the
programs.…” This is not accurate. Employees report their time worked each
day, including the amount of time they worked on different projects if
applicable. Employees report this in our commercial HRIS/Payroll system,
where it is maintained and where it is reviewed and approved by the employee’s
manager. The employees report the time they worked and which project(s) they
worked on, their managers review and approve the time and the distribution, and
the data is tracked and maintained in our HRIS/Payroll system (ExponentHR).
Also under Condition, the finding states, “The specific amount of employee
salaries and wages that are allocated to specific federal programs for
reimbursement, and which are less than the amounts reflected in time and effort
records, are determined by members of the finance staff.” It is correct that we
would have to invoice sponsors for less than the total cost of an employee’s
allocated time and effort if a sponsor’s budget is not sufficient to cover that full
amount. This is the correct procedure to follow. Employees correctly continue
documenting their hours worked on a specific project even if the budget is
expended and the accounting staff can no longer bill the sponsor. If a particular
grant does not have sufficient sponsor funds, then the Grants Accounting staff
reduce the bill accordingly.
Also under Condition, the finding states, “The rationale for the amount actually
allocated for reimbursement, if less than the amount reflected in time and effort
records, is not documented”. This is incorrect. Our monthly invoices to each
sponsor accumulate, with each invoice clearly showing not only that month’s
expense but also the year-to-date expense and remaining balance, which forces
the sponsor invoice to stop at an amount less than the total cost of employees’
time and effort when the budget is exhausted.
Also under Condition, the finding states, “Review and approval of the allocation
of employee compensation to specific federal programs reimbursement requests
is not maintained.” Each employee records their hours worked, and the
project(s) on which they worked those hours, in our HRIS/Payroll system. The
employee’s manager reviews and approves both the hours worked and the
projects on which the hours were worked. This review and approval is
maintained in our HRIS/Payroll system. Financial staff calculate the amount to
allocate to specific federal programs based on these HRIS/Payroll system records
(or other records such as clinical units produced, based on the terms of each
grant). Separate accounting staff review the sponsor invoice and post the
Receivable once they deem the invoice correct.
Under Cause, the finding states, “…..the Organization has not implemented a
structured process for documenting the extent to which allowable [emphasis
added] compensation costs will be allocated for reimbursement to specific
federal programs in instances where the allowable compensation cost exceeds
the amount allocated for reimbursement.” This means that we do not have a
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
process for documenting how much of a payroll expense already deemed
allowable on a particular grant will actually be invoiced there. We disagree and
believe that the presence and documentation of a limited sponsor budget, along
with cumulative tracking and documentation of compensation expenses against
that budget, proves and documents why sometimes full compensation costs are
not charged to a grant.
Under Possible Effect, the finding addresses possible effects of “the absence of
documented allocation methodologies.” We don’t agree that our process could
lead to improper allocation between federal programs (as the finding states) nor
to misstating federal expenditures (as the finding states). When a sponsor’s
budget is insufficient to cover its appropriately allocated compensation costs,
those costs are paid from unrestricted, non-federal funds. As also noted in the
finding, no questioned costs were identified.
Finding number: 2023-004 – Material Weakness in Internal Control Over Preparation,
Reconciliation, and Retention of the Schedule of Expenditures of Federal
Awards (SEFA)
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number: 93.914
Federal Program #2 HIV Care Formula Grants): CFDA Number: 93.917
Federal Program #3: HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
Name of pass-through
entity:
Multiple
Repeat finding: No
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Criteria: Under 2 CFR §200.510(b), recipients of federal funds are required to prepare a
Schedule of Expenditures of Federal Awards (SEFA) that fairly presents federal
expenditures for each grant program and is derived from and supported by the
entity's accounting records. Additionally, 2 CFR §200.302 requires that financial
management systems adequately identify and account for federal awards to
ensure accuracy and compliance with applicable federal requirements. Best
practices dictate that federal expenditures should be reconciled regularly to the
general ledger, and supporting documentation should be maintained to
substantiate amounts reported on the SEFA.
Condition: The Organization lacked adequate controls over the preparation, reconciliation,
and retention of records related to the SEFA. Specifically:
The SEFA incorrectly reported certain federal awards as non-federal awards.
The SEFA is prepared based on amounts requested for reimbursement
instead of directly based on expenditures incurred.
Reconciliation schedules that tied SEFA expenditures directly back to the
expenses recorded in the general ledger could not be located.
Expenses recorded in the general ledger represent expenses incurred to
operate the program in addition to direct grant expenditures; the
Organization only requests reimbursement for direct program expenditures
allowable under the program.
Documentation of Excel-based reconciliations did not agree to reported
monthly expenditures, indicating manual reclassification entries between
program codes that were not clearly supported.
Cause: The deficiencies noted were primarily due to:
Lack of system controls to ensure that state and federal expenditures were
separately tracked from non-grant funds spent within the same source codes.
Turnover in grants management personnel, which resulted in missing,
incomplete, or inaccurate reconciling records.
Possible effect: Without a complete and accurate SEFA, the Organization risks noncompliance
with Uniform Guidance reporting requirements, which could impact its ability to
receive and administer federal funds in the future. Additionally, inaccurate
SEFA reporting increases the risk of errors in administering funds, questioned
costs, and over or under expenditure of grants.
Questioned cost: None identified at this time.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Recommendation: We recommend that the Organization implement the following measures to
improve SEFA preparation and record retention:
1. Develop a Standardized SEFA Reconciliation Process – Implement formal
policies and procedures requiring that SEFA expenditures be reconciled to
the general ledger on a monthly basis, with documentation maintained for
audit purposes.
2. Enhance System Controls for Grant Expenditures – Modify the financial
system to allow for the proper segregation of state and federal expenditures
from non-grant funds, ensuring that expenditures are properly classified at
the time of entry.
3. Require Monthly Documentation Reviews – Establish a control requiring
management to review and approve SEFA reconciliation schedules on a
monthly or quarterly basis to ensure accuracy and completeness.
4. Implement a Centralized Documentation Retention Policy – Require that all
SEFA-related reconciliation records, including general ledger tie-outs and
manual adjustments, be retained in a centralized, accessible location.
5. Provide Grants Management Training – Conduct training for grants
management and accounting personnel on SEFA preparation requirements,
including Uniform Guidance compliance and best practices for
documentation and reconciliation.
6. By implementing these measures, the Organization can improve its internal
controls over SEFA preparation, ensure compliance with Uniform Guidance,
and reduce the risk of reporting inaccuracies.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management partially agrees with the finding. While we acknowledge that
documentation supporting SEFA reconciliation was incomplete, we believe that
federal expenditures were properly accounted for. We would like to address
some of the auditors' points individually:
"The SEFA is prepared based on amounts requested for reimbursement instead
of directly based on expenditures incurred." Most grant awards do not fully fund
the programs they support, most grant awards do not run concurrently with Prism
Health North Texas' fiscal year (i.e., with the Calendar Year), and most grant
awards are not spent in equal monthly amounts. It is correct that the 2023 SEFA
was based on grant-appropriate expenditures that occurred during Calendar Year
2023 and were submitted to those grant sponsors for reimbursement. This will
not necessarily reach the full cost to Prism for each grant-supported program, nor
is it likely to exactly match any annual grant award amount.
"Expenses recorded in the general ledger represent expenses incurred to operate
the program in addition to direct grant expenditures; the Organization only
requests reimbursement for direct program expenditures allowable under the
program." As we confirmed verbally with the audit partner on April 25, 2025,
this statement is intended to provide information and context and is not a
criticism or intended to point out any problem. As stated above, most grant
awards do not fully fund the programs they support; therefore, the general ledger
necessarily includes both expenses the sponsor will reimburse and expenses the
sponsor will not reimburse.
Nonetheless, we are enhancing our reconciliation procedures and documentation
practices to fully meet audit requirements. Finding 2023-004 refers to the
auditors' assessment of the SEFA preparation and reconciliation processes that
occurred in Calendar Year 2023. As of this writing, Prism Health North Texas
has already changed its SEFA preparation and reconciliation processes and
meets many of the recommendations above.
Action Taken:
Documentation Retention – On April 25, 2025, management created a structured
and easily accessible system for storing all relevant information for all grants
management personnel.
A logical naming system for files identifying the SEFA period, the
funding agency and identified general ledger expenditures claimed on
the SEFA.
We are now documenting the difference between all GL transactions and
those submitted for sponsor reimbursement (i.e., SEFA
components) in a single document per fund code, arranged by
fiscal year. Previously this documentation was kept by invoice and
arranged by grant year.
Management will continue to ensure all expenditure-related support,
such as invoices and purchase orders, is saved electronically to all
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
financial transactions.
SEFA Reconciliation – Management has decided to move from an annual to
quarterly SEFA reconciliation process to enhance the frequency of management
oversight in SEFA draft preparation. VP of Finance will prepare the SEFA for
independent review by the CFO. This will be put into a written
policy/procedure.
System Enhancements – Prism's current accounting system does not
accommodate this. However, Prism is already in the later stages of selecting a
new Enterprise Resource Planning (ERP) solution, with this as one of our key
selection criteria. Our new ERP should allow for expenditures within the same
cost center to be identified as grant-reimbursable or non-grant-reimbursable at
the time of entry. We have identified opportunities in new financial
management software solutions that we are scheduled to demo May 12th and the
16th of 2025. Opportunities such as:
The ability to tag grant-reimbursable transactions, to segment our award
cost center into two important categories.
The full cost to manage a specific program.
Identified cost claimed on the SEFA.
Dedicated grant modules that will allow us to establish business rules
and workflows to streamline and digitize critical aspects of grant
management.
Staff Engagement – Cross department coordination meetings occur monthly
between the Finance organization and the Grants Management team to continue
to foster alignment and collaboration in our grant cycles. A general overview of
SEFA, including how to prepare and organize the monthly reconciliations, has
already occurred with some of the grants accountants.
_________________________________________________________
Finding number: 2023-005 Significant Deficiency in Internal Control Over Compliance:
Allowable Costs and Activities
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914
Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917
Federal Program #3 HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
Name of pass-through
entity:
Multiple
Repeat finding: No
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Criteria: Under 2 CFR §200.303, recipients of federal funds must establish and maintain
effective internal controls to ensure compliance with federal statutes,
regulations, and the terms of grant agreements. 2 CFR §200.403 specifies that
costs charged to federal programs must be allowable, necessary, reasonable, and
allocable to the respective award. Additionally, 2 CFR §200.302 requires
financial management systems to provide effective control and accountability
over federal funds, including documented approval of expenditures.
A best practice for grant compliance is to implement a documented approval
process for expenditures charged to federal programs, ensuring that all costs are
reviewed and supported by adequate documentation before reimbursement
requests are submitted.
Condition: The Organization did not have readily-available documented evidence of review
and approval for expenditures charged to federal grants during the fiscal year.
Specifically:
The financial system did not capture or document approval of expenditures
before they were charged to federal programs.
No formalized system existed to retain evidence of grant-related expenditure
reviews.
While the prior Chief Financial Officer (CFO) manually reviewed each
invoice, there was no indication of approval on the supporting
documentation, making it impossible to verify that an appropriate review
occurred before costs were charged to the grants.
Cause: The issue arose due to the Organization's reliance on a manual review process
conducted by the previous CFO, without requiring a formal approval signature or
electronic system control to document review. This lack of a structured approval
process resulted in insufficient evidence to support compliance with federal
allowable cost requirements.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Possible effect: Without a documented approval process, the Organization cannot demonstrate
that expenditures charged to the grants were properly reviewed for allowability,
reasonableness, and allocability in accordance with federal regulations. This
increases the risk that:
Unallowable or misclassified expenditures could be charged to the grants
without detection.
Noncompliance with federal grant requirements could result in questioned
costs or additional oversight from funding agencies.
Financial statement and grant reporting inaccuracies may occur if
expenditures are not properly reviewed and approved.
Although no specific unallowable costs were identified during the audit, the lack
of documented review represents a significant deficiency in internal control over
compliance.
Questioned cost: None identified at this time.
Recommendation: We recommend that the Organization strengthen its internal controls over grant
expenditures by implementing the following measures:
1. Implement a Formal Expenditure Review and Approval Policy – Establish a
policy requiring that all expenditures charged to grants be reviewed and
approved by an appropriate individual before being recorded in the system.
2. Require Documentation of Review and Approval – Ensure that invoices,
payroll allocations, and other cost support documents include a signature,
initials, or system-generated approval to confirm review.
3. Utilize System-Based Controls – If possible, configure the financial system
to require electronic approval for all grant-related expenditures before costs
are recorded.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management partially agrees with the finding. While we acknowledge that
documentation of expenditure approval was not always retrievable, we believe
the expenditures reviewed were all appropriate. Finding 2023-005 refers to the
auditors' assessment of expenditure review and approval processes that occurred
in Calendar Year 2023. During Calendar Year 2023, Prism relied on email
routing of expenditures for review and approval. As of this writing, Prism
Health North Texas' expenditure review and approval processes already meet or
exceed the recommendations above.
Action Taken:
Expenditure Review – All expenditures charged to grants are reviewed and
approved by two qualified individuals.
Documentation of Review and Approval –
Such review and approval for non-payroll expenditures occur in and are
documented in the SAP Concur software before the costs are recorded in
the accounting system (Abila).
Such review and approval for payroll-related expenditures occur via and
are documented via a combination of methods, also before they are
recorded in Abila.
Employees report their time, including how much time was
devoted to grant activities, in the ExponentHR payroll system,
and their supervisors approve both the time and the allocation in
that system.
Programmatic measures that also support grant billing ("units")
are calculated from activity documented in the athenaOne
electronic health record (EHR).
Payroll allocation is calculated by one person, based on the
ExponentHR documentation and the units, then reviewed and
imported into Abila by a second person. The unposted
transactions are reviewed again before posting.
Utilize System-Based Controls – In place as above.
_________________________________________________________
Finding number: 2023-006 Significant Deficiency in Internal Control Over Compliance:
Allowable Costs and Activities
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914
Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917
Federal Program #2 HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Name of pass-through
entity:
Multiple
Repeat finding: No
Criteria: 2 CFR §200.405 requires that costs be allocable to the federal program based on
relative benefits received and be supported by appropriate documentation.
For personnel costs, 2 CFR §200.430(i) requires that compensation for
employees whose time is charged to federal awards be based on records that
accurately reflect the work performed, such as time and effort reporting or
equivalent documentation. For shared costs, 2 CFR §200.412-200.414 requires
that cost allocations be based on documented methodologies that are reasonable
and supported by underlying calculations.
Condition: The Organization does not have formalized internal controls to support the
rationale for allocation of shared costs and employee time across federal
programs. Specifically:
Time and effort is being tracked and maintained by employees, including
hours charged to the specific efforts for the programs. Often, employees
charge hours to specific programs in excess of amounts allocated to the
program as expenditures. The specific amount of employee salaries and
wages that are allocated to specific federal programs for reimbursement, and
which are less than the amounts reflected in the time and effort records, are
determined by members of the finance staff. The rationale for the amount
actually allocated for reimbursement, if less than the amount reflected in the
time and effort records, is not documented.
Review and approval of the allocation of employee compensation to specific
federal programs reimbursement requests is not maintained.
Cause: The deficiency exists because the Organization has not implemented a structured
process for documenting the extent to which allowable compensation costs will
be allocated for reimbursement to specific federal programs in instances where
the allowable compensation cost exceeds the amount allocated for
reimbursement.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Possible effect: The absence of documented allocation methodologies in instances where
allowable compensation costs exceed the amount allocated for reimbursement
increases the risk that:
Costs may be improperly allocated between federal programs, resulting in
potential noncompliance with federal cost principles.
Federal expenditures may be misstated, impacting financial and grant
reporting.
Although questioned costs were not identified, the lack of specific supporting
documentation and controls represents a significant deficiency in internal control
over compliance.
Questioned cost: None identified at this time.
Recommendation: We recommend that the Organization implement the following corrective
actions:
1. Develop and Implement a Written Cost Allocation Policy – Establish a
formal policy outlining the methodology for allocating shared costs and
personnel time across programs, especially in instances where allowable
costs exceed amounts allocated for reimbursement, ensuring compliance
with 2 CFR Part 200 cost principles.
2. Document Allocation Methodologies for Shared Costs – Ensure that
allocations for shared costs (e.g., rent, utilities, and administrative expenses)
are based on a reasonable and documented methodology that can be
reviewed and reperformed.
3. Retain Evidence of Implementation of Internal Controls - Implement review
and approval controls over all requests for reimbursement, including review
and approval of allocation of personnel and shared costs to specific funding
sources. In circumstances where costs can be appropriately allocated to
multiple funding sources, document the rationale for allocating the specific
amount to each funding source.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management respectfully disagrees with this Finding.
Under Condition, the finding states, “Time and effort is being tracked and
maintained by employees, including hours charged to the specific efforts for the
programs.…” This is not accurate. Employees report their time worked each
day, including the amount of time they worked on different projects if
applicable. Employees report this in our commercial HRIS/Payroll system,
where it is maintained and where it is reviewed and approved by the employee’s
manager. The employees report the time they worked and which project(s) they
worked on, their managers review and approve the time and the distribution, and
the data is tracked and maintained in our HRIS/Payroll system (ExponentHR).
Also under Condition, the finding states, “The specific amount of employee
salaries and wages that are allocated to specific federal programs for
reimbursement, and which are less than the amounts reflected in time and effort
records, are determined by members of the finance staff.” It is correct that we
would have to invoice sponsors for less than the total cost of an employee’s
allocated time and effort if a sponsor’s budget is not sufficient to cover that full
amount. This is the correct procedure to follow. Employees correctly continue
documenting their hours worked on a specific project even if the budget is
expended and the accounting staff can no longer bill the sponsor. If a particular
grant does not have sufficient sponsor funds, then the Grants Accounting staff
reduce the bill accordingly.
Also under Condition, the finding states, “The rationale for the amount actually
allocated for reimbursement, if less than the amount reflected in time and effort
records, is not documented”. This is incorrect. Our monthly invoices to each
sponsor accumulate, with each invoice clearly showing not only that month’s
expense but also the year-to-date expense and remaining balance, which forces
the sponsor invoice to stop at an amount less than the total cost of employees’
time and effort when the budget is exhausted.
Also under Condition, the finding states, “Review and approval of the allocation
of employee compensation to specific federal programs reimbursement requests
is not maintained.” Each employee records their hours worked, and the
project(s) on which they worked those hours, in our HRIS/Payroll system. The
employee’s manager reviews and approves both the hours worked and the
projects on which the hours were worked. This review and approval is
maintained in our HRIS/Payroll system. Financial staff calculate the amount to
allocate to specific federal programs based on these HRIS/Payroll system records
(or other records such as clinical units produced, based on the terms of each
grant). Separate accounting staff review the sponsor invoice and post the
Receivable once they deem the invoice correct.
Under Cause, the finding states, “…..the Organization has not implemented a
structured process for documenting the extent to which allowable [emphasis
added] compensation costs will be allocated for reimbursement to specific
federal programs in instances where the allowable compensation cost exceeds
the amount allocated for reimbursement.” This means that we do not have a
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
process for documenting how much of a payroll expense already deemed
allowable on a particular grant will actually be invoiced there. We disagree and
believe that the presence and documentation of a limited sponsor budget, along
with cumulative tracking and documentation of compensation expenses against
that budget, proves and documents why sometimes full compensation costs are
not charged to a grant.
Under Possible Effect, the finding addresses possible effects of “the absence of
documented allocation methodologies.” We don’t agree that our process could
lead to improper allocation between federal programs (as the finding states) nor
to misstating federal expenditures (as the finding states). When a sponsor’s
budget is insufficient to cover its appropriately allocated compensation costs,
those costs are paid from unrestricted, non-federal funds. As also noted in the
finding, no questioned costs were identified.
Finding number: 2023-004 – Material Weakness in Internal Control Over Preparation,
Reconciliation, and Retention of the Schedule of Expenditures of Federal
Awards (SEFA)
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number: 93.914
Federal Program #2 HIV Care Formula Grants): CFDA Number: 93.917
Federal Program #3: HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
Name of pass-through
entity:
Multiple
Repeat finding: No
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Criteria: Under 2 CFR §200.510(b), recipients of federal funds are required to prepare a
Schedule of Expenditures of Federal Awards (SEFA) that fairly presents federal
expenditures for each grant program and is derived from and supported by the
entity's accounting records. Additionally, 2 CFR §200.302 requires that financial
management systems adequately identify and account for federal awards to
ensure accuracy and compliance with applicable federal requirements. Best
practices dictate that federal expenditures should be reconciled regularly to the
general ledger, and supporting documentation should be maintained to
substantiate amounts reported on the SEFA.
Condition: The Organization lacked adequate controls over the preparation, reconciliation,
and retention of records related to the SEFA. Specifically:
The SEFA incorrectly reported certain federal awards as non-federal awards.
The SEFA is prepared based on amounts requested for reimbursement
instead of directly based on expenditures incurred.
Reconciliation schedules that tied SEFA expenditures directly back to the
expenses recorded in the general ledger could not be located.
Expenses recorded in the general ledger represent expenses incurred to
operate the program in addition to direct grant expenditures; the
Organization only requests reimbursement for direct program expenditures
allowable under the program.
Documentation of Excel-based reconciliations did not agree to reported
monthly expenditures, indicating manual reclassification entries between
program codes that were not clearly supported.
Cause: The deficiencies noted were primarily due to:
Lack of system controls to ensure that state and federal expenditures were
separately tracked from non-grant funds spent within the same source codes.
Turnover in grants management personnel, which resulted in missing,
incomplete, or inaccurate reconciling records.
Possible effect: Without a complete and accurate SEFA, the Organization risks noncompliance
with Uniform Guidance reporting requirements, which could impact its ability to
receive and administer federal funds in the future. Additionally, inaccurate
SEFA reporting increases the risk of errors in administering funds, questioned
costs, and over or under expenditure of grants.
Questioned cost: None identified at this time.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Recommendation: We recommend that the Organization implement the following measures to
improve SEFA preparation and record retention:
1. Develop a Standardized SEFA Reconciliation Process – Implement formal
policies and procedures requiring that SEFA expenditures be reconciled to
the general ledger on a monthly basis, with documentation maintained for
audit purposes.
2. Enhance System Controls for Grant Expenditures – Modify the financial
system to allow for the proper segregation of state and federal expenditures
from non-grant funds, ensuring that expenditures are properly classified at
the time of entry.
3. Require Monthly Documentation Reviews – Establish a control requiring
management to review and approve SEFA reconciliation schedules on a
monthly or quarterly basis to ensure accuracy and completeness.
4. Implement a Centralized Documentation Retention Policy – Require that all
SEFA-related reconciliation records, including general ledger tie-outs and
manual adjustments, be retained in a centralized, accessible location.
5. Provide Grants Management Training – Conduct training for grants
management and accounting personnel on SEFA preparation requirements,
including Uniform Guidance compliance and best practices for
documentation and reconciliation.
6. By implementing these measures, the Organization can improve its internal
controls over SEFA preparation, ensure compliance with Uniform Guidance,
and reduce the risk of reporting inaccuracies.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management partially agrees with the finding. While we acknowledge that
documentation supporting SEFA reconciliation was incomplete, we believe that
federal expenditures were properly accounted for. We would like to address
some of the auditors' points individually:
"The SEFA is prepared based on amounts requested for reimbursement instead
of directly based on expenditures incurred." Most grant awards do not fully fund
the programs they support, most grant awards do not run concurrently with Prism
Health North Texas' fiscal year (i.e., with the Calendar Year), and most grant
awards are not spent in equal monthly amounts. It is correct that the 2023 SEFA
was based on grant-appropriate expenditures that occurred during Calendar Year
2023 and were submitted to those grant sponsors for reimbursement. This will
not necessarily reach the full cost to Prism for each grant-supported program, nor
is it likely to exactly match any annual grant award amount.
"Expenses recorded in the general ledger represent expenses incurred to operate
the program in addition to direct grant expenditures; the Organization only
requests reimbursement for direct program expenditures allowable under the
program." As we confirmed verbally with the audit partner on April 25, 2025,
this statement is intended to provide information and context and is not a
criticism or intended to point out any problem. As stated above, most grant
awards do not fully fund the programs they support; therefore, the general ledger
necessarily includes both expenses the sponsor will reimburse and expenses the
sponsor will not reimburse.
Nonetheless, we are enhancing our reconciliation procedures and documentation
practices to fully meet audit requirements. Finding 2023-004 refers to the
auditors' assessment of the SEFA preparation and reconciliation processes that
occurred in Calendar Year 2023. As of this writing, Prism Health North Texas
has already changed its SEFA preparation and reconciliation processes and
meets many of the recommendations above.
Action Taken:
Documentation Retention – On April 25, 2025, management created a structured
and easily accessible system for storing all relevant information for all grants
management personnel.
A logical naming system for files identifying the SEFA period, the
funding agency and identified general ledger expenditures claimed on
the SEFA.
We are now documenting the difference between all GL transactions and
those submitted for sponsor reimbursement (i.e., SEFA
components) in a single document per fund code, arranged by
fiscal year. Previously this documentation was kept by invoice and
arranged by grant year.
Management will continue to ensure all expenditure-related support,
such as invoices and purchase orders, is saved electronically to all
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
financial transactions.
SEFA Reconciliation – Management has decided to move from an annual to
quarterly SEFA reconciliation process to enhance the frequency of management
oversight in SEFA draft preparation. VP of Finance will prepare the SEFA for
independent review by the CFO. This will be put into a written
policy/procedure.
System Enhancements – Prism's current accounting system does not
accommodate this. However, Prism is already in the later stages of selecting a
new Enterprise Resource Planning (ERP) solution, with this as one of our key
selection criteria. Our new ERP should allow for expenditures within the same
cost center to be identified as grant-reimbursable or non-grant-reimbursable at
the time of entry. We have identified opportunities in new financial
management software solutions that we are scheduled to demo May 12th and the
16th of 2025. Opportunities such as:
The ability to tag grant-reimbursable transactions, to segment our award
cost center into two important categories.
The full cost to manage a specific program.
Identified cost claimed on the SEFA.
Dedicated grant modules that will allow us to establish business rules
and workflows to streamline and digitize critical aspects of grant
management.
Staff Engagement – Cross department coordination meetings occur monthly
between the Finance organization and the Grants Management team to continue
to foster alignment and collaboration in our grant cycles. A general overview of
SEFA, including how to prepare and organize the monthly reconciliations, has
already occurred with some of the grants accountants.
_________________________________________________________
Finding number: 2023-005 Significant Deficiency in Internal Control Over Compliance:
Allowable Costs and Activities
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914
Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917
Federal Program #3 HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
Name of pass-through
entity:
Multiple
Repeat finding: No
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Criteria: Under 2 CFR §200.303, recipients of federal funds must establish and maintain
effective internal controls to ensure compliance with federal statutes,
regulations, and the terms of grant agreements. 2 CFR §200.403 specifies that
costs charged to federal programs must be allowable, necessary, reasonable, and
allocable to the respective award. Additionally, 2 CFR §200.302 requires
financial management systems to provide effective control and accountability
over federal funds, including documented approval of expenditures.
A best practice for grant compliance is to implement a documented approval
process for expenditures charged to federal programs, ensuring that all costs are
reviewed and supported by adequate documentation before reimbursement
requests are submitted.
Condition: The Organization did not have readily-available documented evidence of review
and approval for expenditures charged to federal grants during the fiscal year.
Specifically:
The financial system did not capture or document approval of expenditures
before they were charged to federal programs.
No formalized system existed to retain evidence of grant-related expenditure
reviews.
While the prior Chief Financial Officer (CFO) manually reviewed each
invoice, there was no indication of approval on the supporting
documentation, making it impossible to verify that an appropriate review
occurred before costs were charged to the grants.
Cause: The issue arose due to the Organization's reliance on a manual review process
conducted by the previous CFO, without requiring a formal approval signature or
electronic system control to document review. This lack of a structured approval
process resulted in insufficient evidence to support compliance with federal
allowable cost requirements.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Possible effect: Without a documented approval process, the Organization cannot demonstrate
that expenditures charged to the grants were properly reviewed for allowability,
reasonableness, and allocability in accordance with federal regulations. This
increases the risk that:
Unallowable or misclassified expenditures could be charged to the grants
without detection.
Noncompliance with federal grant requirements could result in questioned
costs or additional oversight from funding agencies.
Financial statement and grant reporting inaccuracies may occur if
expenditures are not properly reviewed and approved.
Although no specific unallowable costs were identified during the audit, the lack
of documented review represents a significant deficiency in internal control over
compliance.
Questioned cost: None identified at this time.
Recommendation: We recommend that the Organization strengthen its internal controls over grant
expenditures by implementing the following measures:
1. Implement a Formal Expenditure Review and Approval Policy – Establish a
policy requiring that all expenditures charged to grants be reviewed and
approved by an appropriate individual before being recorded in the system.
2. Require Documentation of Review and Approval – Ensure that invoices,
payroll allocations, and other cost support documents include a signature,
initials, or system-generated approval to confirm review.
3. Utilize System-Based Controls – If possible, configure the financial system
to require electronic approval for all grant-related expenditures before costs
are recorded.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management partially agrees with the finding. While we acknowledge that
documentation of expenditure approval was not always retrievable, we believe
the expenditures reviewed were all appropriate. Finding 2023-005 refers to the
auditors' assessment of expenditure review and approval processes that occurred
in Calendar Year 2023. During Calendar Year 2023, Prism relied on email
routing of expenditures for review and approval. As of this writing, Prism
Health North Texas' expenditure review and approval processes already meet or
exceed the recommendations above.
Action Taken:
Expenditure Review – All expenditures charged to grants are reviewed and
approved by two qualified individuals.
Documentation of Review and Approval –
Such review and approval for non-payroll expenditures occur in and are
documented in the SAP Concur software before the costs are recorded in
the accounting system (Abila).
Such review and approval for payroll-related expenditures occur via and
are documented via a combination of methods, also before they are
recorded in Abila.
Employees report their time, including how much time was
devoted to grant activities, in the ExponentHR payroll system,
and their supervisors approve both the time and the allocation in
that system.
Programmatic measures that also support grant billing ("units")
are calculated from activity documented in the athenaOne
electronic health record (EHR).
Payroll allocation is calculated by one person, based on the
ExponentHR documentation and the units, then reviewed and
imported into Abila by a second person. The unposted
transactions are reviewed again before posting.
Utilize System-Based Controls – In place as above.
_________________________________________________________
Finding number: 2023-006 Significant Deficiency in Internal Control Over Compliance:
Allowable Costs and Activities
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914
Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917
Federal Program #2 HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Name of pass-through
entity:
Multiple
Repeat finding: No
Criteria: 2 CFR §200.405 requires that costs be allocable to the federal program based on
relative benefits received and be supported by appropriate documentation.
For personnel costs, 2 CFR §200.430(i) requires that compensation for
employees whose time is charged to federal awards be based on records that
accurately reflect the work performed, such as time and effort reporting or
equivalent documentation. For shared costs, 2 CFR §200.412-200.414 requires
that cost allocations be based on documented methodologies that are reasonable
and supported by underlying calculations.
Condition: The Organization does not have formalized internal controls to support the
rationale for allocation of shared costs and employee time across federal
programs. Specifically:
Time and effort is being tracked and maintained by employees, including
hours charged to the specific efforts for the programs. Often, employees
charge hours to specific programs in excess of amounts allocated to the
program as expenditures. The specific amount of employee salaries and
wages that are allocated to specific federal programs for reimbursement, and
which are less than the amounts reflected in the time and effort records, are
determined by members of the finance staff. The rationale for the amount
actually allocated for reimbursement, if less than the amount reflected in the
time and effort records, is not documented.
Review and approval of the allocation of employee compensation to specific
federal programs reimbursement requests is not maintained.
Cause: The deficiency exists because the Organization has not implemented a structured
process for documenting the extent to which allowable compensation costs will
be allocated for reimbursement to specific federal programs in instances where
the allowable compensation cost exceeds the amount allocated for
reimbursement.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Possible effect: The absence of documented allocation methodologies in instances where
allowable compensation costs exceed the amount allocated for reimbursement
increases the risk that:
Costs may be improperly allocated between federal programs, resulting in
potential noncompliance with federal cost principles.
Federal expenditures may be misstated, impacting financial and grant
reporting.
Although questioned costs were not identified, the lack of specific supporting
documentation and controls represents a significant deficiency in internal control
over compliance.
Questioned cost: None identified at this time.
Recommendation: We recommend that the Organization implement the following corrective
actions:
1. Develop and Implement a Written Cost Allocation Policy – Establish a
formal policy outlining the methodology for allocating shared costs and
personnel time across programs, especially in instances where allowable
costs exceed amounts allocated for reimbursement, ensuring compliance
with 2 CFR Part 200 cost principles.
2. Document Allocation Methodologies for Shared Costs – Ensure that
allocations for shared costs (e.g., rent, utilities, and administrative expenses)
are based on a reasonable and documented methodology that can be
reviewed and reperformed.
3. Retain Evidence of Implementation of Internal Controls - Implement review
and approval controls over all requests for reimbursement, including review
and approval of allocation of personnel and shared costs to specific funding
sources. In circumstances where costs can be appropriately allocated to
multiple funding sources, document the rationale for allocating the specific
amount to each funding source.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management respectfully disagrees with this Finding.
Under Condition, the finding states, “Time and effort is being tracked and
maintained by employees, including hours charged to the specific efforts for the
programs.…” This is not accurate. Employees report their time worked each
day, including the amount of time they worked on different projects if
applicable. Employees report this in our commercial HRIS/Payroll system,
where it is maintained and where it is reviewed and approved by the employee’s
manager. The employees report the time they worked and which project(s) they
worked on, their managers review and approve the time and the distribution, and
the data is tracked and maintained in our HRIS/Payroll system (ExponentHR).
Also under Condition, the finding states, “The specific amount of employee
salaries and wages that are allocated to specific federal programs for
reimbursement, and which are less than the amounts reflected in time and effort
records, are determined by members of the finance staff.” It is correct that we
would have to invoice sponsors for less than the total cost of an employee’s
allocated time and effort if a sponsor’s budget is not sufficient to cover that full
amount. This is the correct procedure to follow. Employees correctly continue
documenting their hours worked on a specific project even if the budget is
expended and the accounting staff can no longer bill the sponsor. If a particular
grant does not have sufficient sponsor funds, then the Grants Accounting staff
reduce the bill accordingly.
Also under Condition, the finding states, “The rationale for the amount actually
allocated for reimbursement, if less than the amount reflected in time and effort
records, is not documented”. This is incorrect. Our monthly invoices to each
sponsor accumulate, with each invoice clearly showing not only that month’s
expense but also the year-to-date expense and remaining balance, which forces
the sponsor invoice to stop at an amount less than the total cost of employees’
time and effort when the budget is exhausted.
Also under Condition, the finding states, “Review and approval of the allocation
of employee compensation to specific federal programs reimbursement requests
is not maintained.” Each employee records their hours worked, and the
project(s) on which they worked those hours, in our HRIS/Payroll system. The
employee’s manager reviews and approves both the hours worked and the
projects on which the hours were worked. This review and approval is
maintained in our HRIS/Payroll system. Financial staff calculate the amount to
allocate to specific federal programs based on these HRIS/Payroll system records
(or other records such as clinical units produced, based on the terms of each
grant). Separate accounting staff review the sponsor invoice and post the
Receivable once they deem the invoice correct.
Under Cause, the finding states, “…..the Organization has not implemented a
structured process for documenting the extent to which allowable [emphasis
added] compensation costs will be allocated for reimbursement to specific
federal programs in instances where the allowable compensation cost exceeds
the amount allocated for reimbursement.” This means that we do not have a
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
process for documenting how much of a payroll expense already deemed
allowable on a particular grant will actually be invoiced there. We disagree and
believe that the presence and documentation of a limited sponsor budget, along
with cumulative tracking and documentation of compensation expenses against
that budget, proves and documents why sometimes full compensation costs are
not charged to a grant.
Under Possible Effect, the finding addresses possible effects of “the absence of
documented allocation methodologies.” We don’t agree that our process could
lead to improper allocation between federal programs (as the finding states) nor
to misstating federal expenditures (as the finding states). When a sponsor’s
budget is insufficient to cover its appropriately allocated compensation costs,
those costs are paid from unrestricted, non-federal funds. As also noted in the
finding, no questioned costs were identified.
Finding number: 2023-004 – Material Weakness in Internal Control Over Preparation,
Reconciliation, and Retention of the Schedule of Expenditures of Federal
Awards (SEFA)
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number: 93.914
Federal Program #2 HIV Care Formula Grants): CFDA Number: 93.917
Federal Program #3: HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
Name of pass-through
entity:
Multiple
Repeat finding: No
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Criteria: Under 2 CFR §200.510(b), recipients of federal funds are required to prepare a
Schedule of Expenditures of Federal Awards (SEFA) that fairly presents federal
expenditures for each grant program and is derived from and supported by the
entity's accounting records. Additionally, 2 CFR §200.302 requires that financial
management systems adequately identify and account for federal awards to
ensure accuracy and compliance with applicable federal requirements. Best
practices dictate that federal expenditures should be reconciled regularly to the
general ledger, and supporting documentation should be maintained to
substantiate amounts reported on the SEFA.
Condition: The Organization lacked adequate controls over the preparation, reconciliation,
and retention of records related to the SEFA. Specifically:
The SEFA incorrectly reported certain federal awards as non-federal awards.
The SEFA is prepared based on amounts requested for reimbursement
instead of directly based on expenditures incurred.
Reconciliation schedules that tied SEFA expenditures directly back to the
expenses recorded in the general ledger could not be located.
Expenses recorded in the general ledger represent expenses incurred to
operate the program in addition to direct grant expenditures; the
Organization only requests reimbursement for direct program expenditures
allowable under the program.
Documentation of Excel-based reconciliations did not agree to reported
monthly expenditures, indicating manual reclassification entries between
program codes that were not clearly supported.
Cause: The deficiencies noted were primarily due to:
Lack of system controls to ensure that state and federal expenditures were
separately tracked from non-grant funds spent within the same source codes.
Turnover in grants management personnel, which resulted in missing,
incomplete, or inaccurate reconciling records.
Possible effect: Without a complete and accurate SEFA, the Organization risks noncompliance
with Uniform Guidance reporting requirements, which could impact its ability to
receive and administer federal funds in the future. Additionally, inaccurate
SEFA reporting increases the risk of errors in administering funds, questioned
costs, and over or under expenditure of grants.
Questioned cost: None identified at this time.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Recommendation: We recommend that the Organization implement the following measures to
improve SEFA preparation and record retention:
1. Develop a Standardized SEFA Reconciliation Process – Implement formal
policies and procedures requiring that SEFA expenditures be reconciled to
the general ledger on a monthly basis, with documentation maintained for
audit purposes.
2. Enhance System Controls for Grant Expenditures – Modify the financial
system to allow for the proper segregation of state and federal expenditures
from non-grant funds, ensuring that expenditures are properly classified at
the time of entry.
3. Require Monthly Documentation Reviews – Establish a control requiring
management to review and approve SEFA reconciliation schedules on a
monthly or quarterly basis to ensure accuracy and completeness.
4. Implement a Centralized Documentation Retention Policy – Require that all
SEFA-related reconciliation records, including general ledger tie-outs and
manual adjustments, be retained in a centralized, accessible location.
5. Provide Grants Management Training – Conduct training for grants
management and accounting personnel on SEFA preparation requirements,
including Uniform Guidance compliance and best practices for
documentation and reconciliation.
6. By implementing these measures, the Organization can improve its internal
controls over SEFA preparation, ensure compliance with Uniform Guidance,
and reduce the risk of reporting inaccuracies.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management partially agrees with the finding. While we acknowledge that
documentation supporting SEFA reconciliation was incomplete, we believe that
federal expenditures were properly accounted for. We would like to address
some of the auditors' points individually:
"The SEFA is prepared based on amounts requested for reimbursement instead
of directly based on expenditures incurred." Most grant awards do not fully fund
the programs they support, most grant awards do not run concurrently with Prism
Health North Texas' fiscal year (i.e., with the Calendar Year), and most grant
awards are not spent in equal monthly amounts. It is correct that the 2023 SEFA
was based on grant-appropriate expenditures that occurred during Calendar Year
2023 and were submitted to those grant sponsors for reimbursement. This will
not necessarily reach the full cost to Prism for each grant-supported program, nor
is it likely to exactly match any annual grant award amount.
"Expenses recorded in the general ledger represent expenses incurred to operate
the program in addition to direct grant expenditures; the Organization only
requests reimbursement for direct program expenditures allowable under the
program." As we confirmed verbally with the audit partner on April 25, 2025,
this statement is intended to provide information and context and is not a
criticism or intended to point out any problem. As stated above, most grant
awards do not fully fund the programs they support; therefore, the general ledger
necessarily includes both expenses the sponsor will reimburse and expenses the
sponsor will not reimburse.
Nonetheless, we are enhancing our reconciliation procedures and documentation
practices to fully meet audit requirements. Finding 2023-004 refers to the
auditors' assessment of the SEFA preparation and reconciliation processes that
occurred in Calendar Year 2023. As of this writing, Prism Health North Texas
has already changed its SEFA preparation and reconciliation processes and
meets many of the recommendations above.
Action Taken:
Documentation Retention – On April 25, 2025, management created a structured
and easily accessible system for storing all relevant information for all grants
management personnel.
A logical naming system for files identifying the SEFA period, the
funding agency and identified general ledger expenditures claimed on
the SEFA.
We are now documenting the difference between all GL transactions and
those submitted for sponsor reimbursement (i.e., SEFA
components) in a single document per fund code, arranged by
fiscal year. Previously this documentation was kept by invoice and
arranged by grant year.
Management will continue to ensure all expenditure-related support,
such as invoices and purchase orders, is saved electronically to all
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
financial transactions.
SEFA Reconciliation – Management has decided to move from an annual to
quarterly SEFA reconciliation process to enhance the frequency of management
oversight in SEFA draft preparation. VP of Finance will prepare the SEFA for
independent review by the CFO. This will be put into a written
policy/procedure.
System Enhancements – Prism's current accounting system does not
accommodate this. However, Prism is already in the later stages of selecting a
new Enterprise Resource Planning (ERP) solution, with this as one of our key
selection criteria. Our new ERP should allow for expenditures within the same
cost center to be identified as grant-reimbursable or non-grant-reimbursable at
the time of entry. We have identified opportunities in new financial
management software solutions that we are scheduled to demo May 12th and the
16th of 2025. Opportunities such as:
The ability to tag grant-reimbursable transactions, to segment our award
cost center into two important categories.
The full cost to manage a specific program.
Identified cost claimed on the SEFA.
Dedicated grant modules that will allow us to establish business rules
and workflows to streamline and digitize critical aspects of grant
management.
Staff Engagement – Cross department coordination meetings occur monthly
between the Finance organization and the Grants Management team to continue
to foster alignment and collaboration in our grant cycles. A general overview of
SEFA, including how to prepare and organize the monthly reconciliations, has
already occurred with some of the grants accountants.
_________________________________________________________
Finding number: 2023-005 Significant Deficiency in Internal Control Over Compliance:
Allowable Costs and Activities
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914
Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917
Federal Program #3 HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
Name of pass-through
entity:
Multiple
Repeat finding: No
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Criteria: Under 2 CFR §200.303, recipients of federal funds must establish and maintain
effective internal controls to ensure compliance with federal statutes,
regulations, and the terms of grant agreements. 2 CFR §200.403 specifies that
costs charged to federal programs must be allowable, necessary, reasonable, and
allocable to the respective award. Additionally, 2 CFR §200.302 requires
financial management systems to provide effective control and accountability
over federal funds, including documented approval of expenditures.
A best practice for grant compliance is to implement a documented approval
process for expenditures charged to federal programs, ensuring that all costs are
reviewed and supported by adequate documentation before reimbursement
requests are submitted.
Condition: The Organization did not have readily-available documented evidence of review
and approval for expenditures charged to federal grants during the fiscal year.
Specifically:
The financial system did not capture or document approval of expenditures
before they were charged to federal programs.
No formalized system existed to retain evidence of grant-related expenditure
reviews.
While the prior Chief Financial Officer (CFO) manually reviewed each
invoice, there was no indication of approval on the supporting
documentation, making it impossible to verify that an appropriate review
occurred before costs were charged to the grants.
Cause: The issue arose due to the Organization's reliance on a manual review process
conducted by the previous CFO, without requiring a formal approval signature or
electronic system control to document review. This lack of a structured approval
process resulted in insufficient evidence to support compliance with federal
allowable cost requirements.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Possible effect: Without a documented approval process, the Organization cannot demonstrate
that expenditures charged to the grants were properly reviewed for allowability,
reasonableness, and allocability in accordance with federal regulations. This
increases the risk that:
Unallowable or misclassified expenditures could be charged to the grants
without detection.
Noncompliance with federal grant requirements could result in questioned
costs or additional oversight from funding agencies.
Financial statement and grant reporting inaccuracies may occur if
expenditures are not properly reviewed and approved.
Although no specific unallowable costs were identified during the audit, the lack
of documented review represents a significant deficiency in internal control over
compliance.
Questioned cost: None identified at this time.
Recommendation: We recommend that the Organization strengthen its internal controls over grant
expenditures by implementing the following measures:
1. Implement a Formal Expenditure Review and Approval Policy – Establish a
policy requiring that all expenditures charged to grants be reviewed and
approved by an appropriate individual before being recorded in the system.
2. Require Documentation of Review and Approval – Ensure that invoices,
payroll allocations, and other cost support documents include a signature,
initials, or system-generated approval to confirm review.
3. Utilize System-Based Controls – If possible, configure the financial system
to require electronic approval for all grant-related expenditures before costs
are recorded.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management partially agrees with the finding. While we acknowledge that
documentation of expenditure approval was not always retrievable, we believe
the expenditures reviewed were all appropriate. Finding 2023-005 refers to the
auditors' assessment of expenditure review and approval processes that occurred
in Calendar Year 2023. During Calendar Year 2023, Prism relied on email
routing of expenditures for review and approval. As of this writing, Prism
Health North Texas' expenditure review and approval processes already meet or
exceed the recommendations above.
Action Taken:
Expenditure Review – All expenditures charged to grants are reviewed and
approved by two qualified individuals.
Documentation of Review and Approval –
Such review and approval for non-payroll expenditures occur in and are
documented in the SAP Concur software before the costs are recorded in
the accounting system (Abila).
Such review and approval for payroll-related expenditures occur via and
are documented via a combination of methods, also before they are
recorded in Abila.
Employees report their time, including how much time was
devoted to grant activities, in the ExponentHR payroll system,
and their supervisors approve both the time and the allocation in
that system.
Programmatic measures that also support grant billing ("units")
are calculated from activity documented in the athenaOne
electronic health record (EHR).
Payroll allocation is calculated by one person, based on the
ExponentHR documentation and the units, then reviewed and
imported into Abila by a second person. The unposted
transactions are reviewed again before posting.
Utilize System-Based Controls – In place as above.
_________________________________________________________
Finding number: 2023-006 Significant Deficiency in Internal Control Over Compliance:
Allowable Costs and Activities
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914
Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917
Federal Program #2 HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Name of pass-through
entity:
Multiple
Repeat finding: No
Criteria: 2 CFR §200.405 requires that costs be allocable to the federal program based on
relative benefits received and be supported by appropriate documentation.
For personnel costs, 2 CFR §200.430(i) requires that compensation for
employees whose time is charged to federal awards be based on records that
accurately reflect the work performed, such as time and effort reporting or
equivalent documentation. For shared costs, 2 CFR §200.412-200.414 requires
that cost allocations be based on documented methodologies that are reasonable
and supported by underlying calculations.
Condition: The Organization does not have formalized internal controls to support the
rationale for allocation of shared costs and employee time across federal
programs. Specifically:
Time and effort is being tracked and maintained by employees, including
hours charged to the specific efforts for the programs. Often, employees
charge hours to specific programs in excess of amounts allocated to the
program as expenditures. The specific amount of employee salaries and
wages that are allocated to specific federal programs for reimbursement, and
which are less than the amounts reflected in the time and effort records, are
determined by members of the finance staff. The rationale for the amount
actually allocated for reimbursement, if less than the amount reflected in the
time and effort records, is not documented.
Review and approval of the allocation of employee compensation to specific
federal programs reimbursement requests is not maintained.
Cause: The deficiency exists because the Organization has not implemented a structured
process for documenting the extent to which allowable compensation costs will
be allocated for reimbursement to specific federal programs in instances where
the allowable compensation cost exceeds the amount allocated for
reimbursement.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Possible effect: The absence of documented allocation methodologies in instances where
allowable compensation costs exceed the amount allocated for reimbursement
increases the risk that:
Costs may be improperly allocated between federal programs, resulting in
potential noncompliance with federal cost principles.
Federal expenditures may be misstated, impacting financial and grant
reporting.
Although questioned costs were not identified, the lack of specific supporting
documentation and controls represents a significant deficiency in internal control
over compliance.
Questioned cost: None identified at this time.
Recommendation: We recommend that the Organization implement the following corrective
actions:
1. Develop and Implement a Written Cost Allocation Policy – Establish a
formal policy outlining the methodology for allocating shared costs and
personnel time across programs, especially in instances where allowable
costs exceed amounts allocated for reimbursement, ensuring compliance
with 2 CFR Part 200 cost principles.
2. Document Allocation Methodologies for Shared Costs – Ensure that
allocations for shared costs (e.g., rent, utilities, and administrative expenses)
are based on a reasonable and documented methodology that can be
reviewed and reperformed.
3. Retain Evidence of Implementation of Internal Controls - Implement review
and approval controls over all requests for reimbursement, including review
and approval of allocation of personnel and shared costs to specific funding
sources. In circumstances where costs can be appropriately allocated to
multiple funding sources, document the rationale for allocating the specific
amount to each funding source.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management respectfully disagrees with this Finding.
Under Condition, the finding states, “Time and effort is being tracked and
maintained by employees, including hours charged to the specific efforts for the
programs.…” This is not accurate. Employees report their time worked each
day, including the amount of time they worked on different projects if
applicable. Employees report this in our commercial HRIS/Payroll system,
where it is maintained and where it is reviewed and approved by the employee’s
manager. The employees report the time they worked and which project(s) they
worked on, their managers review and approve the time and the distribution, and
the data is tracked and maintained in our HRIS/Payroll system (ExponentHR).
Also under Condition, the finding states, “The specific amount of employee
salaries and wages that are allocated to specific federal programs for
reimbursement, and which are less than the amounts reflected in time and effort
records, are determined by members of the finance staff.” It is correct that we
would have to invoice sponsors for less than the total cost of an employee’s
allocated time and effort if a sponsor’s budget is not sufficient to cover that full
amount. This is the correct procedure to follow. Employees correctly continue
documenting their hours worked on a specific project even if the budget is
expended and the accounting staff can no longer bill the sponsor. If a particular
grant does not have sufficient sponsor funds, then the Grants Accounting staff
reduce the bill accordingly.
Also under Condition, the finding states, “The rationale for the amount actually
allocated for reimbursement, if less than the amount reflected in time and effort
records, is not documented”. This is incorrect. Our monthly invoices to each
sponsor accumulate, with each invoice clearly showing not only that month’s
expense but also the year-to-date expense and remaining balance, which forces
the sponsor invoice to stop at an amount less than the total cost of employees’
time and effort when the budget is exhausted.
Also under Condition, the finding states, “Review and approval of the allocation
of employee compensation to specific federal programs reimbursement requests
is not maintained.” Each employee records their hours worked, and the
project(s) on which they worked those hours, in our HRIS/Payroll system. The
employee’s manager reviews and approves both the hours worked and the
projects on which the hours were worked. This review and approval is
maintained in our HRIS/Payroll system. Financial staff calculate the amount to
allocate to specific federal programs based on these HRIS/Payroll system records
(or other records such as clinical units produced, based on the terms of each
grant). Separate accounting staff review the sponsor invoice and post the
Receivable once they deem the invoice correct.
Under Cause, the finding states, “…..the Organization has not implemented a
structured process for documenting the extent to which allowable [emphasis
added] compensation costs will be allocated for reimbursement to specific
federal programs in instances where the allowable compensation cost exceeds
the amount allocated for reimbursement.” This means that we do not have a
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
process for documenting how much of a payroll expense already deemed
allowable on a particular grant will actually be invoiced there. We disagree and
believe that the presence and documentation of a limited sponsor budget, along
with cumulative tracking and documentation of compensation expenses against
that budget, proves and documents why sometimes full compensation costs are
not charged to a grant.
Under Possible Effect, the finding addresses possible effects of “the absence of
documented allocation methodologies.” We don’t agree that our process could
lead to improper allocation between federal programs (as the finding states) nor
to misstating federal expenditures (as the finding states). When a sponsor’s
budget is insufficient to cover its appropriately allocated compensation costs,
those costs are paid from unrestricted, non-federal funds. As also noted in the
finding, no questioned costs were identified.
Finding number: 2023-004 – Material Weakness in Internal Control Over Preparation,
Reconciliation, and Retention of the Schedule of Expenditures of Federal
Awards (SEFA)
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number: 93.914
Federal Program #2 HIV Care Formula Grants): CFDA Number: 93.917
Federal Program #3: HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
Name of pass-through
entity:
Multiple
Repeat finding: No
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Criteria: Under 2 CFR §200.510(b), recipients of federal funds are required to prepare a
Schedule of Expenditures of Federal Awards (SEFA) that fairly presents federal
expenditures for each grant program and is derived from and supported by the
entity's accounting records. Additionally, 2 CFR §200.302 requires that financial
management systems adequately identify and account for federal awards to
ensure accuracy and compliance with applicable federal requirements. Best
practices dictate that federal expenditures should be reconciled regularly to the
general ledger, and supporting documentation should be maintained to
substantiate amounts reported on the SEFA.
Condition: The Organization lacked adequate controls over the preparation, reconciliation,
and retention of records related to the SEFA. Specifically:
The SEFA incorrectly reported certain federal awards as non-federal awards.
The SEFA is prepared based on amounts requested for reimbursement
instead of directly based on expenditures incurred.
Reconciliation schedules that tied SEFA expenditures directly back to the
expenses recorded in the general ledger could not be located.
Expenses recorded in the general ledger represent expenses incurred to
operate the program in addition to direct grant expenditures; the
Organization only requests reimbursement for direct program expenditures
allowable under the program.
Documentation of Excel-based reconciliations did not agree to reported
monthly expenditures, indicating manual reclassification entries between
program codes that were not clearly supported.
Cause: The deficiencies noted were primarily due to:
Lack of system controls to ensure that state and federal expenditures were
separately tracked from non-grant funds spent within the same source codes.
Turnover in grants management personnel, which resulted in missing,
incomplete, or inaccurate reconciling records.
Possible effect: Without a complete and accurate SEFA, the Organization risks noncompliance
with Uniform Guidance reporting requirements, which could impact its ability to
receive and administer federal funds in the future. Additionally, inaccurate
SEFA reporting increases the risk of errors in administering funds, questioned
costs, and over or under expenditure of grants.
Questioned cost: None identified at this time.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Recommendation: We recommend that the Organization implement the following measures to
improve SEFA preparation and record retention:
1. Develop a Standardized SEFA Reconciliation Process – Implement formal
policies and procedures requiring that SEFA expenditures be reconciled to
the general ledger on a monthly basis, with documentation maintained for
audit purposes.
2. Enhance System Controls for Grant Expenditures – Modify the financial
system to allow for the proper segregation of state and federal expenditures
from non-grant funds, ensuring that expenditures are properly classified at
the time of entry.
3. Require Monthly Documentation Reviews – Establish a control requiring
management to review and approve SEFA reconciliation schedules on a
monthly or quarterly basis to ensure accuracy and completeness.
4. Implement a Centralized Documentation Retention Policy – Require that all
SEFA-related reconciliation records, including general ledger tie-outs and
manual adjustments, be retained in a centralized, accessible location.
5. Provide Grants Management Training – Conduct training for grants
management and accounting personnel on SEFA preparation requirements,
including Uniform Guidance compliance and best practices for
documentation and reconciliation.
6. By implementing these measures, the Organization can improve its internal
controls over SEFA preparation, ensure compliance with Uniform Guidance,
and reduce the risk of reporting inaccuracies.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management partially agrees with the finding. While we acknowledge that
documentation supporting SEFA reconciliation was incomplete, we believe that
federal expenditures were properly accounted for. We would like to address
some of the auditors' points individually:
"The SEFA is prepared based on amounts requested for reimbursement instead
of directly based on expenditures incurred." Most grant awards do not fully fund
the programs they support, most grant awards do not run concurrently with Prism
Health North Texas' fiscal year (i.e., with the Calendar Year), and most grant
awards are not spent in equal monthly amounts. It is correct that the 2023 SEFA
was based on grant-appropriate expenditures that occurred during Calendar Year
2023 and were submitted to those grant sponsors for reimbursement. This will
not necessarily reach the full cost to Prism for each grant-supported program, nor
is it likely to exactly match any annual grant award amount.
"Expenses recorded in the general ledger represent expenses incurred to operate
the program in addition to direct grant expenditures; the Organization only
requests reimbursement for direct program expenditures allowable under the
program." As we confirmed verbally with the audit partner on April 25, 2025,
this statement is intended to provide information and context and is not a
criticism or intended to point out any problem. As stated above, most grant
awards do not fully fund the programs they support; therefore, the general ledger
necessarily includes both expenses the sponsor will reimburse and expenses the
sponsor will not reimburse.
Nonetheless, we are enhancing our reconciliation procedures and documentation
practices to fully meet audit requirements. Finding 2023-004 refers to the
auditors' assessment of the SEFA preparation and reconciliation processes that
occurred in Calendar Year 2023. As of this writing, Prism Health North Texas
has already changed its SEFA preparation and reconciliation processes and
meets many of the recommendations above.
Action Taken:
Documentation Retention – On April 25, 2025, management created a structured
and easily accessible system for storing all relevant information for all grants
management personnel.
A logical naming system for files identifying the SEFA period, the
funding agency and identified general ledger expenditures claimed on
the SEFA.
We are now documenting the difference between all GL transactions and
those submitted for sponsor reimbursement (i.e., SEFA
components) in a single document per fund code, arranged by
fiscal year. Previously this documentation was kept by invoice and
arranged by grant year.
Management will continue to ensure all expenditure-related support,
such as invoices and purchase orders, is saved electronically to all
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
financial transactions.
SEFA Reconciliation – Management has decided to move from an annual to
quarterly SEFA reconciliation process to enhance the frequency of management
oversight in SEFA draft preparation. VP of Finance will prepare the SEFA for
independent review by the CFO. This will be put into a written
policy/procedure.
System Enhancements – Prism's current accounting system does not
accommodate this. However, Prism is already in the later stages of selecting a
new Enterprise Resource Planning (ERP) solution, with this as one of our key
selection criteria. Our new ERP should allow for expenditures within the same
cost center to be identified as grant-reimbursable or non-grant-reimbursable at
the time of entry. We have identified opportunities in new financial
management software solutions that we are scheduled to demo May 12th and the
16th of 2025. Opportunities such as:
The ability to tag grant-reimbursable transactions, to segment our award
cost center into two important categories.
The full cost to manage a specific program.
Identified cost claimed on the SEFA.
Dedicated grant modules that will allow us to establish business rules
and workflows to streamline and digitize critical aspects of grant
management.
Staff Engagement – Cross department coordination meetings occur monthly
between the Finance organization and the Grants Management team to continue
to foster alignment and collaboration in our grant cycles. A general overview of
SEFA, including how to prepare and organize the monthly reconciliations, has
already occurred with some of the grants accountants.
_________________________________________________________
Finding number: 2023-005 Significant Deficiency in Internal Control Over Compliance:
Allowable Costs and Activities
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914
Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917
Federal Program #3 HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
Name of pass-through
entity:
Multiple
Repeat finding: No
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Criteria: Under 2 CFR §200.303, recipients of federal funds must establish and maintain
effective internal controls to ensure compliance with federal statutes,
regulations, and the terms of grant agreements. 2 CFR §200.403 specifies that
costs charged to federal programs must be allowable, necessary, reasonable, and
allocable to the respective award. Additionally, 2 CFR §200.302 requires
financial management systems to provide effective control and accountability
over federal funds, including documented approval of expenditures.
A best practice for grant compliance is to implement a documented approval
process for expenditures charged to federal programs, ensuring that all costs are
reviewed and supported by adequate documentation before reimbursement
requests are submitted.
Condition: The Organization did not have readily-available documented evidence of review
and approval for expenditures charged to federal grants during the fiscal year.
Specifically:
The financial system did not capture or document approval of expenditures
before they were charged to federal programs.
No formalized system existed to retain evidence of grant-related expenditure
reviews.
While the prior Chief Financial Officer (CFO) manually reviewed each
invoice, there was no indication of approval on the supporting
documentation, making it impossible to verify that an appropriate review
occurred before costs were charged to the grants.
Cause: The issue arose due to the Organization's reliance on a manual review process
conducted by the previous CFO, without requiring a formal approval signature or
electronic system control to document review. This lack of a structured approval
process resulted in insufficient evidence to support compliance with federal
allowable cost requirements.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Possible effect: Without a documented approval process, the Organization cannot demonstrate
that expenditures charged to the grants were properly reviewed for allowability,
reasonableness, and allocability in accordance with federal regulations. This
increases the risk that:
Unallowable or misclassified expenditures could be charged to the grants
without detection.
Noncompliance with federal grant requirements could result in questioned
costs or additional oversight from funding agencies.
Financial statement and grant reporting inaccuracies may occur if
expenditures are not properly reviewed and approved.
Although no specific unallowable costs were identified during the audit, the lack
of documented review represents a significant deficiency in internal control over
compliance.
Questioned cost: None identified at this time.
Recommendation: We recommend that the Organization strengthen its internal controls over grant
expenditures by implementing the following measures:
1. Implement a Formal Expenditure Review and Approval Policy – Establish a
policy requiring that all expenditures charged to grants be reviewed and
approved by an appropriate individual before being recorded in the system.
2. Require Documentation of Review and Approval – Ensure that invoices,
payroll allocations, and other cost support documents include a signature,
initials, or system-generated approval to confirm review.
3. Utilize System-Based Controls – If possible, configure the financial system
to require electronic approval for all grant-related expenditures before costs
are recorded.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management partially agrees with the finding. While we acknowledge that
documentation of expenditure approval was not always retrievable, we believe
the expenditures reviewed were all appropriate. Finding 2023-005 refers to the
auditors' assessment of expenditure review and approval processes that occurred
in Calendar Year 2023. During Calendar Year 2023, Prism relied on email
routing of expenditures for review and approval. As of this writing, Prism
Health North Texas' expenditure review and approval processes already meet or
exceed the recommendations above.
Action Taken:
Expenditure Review – All expenditures charged to grants are reviewed and
approved by two qualified individuals.
Documentation of Review and Approval –
Such review and approval for non-payroll expenditures occur in and are
documented in the SAP Concur software before the costs are recorded in
the accounting system (Abila).
Such review and approval for payroll-related expenditures occur via and
are documented via a combination of methods, also before they are
recorded in Abila.
Employees report their time, including how much time was
devoted to grant activities, in the ExponentHR payroll system,
and their supervisors approve both the time and the allocation in
that system.
Programmatic measures that also support grant billing ("units")
are calculated from activity documented in the athenaOne
electronic health record (EHR).
Payroll allocation is calculated by one person, based on the
ExponentHR documentation and the units, then reviewed and
imported into Abila by a second person. The unposted
transactions are reviewed again before posting.
Utilize System-Based Controls – In place as above.
_________________________________________________________
Finding number: 2023-006 Significant Deficiency in Internal Control Over Compliance:
Allowable Costs and Activities
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914
Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917
Federal Program #2 HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Name of pass-through
entity:
Multiple
Repeat finding: No
Criteria: 2 CFR §200.405 requires that costs be allocable to the federal program based on
relative benefits received and be supported by appropriate documentation.
For personnel costs, 2 CFR §200.430(i) requires that compensation for
employees whose time is charged to federal awards be based on records that
accurately reflect the work performed, such as time and effort reporting or
equivalent documentation. For shared costs, 2 CFR §200.412-200.414 requires
that cost allocations be based on documented methodologies that are reasonable
and supported by underlying calculations.
Condition: The Organization does not have formalized internal controls to support the
rationale for allocation of shared costs and employee time across federal
programs. Specifically:
Time and effort is being tracked and maintained by employees, including
hours charged to the specific efforts for the programs. Often, employees
charge hours to specific programs in excess of amounts allocated to the
program as expenditures. The specific amount of employee salaries and
wages that are allocated to specific federal programs for reimbursement, and
which are less than the amounts reflected in the time and effort records, are
determined by members of the finance staff. The rationale for the amount
actually allocated for reimbursement, if less than the amount reflected in the
time and effort records, is not documented.
Review and approval of the allocation of employee compensation to specific
federal programs reimbursement requests is not maintained.
Cause: The deficiency exists because the Organization has not implemented a structured
process for documenting the extent to which allowable compensation costs will
be allocated for reimbursement to specific federal programs in instances where
the allowable compensation cost exceeds the amount allocated for
reimbursement.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Possible effect: The absence of documented allocation methodologies in instances where
allowable compensation costs exceed the amount allocated for reimbursement
increases the risk that:
Costs may be improperly allocated between federal programs, resulting in
potential noncompliance with federal cost principles.
Federal expenditures may be misstated, impacting financial and grant
reporting.
Although questioned costs were not identified, the lack of specific supporting
documentation and controls represents a significant deficiency in internal control
over compliance.
Questioned cost: None identified at this time.
Recommendation: We recommend that the Organization implement the following corrective
actions:
1. Develop and Implement a Written Cost Allocation Policy – Establish a
formal policy outlining the methodology for allocating shared costs and
personnel time across programs, especially in instances where allowable
costs exceed amounts allocated for reimbursement, ensuring compliance
with 2 CFR Part 200 cost principles.
2. Document Allocation Methodologies for Shared Costs – Ensure that
allocations for shared costs (e.g., rent, utilities, and administrative expenses)
are based on a reasonable and documented methodology that can be
reviewed and reperformed.
3. Retain Evidence of Implementation of Internal Controls - Implement review
and approval controls over all requests for reimbursement, including review
and approval of allocation of personnel and shared costs to specific funding
sources. In circumstances where costs can be appropriately allocated to
multiple funding sources, document the rationale for allocating the specific
amount to each funding source.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management respectfully disagrees with this Finding.
Under Condition, the finding states, “Time and effort is being tracked and
maintained by employees, including hours charged to the specific efforts for the
programs.…” This is not accurate. Employees report their time worked each
day, including the amount of time they worked on different projects if
applicable. Employees report this in our commercial HRIS/Payroll system,
where it is maintained and where it is reviewed and approved by the employee’s
manager. The employees report the time they worked and which project(s) they
worked on, their managers review and approve the time and the distribution, and
the data is tracked and maintained in our HRIS/Payroll system (ExponentHR).
Also under Condition, the finding states, “The specific amount of employee
salaries and wages that are allocated to specific federal programs for
reimbursement, and which are less than the amounts reflected in time and effort
records, are determined by members of the finance staff.” It is correct that we
would have to invoice sponsors for less than the total cost of an employee’s
allocated time and effort if a sponsor’s budget is not sufficient to cover that full
amount. This is the correct procedure to follow. Employees correctly continue
documenting their hours worked on a specific project even if the budget is
expended and the accounting staff can no longer bill the sponsor. If a particular
grant does not have sufficient sponsor funds, then the Grants Accounting staff
reduce the bill accordingly.
Also under Condition, the finding states, “The rationale for the amount actually
allocated for reimbursement, if less than the amount reflected in time and effort
records, is not documented”. This is incorrect. Our monthly invoices to each
sponsor accumulate, with each invoice clearly showing not only that month’s
expense but also the year-to-date expense and remaining balance, which forces
the sponsor invoice to stop at an amount less than the total cost of employees’
time and effort when the budget is exhausted.
Also under Condition, the finding states, “Review and approval of the allocation
of employee compensation to specific federal programs reimbursement requests
is not maintained.” Each employee records their hours worked, and the
project(s) on which they worked those hours, in our HRIS/Payroll system. The
employee’s manager reviews and approves both the hours worked and the
projects on which the hours were worked. This review and approval is
maintained in our HRIS/Payroll system. Financial staff calculate the amount to
allocate to specific federal programs based on these HRIS/Payroll system records
(or other records such as clinical units produced, based on the terms of each
grant). Separate accounting staff review the sponsor invoice and post the
Receivable once they deem the invoice correct.
Under Cause, the finding states, “…..the Organization has not implemented a
structured process for documenting the extent to which allowable [emphasis
added] compensation costs will be allocated for reimbursement to specific
federal programs in instances where the allowable compensation cost exceeds
the amount allocated for reimbursement.” This means that we do not have a
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
process for documenting how much of a payroll expense already deemed
allowable on a particular grant will actually be invoiced there. We disagree and
believe that the presence and documentation of a limited sponsor budget, along
with cumulative tracking and documentation of compensation expenses against
that budget, proves and documents why sometimes full compensation costs are
not charged to a grant.
Under Possible Effect, the finding addresses possible effects of “the absence of
documented allocation methodologies.” We don’t agree that our process could
lead to improper allocation between federal programs (as the finding states) nor
to misstating federal expenditures (as the finding states). When a sponsor’s
budget is insufficient to cover its appropriately allocated compensation costs,
those costs are paid from unrestricted, non-federal funds. As also noted in the
finding, no questioned costs were identified.
Finding number: 2023-004 – Material Weakness in Internal Control Over Preparation,
Reconciliation, and Retention of the Schedule of Expenditures of Federal
Awards (SEFA)
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number: 93.914
Federal Program #2 HIV Care Formula Grants): CFDA Number: 93.917
Federal Program #3: HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
Name of pass-through
entity:
Multiple
Repeat finding: No
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Criteria: Under 2 CFR §200.510(b), recipients of federal funds are required to prepare a
Schedule of Expenditures of Federal Awards (SEFA) that fairly presents federal
expenditures for each grant program and is derived from and supported by the
entity's accounting records. Additionally, 2 CFR §200.302 requires that financial
management systems adequately identify and account for federal awards to
ensure accuracy and compliance with applicable federal requirements. Best
practices dictate that federal expenditures should be reconciled regularly to the
general ledger, and supporting documentation should be maintained to
substantiate amounts reported on the SEFA.
Condition: The Organization lacked adequate controls over the preparation, reconciliation,
and retention of records related to the SEFA. Specifically:
The SEFA incorrectly reported certain federal awards as non-federal awards.
The SEFA is prepared based on amounts requested for reimbursement
instead of directly based on expenditures incurred.
Reconciliation schedules that tied SEFA expenditures directly back to the
expenses recorded in the general ledger could not be located.
Expenses recorded in the general ledger represent expenses incurred to
operate the program in addition to direct grant expenditures; the
Organization only requests reimbursement for direct program expenditures
allowable under the program.
Documentation of Excel-based reconciliations did not agree to reported
monthly expenditures, indicating manual reclassification entries between
program codes that were not clearly supported.
Cause: The deficiencies noted were primarily due to:
Lack of system controls to ensure that state and federal expenditures were
separately tracked from non-grant funds spent within the same source codes.
Turnover in grants management personnel, which resulted in missing,
incomplete, or inaccurate reconciling records.
Possible effect: Without a complete and accurate SEFA, the Organization risks noncompliance
with Uniform Guidance reporting requirements, which could impact its ability to
receive and administer federal funds in the future. Additionally, inaccurate
SEFA reporting increases the risk of errors in administering funds, questioned
costs, and over or under expenditure of grants.
Questioned cost: None identified at this time.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Recommendation: We recommend that the Organization implement the following measures to
improve SEFA preparation and record retention:
1. Develop a Standardized SEFA Reconciliation Process – Implement formal
policies and procedures requiring that SEFA expenditures be reconciled to
the general ledger on a monthly basis, with documentation maintained for
audit purposes.
2. Enhance System Controls for Grant Expenditures – Modify the financial
system to allow for the proper segregation of state and federal expenditures
from non-grant funds, ensuring that expenditures are properly classified at
the time of entry.
3. Require Monthly Documentation Reviews – Establish a control requiring
management to review and approve SEFA reconciliation schedules on a
monthly or quarterly basis to ensure accuracy and completeness.
4. Implement a Centralized Documentation Retention Policy – Require that all
SEFA-related reconciliation records, including general ledger tie-outs and
manual adjustments, be retained in a centralized, accessible location.
5. Provide Grants Management Training – Conduct training for grants
management and accounting personnel on SEFA preparation requirements,
including Uniform Guidance compliance and best practices for
documentation and reconciliation.
6. By implementing these measures, the Organization can improve its internal
controls over SEFA preparation, ensure compliance with Uniform Guidance,
and reduce the risk of reporting inaccuracies.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management partially agrees with the finding. While we acknowledge that
documentation supporting SEFA reconciliation was incomplete, we believe that
federal expenditures were properly accounted for. We would like to address
some of the auditors' points individually:
"The SEFA is prepared based on amounts requested for reimbursement instead
of directly based on expenditures incurred." Most grant awards do not fully fund
the programs they support, most grant awards do not run concurrently with Prism
Health North Texas' fiscal year (i.e., with the Calendar Year), and most grant
awards are not spent in equal monthly amounts. It is correct that the 2023 SEFA
was based on grant-appropriate expenditures that occurred during Calendar Year
2023 and were submitted to those grant sponsors for reimbursement. This will
not necessarily reach the full cost to Prism for each grant-supported program, nor
is it likely to exactly match any annual grant award amount.
"Expenses recorded in the general ledger represent expenses incurred to operate
the program in addition to direct grant expenditures; the Organization only
requests reimbursement for direct program expenditures allowable under the
program." As we confirmed verbally with the audit partner on April 25, 2025,
this statement is intended to provide information and context and is not a
criticism or intended to point out any problem. As stated above, most grant
awards do not fully fund the programs they support; therefore, the general ledger
necessarily includes both expenses the sponsor will reimburse and expenses the
sponsor will not reimburse.
Nonetheless, we are enhancing our reconciliation procedures and documentation
practices to fully meet audit requirements. Finding 2023-004 refers to the
auditors' assessment of the SEFA preparation and reconciliation processes that
occurred in Calendar Year 2023. As of this writing, Prism Health North Texas
has already changed its SEFA preparation and reconciliation processes and
meets many of the recommendations above.
Action Taken:
Documentation Retention – On April 25, 2025, management created a structured
and easily accessible system for storing all relevant information for all grants
management personnel.
A logical naming system for files identifying the SEFA period, the
funding agency and identified general ledger expenditures claimed on
the SEFA.
We are now documenting the difference between all GL transactions and
those submitted for sponsor reimbursement (i.e., SEFA
components) in a single document per fund code, arranged by
fiscal year. Previously this documentation was kept by invoice and
arranged by grant year.
Management will continue to ensure all expenditure-related support,
such as invoices and purchase orders, is saved electronically to all
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
financial transactions.
SEFA Reconciliation – Management has decided to move from an annual to
quarterly SEFA reconciliation process to enhance the frequency of management
oversight in SEFA draft preparation. VP of Finance will prepare the SEFA for
independent review by the CFO. This will be put into a written
policy/procedure.
System Enhancements – Prism's current accounting system does not
accommodate this. However, Prism is already in the later stages of selecting a
new Enterprise Resource Planning (ERP) solution, with this as one of our key
selection criteria. Our new ERP should allow for expenditures within the same
cost center to be identified as grant-reimbursable or non-grant-reimbursable at
the time of entry. We have identified opportunities in new financial
management software solutions that we are scheduled to demo May 12th and the
16th of 2025. Opportunities such as:
The ability to tag grant-reimbursable transactions, to segment our award
cost center into two important categories.
The full cost to manage a specific program.
Identified cost claimed on the SEFA.
Dedicated grant modules that will allow us to establish business rules
and workflows to streamline and digitize critical aspects of grant
management.
Staff Engagement – Cross department coordination meetings occur monthly
between the Finance organization and the Grants Management team to continue
to foster alignment and collaboration in our grant cycles. A general overview of
SEFA, including how to prepare and organize the monthly reconciliations, has
already occurred with some of the grants accountants.
_________________________________________________________
Finding number: 2023-005 Significant Deficiency in Internal Control Over Compliance:
Allowable Costs and Activities
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914
Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917
Federal Program #3 HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
Name of pass-through
entity:
Multiple
Repeat finding: No
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Criteria: Under 2 CFR §200.303, recipients of federal funds must establish and maintain
effective internal controls to ensure compliance with federal statutes,
regulations, and the terms of grant agreements. 2 CFR §200.403 specifies that
costs charged to federal programs must be allowable, necessary, reasonable, and
allocable to the respective award. Additionally, 2 CFR §200.302 requires
financial management systems to provide effective control and accountability
over federal funds, including documented approval of expenditures.
A best practice for grant compliance is to implement a documented approval
process for expenditures charged to federal programs, ensuring that all costs are
reviewed and supported by adequate documentation before reimbursement
requests are submitted.
Condition: The Organization did not have readily-available documented evidence of review
and approval for expenditures charged to federal grants during the fiscal year.
Specifically:
The financial system did not capture or document approval of expenditures
before they were charged to federal programs.
No formalized system existed to retain evidence of grant-related expenditure
reviews.
While the prior Chief Financial Officer (CFO) manually reviewed each
invoice, there was no indication of approval on the supporting
documentation, making it impossible to verify that an appropriate review
occurred before costs were charged to the grants.
Cause: The issue arose due to the Organization's reliance on a manual review process
conducted by the previous CFO, without requiring a formal approval signature or
electronic system control to document review. This lack of a structured approval
process resulted in insufficient evidence to support compliance with federal
allowable cost requirements.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Possible effect: Without a documented approval process, the Organization cannot demonstrate
that expenditures charged to the grants were properly reviewed for allowability,
reasonableness, and allocability in accordance with federal regulations. This
increases the risk that:
Unallowable or misclassified expenditures could be charged to the grants
without detection.
Noncompliance with federal grant requirements could result in questioned
costs or additional oversight from funding agencies.
Financial statement and grant reporting inaccuracies may occur if
expenditures are not properly reviewed and approved.
Although no specific unallowable costs were identified during the audit, the lack
of documented review represents a significant deficiency in internal control over
compliance.
Questioned cost: None identified at this time.
Recommendation: We recommend that the Organization strengthen its internal controls over grant
expenditures by implementing the following measures:
1. Implement a Formal Expenditure Review and Approval Policy – Establish a
policy requiring that all expenditures charged to grants be reviewed and
approved by an appropriate individual before being recorded in the system.
2. Require Documentation of Review and Approval – Ensure that invoices,
payroll allocations, and other cost support documents include a signature,
initials, or system-generated approval to confirm review.
3. Utilize System-Based Controls – If possible, configure the financial system
to require electronic approval for all grant-related expenditures before costs
are recorded.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management partially agrees with the finding. While we acknowledge that
documentation of expenditure approval was not always retrievable, we believe
the expenditures reviewed were all appropriate. Finding 2023-005 refers to the
auditors' assessment of expenditure review and approval processes that occurred
in Calendar Year 2023. During Calendar Year 2023, Prism relied on email
routing of expenditures for review and approval. As of this writing, Prism
Health North Texas' expenditure review and approval processes already meet or
exceed the recommendations above.
Action Taken:
Expenditure Review – All expenditures charged to grants are reviewed and
approved by two qualified individuals.
Documentation of Review and Approval –
Such review and approval for non-payroll expenditures occur in and are
documented in the SAP Concur software before the costs are recorded in
the accounting system (Abila).
Such review and approval for payroll-related expenditures occur via and
are documented via a combination of methods, also before they are
recorded in Abila.
Employees report their time, including how much time was
devoted to grant activities, in the ExponentHR payroll system,
and their supervisors approve both the time and the allocation in
that system.
Programmatic measures that also support grant billing ("units")
are calculated from activity documented in the athenaOne
electronic health record (EHR).
Payroll allocation is calculated by one person, based on the
ExponentHR documentation and the units, then reviewed and
imported into Abila by a second person. The unposted
transactions are reviewed again before posting.
Utilize System-Based Controls – In place as above.
_________________________________________________________
Finding number: 2023-006 Significant Deficiency in Internal Control Over Compliance:
Allowable Costs and Activities
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914
Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917
Federal Program #2 HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Name of pass-through
entity:
Multiple
Repeat finding: No
Criteria: 2 CFR §200.405 requires that costs be allocable to the federal program based on
relative benefits received and be supported by appropriate documentation.
For personnel costs, 2 CFR §200.430(i) requires that compensation for
employees whose time is charged to federal awards be based on records that
accurately reflect the work performed, such as time and effort reporting or
equivalent documentation. For shared costs, 2 CFR §200.412-200.414 requires
that cost allocations be based on documented methodologies that are reasonable
and supported by underlying calculations.
Condition: The Organization does not have formalized internal controls to support the
rationale for allocation of shared costs and employee time across federal
programs. Specifically:
Time and effort is being tracked and maintained by employees, including
hours charged to the specific efforts for the programs. Often, employees
charge hours to specific programs in excess of amounts allocated to the
program as expenditures. The specific amount of employee salaries and
wages that are allocated to specific federal programs for reimbursement, and
which are less than the amounts reflected in the time and effort records, are
determined by members of the finance staff. The rationale for the amount
actually allocated for reimbursement, if less than the amount reflected in the
time and effort records, is not documented.
Review and approval of the allocation of employee compensation to specific
federal programs reimbursement requests is not maintained.
Cause: The deficiency exists because the Organization has not implemented a structured
process for documenting the extent to which allowable compensation costs will
be allocated for reimbursement to specific federal programs in instances where
the allowable compensation cost exceeds the amount allocated for
reimbursement.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Possible effect: The absence of documented allocation methodologies in instances where
allowable compensation costs exceed the amount allocated for reimbursement
increases the risk that:
Costs may be improperly allocated between federal programs, resulting in
potential noncompliance with federal cost principles.
Federal expenditures may be misstated, impacting financial and grant
reporting.
Although questioned costs were not identified, the lack of specific supporting
documentation and controls represents a significant deficiency in internal control
over compliance.
Questioned cost: None identified at this time.
Recommendation: We recommend that the Organization implement the following corrective
actions:
1. Develop and Implement a Written Cost Allocation Policy – Establish a
formal policy outlining the methodology for allocating shared costs and
personnel time across programs, especially in instances where allowable
costs exceed amounts allocated for reimbursement, ensuring compliance
with 2 CFR Part 200 cost principles.
2. Document Allocation Methodologies for Shared Costs – Ensure that
allocations for shared costs (e.g., rent, utilities, and administrative expenses)
are based on a reasonable and documented methodology that can be
reviewed and reperformed.
3. Retain Evidence of Implementation of Internal Controls - Implement review
and approval controls over all requests for reimbursement, including review
and approval of allocation of personnel and shared costs to specific funding
sources. In circumstances where costs can be appropriately allocated to
multiple funding sources, document the rationale for allocating the specific
amount to each funding source.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management respectfully disagrees with this Finding.
Under Condition, the finding states, “Time and effort is being tracked and
maintained by employees, including hours charged to the specific efforts for the
programs.…” This is not accurate. Employees report their time worked each
day, including the amount of time they worked on different projects if
applicable. Employees report this in our commercial HRIS/Payroll system,
where it is maintained and where it is reviewed and approved by the employee’s
manager. The employees report the time they worked and which project(s) they
worked on, their managers review and approve the time and the distribution, and
the data is tracked and maintained in our HRIS/Payroll system (ExponentHR).
Also under Condition, the finding states, “The specific amount of employee
salaries and wages that are allocated to specific federal programs for
reimbursement, and which are less than the amounts reflected in time and effort
records, are determined by members of the finance staff.” It is correct that we
would have to invoice sponsors for less than the total cost of an employee’s
allocated time and effort if a sponsor’s budget is not sufficient to cover that full
amount. This is the correct procedure to follow. Employees correctly continue
documenting their hours worked on a specific project even if the budget is
expended and the accounting staff can no longer bill the sponsor. If a particular
grant does not have sufficient sponsor funds, then the Grants Accounting staff
reduce the bill accordingly.
Also under Condition, the finding states, “The rationale for the amount actually
allocated for reimbursement, if less than the amount reflected in time and effort
records, is not documented”. This is incorrect. Our monthly invoices to each
sponsor accumulate, with each invoice clearly showing not only that month’s
expense but also the year-to-date expense and remaining balance, which forces
the sponsor invoice to stop at an amount less than the total cost of employees’
time and effort when the budget is exhausted.
Also under Condition, the finding states, “Review and approval of the allocation
of employee compensation to specific federal programs reimbursement requests
is not maintained.” Each employee records their hours worked, and the
project(s) on which they worked those hours, in our HRIS/Payroll system. The
employee’s manager reviews and approves both the hours worked and the
projects on which the hours were worked. This review and approval is
maintained in our HRIS/Payroll system. Financial staff calculate the amount to
allocate to specific federal programs based on these HRIS/Payroll system records
(or other records such as clinical units produced, based on the terms of each
grant). Separate accounting staff review the sponsor invoice and post the
Receivable once they deem the invoice correct.
Under Cause, the finding states, “…..the Organization has not implemented a
structured process for documenting the extent to which allowable [emphasis
added] compensation costs will be allocated for reimbursement to specific
federal programs in instances where the allowable compensation cost exceeds
the amount allocated for reimbursement.” This means that we do not have a
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
process for documenting how much of a payroll expense already deemed
allowable on a particular grant will actually be invoiced there. We disagree and
believe that the presence and documentation of a limited sponsor budget, along
with cumulative tracking and documentation of compensation expenses against
that budget, proves and documents why sometimes full compensation costs are
not charged to a grant.
Under Possible Effect, the finding addresses possible effects of “the absence of
documented allocation methodologies.” We don’t agree that our process could
lead to improper allocation between federal programs (as the finding states) nor
to misstating federal expenditures (as the finding states). When a sponsor’s
budget is insufficient to cover its appropriately allocated compensation costs,
those costs are paid from unrestricted, non-federal funds. As also noted in the
finding, no questioned costs were identified.
Finding number: 2023-004 – Material Weakness in Internal Control Over Preparation,
Reconciliation, and Retention of the Schedule of Expenditures of Federal
Awards (SEFA)
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number: 93.914
Federal Program #2 HIV Care Formula Grants): CFDA Number: 93.917
Federal Program #3: HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
Name of pass-through
entity:
Multiple
Repeat finding: No
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Criteria: Under 2 CFR §200.510(b), recipients of federal funds are required to prepare a
Schedule of Expenditures of Federal Awards (SEFA) that fairly presents federal
expenditures for each grant program and is derived from and supported by the
entity's accounting records. Additionally, 2 CFR §200.302 requires that financial
management systems adequately identify and account for federal awards to
ensure accuracy and compliance with applicable federal requirements. Best
practices dictate that federal expenditures should be reconciled regularly to the
general ledger, and supporting documentation should be maintained to
substantiate amounts reported on the SEFA.
Condition: The Organization lacked adequate controls over the preparation, reconciliation,
and retention of records related to the SEFA. Specifically:
The SEFA incorrectly reported certain federal awards as non-federal awards.
The SEFA is prepared based on amounts requested for reimbursement
instead of directly based on expenditures incurred.
Reconciliation schedules that tied SEFA expenditures directly back to the
expenses recorded in the general ledger could not be located.
Expenses recorded in the general ledger represent expenses incurred to
operate the program in addition to direct grant expenditures; the
Organization only requests reimbursement for direct program expenditures
allowable under the program.
Documentation of Excel-based reconciliations did not agree to reported
monthly expenditures, indicating manual reclassification entries between
program codes that were not clearly supported.
Cause: The deficiencies noted were primarily due to:
Lack of system controls to ensure that state and federal expenditures were
separately tracked from non-grant funds spent within the same source codes.
Turnover in grants management personnel, which resulted in missing,
incomplete, or inaccurate reconciling records.
Possible effect: Without a complete and accurate SEFA, the Organization risks noncompliance
with Uniform Guidance reporting requirements, which could impact its ability to
receive and administer federal funds in the future. Additionally, inaccurate
SEFA reporting increases the risk of errors in administering funds, questioned
costs, and over or under expenditure of grants.
Questioned cost: None identified at this time.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Recommendation: We recommend that the Organization implement the following measures to
improve SEFA preparation and record retention:
1. Develop a Standardized SEFA Reconciliation Process – Implement formal
policies and procedures requiring that SEFA expenditures be reconciled to
the general ledger on a monthly basis, with documentation maintained for
audit purposes.
2. Enhance System Controls for Grant Expenditures – Modify the financial
system to allow for the proper segregation of state and federal expenditures
from non-grant funds, ensuring that expenditures are properly classified at
the time of entry.
3. Require Monthly Documentation Reviews – Establish a control requiring
management to review and approve SEFA reconciliation schedules on a
monthly or quarterly basis to ensure accuracy and completeness.
4. Implement a Centralized Documentation Retention Policy – Require that all
SEFA-related reconciliation records, including general ledger tie-outs and
manual adjustments, be retained in a centralized, accessible location.
5. Provide Grants Management Training – Conduct training for grants
management and accounting personnel on SEFA preparation requirements,
including Uniform Guidance compliance and best practices for
documentation and reconciliation.
6. By implementing these measures, the Organization can improve its internal
controls over SEFA preparation, ensure compliance with Uniform Guidance,
and reduce the risk of reporting inaccuracies.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management partially agrees with the finding. While we acknowledge that
documentation supporting SEFA reconciliation was incomplete, we believe that
federal expenditures were properly accounted for. We would like to address
some of the auditors' points individually:
"The SEFA is prepared based on amounts requested for reimbursement instead
of directly based on expenditures incurred." Most grant awards do not fully fund
the programs they support, most grant awards do not run concurrently with Prism
Health North Texas' fiscal year (i.e., with the Calendar Year), and most grant
awards are not spent in equal monthly amounts. It is correct that the 2023 SEFA
was based on grant-appropriate expenditures that occurred during Calendar Year
2023 and were submitted to those grant sponsors for reimbursement. This will
not necessarily reach the full cost to Prism for each grant-supported program, nor
is it likely to exactly match any annual grant award amount.
"Expenses recorded in the general ledger represent expenses incurred to operate
the program in addition to direct grant expenditures; the Organization only
requests reimbursement for direct program expenditures allowable under the
program." As we confirmed verbally with the audit partner on April 25, 2025,
this statement is intended to provide information and context and is not a
criticism or intended to point out any problem. As stated above, most grant
awards do not fully fund the programs they support; therefore, the general ledger
necessarily includes both expenses the sponsor will reimburse and expenses the
sponsor will not reimburse.
Nonetheless, we are enhancing our reconciliation procedures and documentation
practices to fully meet audit requirements. Finding 2023-004 refers to the
auditors' assessment of the SEFA preparation and reconciliation processes that
occurred in Calendar Year 2023. As of this writing, Prism Health North Texas
has already changed its SEFA preparation and reconciliation processes and
meets many of the recommendations above.
Action Taken:
Documentation Retention – On April 25, 2025, management created a structured
and easily accessible system for storing all relevant information for all grants
management personnel.
A logical naming system for files identifying the SEFA period, the
funding agency and identified general ledger expenditures claimed on
the SEFA.
We are now documenting the difference between all GL transactions and
those submitted for sponsor reimbursement (i.e., SEFA
components) in a single document per fund code, arranged by
fiscal year. Previously this documentation was kept by invoice and
arranged by grant year.
Management will continue to ensure all expenditure-related support,
such as invoices and purchase orders, is saved electronically to all
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
financial transactions.
SEFA Reconciliation – Management has decided to move from an annual to
quarterly SEFA reconciliation process to enhance the frequency of management
oversight in SEFA draft preparation. VP of Finance will prepare the SEFA for
independent review by the CFO. This will be put into a written
policy/procedure.
System Enhancements – Prism's current accounting system does not
accommodate this. However, Prism is already in the later stages of selecting a
new Enterprise Resource Planning (ERP) solution, with this as one of our key
selection criteria. Our new ERP should allow for expenditures within the same
cost center to be identified as grant-reimbursable or non-grant-reimbursable at
the time of entry. We have identified opportunities in new financial
management software solutions that we are scheduled to demo May 12th and the
16th of 2025. Opportunities such as:
The ability to tag grant-reimbursable transactions, to segment our award
cost center into two important categories.
The full cost to manage a specific program.
Identified cost claimed on the SEFA.
Dedicated grant modules that will allow us to establish business rules
and workflows to streamline and digitize critical aspects of grant
management.
Staff Engagement – Cross department coordination meetings occur monthly
between the Finance organization and the Grants Management team to continue
to foster alignment and collaboration in our grant cycles. A general overview of
SEFA, including how to prepare and organize the monthly reconciliations, has
already occurred with some of the grants accountants.
_________________________________________________________
Finding number: 2023-005 Significant Deficiency in Internal Control Over Compliance:
Allowable Costs and Activities
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914
Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917
Federal Program #3 HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
Name of pass-through
entity:
Multiple
Repeat finding: No
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Criteria: Under 2 CFR §200.303, recipients of federal funds must establish and maintain
effective internal controls to ensure compliance with federal statutes,
regulations, and the terms of grant agreements. 2 CFR §200.403 specifies that
costs charged to federal programs must be allowable, necessary, reasonable, and
allocable to the respective award. Additionally, 2 CFR §200.302 requires
financial management systems to provide effective control and accountability
over federal funds, including documented approval of expenditures.
A best practice for grant compliance is to implement a documented approval
process for expenditures charged to federal programs, ensuring that all costs are
reviewed and supported by adequate documentation before reimbursement
requests are submitted.
Condition: The Organization did not have readily-available documented evidence of review
and approval for expenditures charged to federal grants during the fiscal year.
Specifically:
The financial system did not capture or document approval of expenditures
before they were charged to federal programs.
No formalized system existed to retain evidence of grant-related expenditure
reviews.
While the prior Chief Financial Officer (CFO) manually reviewed each
invoice, there was no indication of approval on the supporting
documentation, making it impossible to verify that an appropriate review
occurred before costs were charged to the grants.
Cause: The issue arose due to the Organization's reliance on a manual review process
conducted by the previous CFO, without requiring a formal approval signature or
electronic system control to document review. This lack of a structured approval
process resulted in insufficient evidence to support compliance with federal
allowable cost requirements.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Possible effect: Without a documented approval process, the Organization cannot demonstrate
that expenditures charged to the grants were properly reviewed for allowability,
reasonableness, and allocability in accordance with federal regulations. This
increases the risk that:
Unallowable or misclassified expenditures could be charged to the grants
without detection.
Noncompliance with federal grant requirements could result in questioned
costs or additional oversight from funding agencies.
Financial statement and grant reporting inaccuracies may occur if
expenditures are not properly reviewed and approved.
Although no specific unallowable costs were identified during the audit, the lack
of documented review represents a significant deficiency in internal control over
compliance.
Questioned cost: None identified at this time.
Recommendation: We recommend that the Organization strengthen its internal controls over grant
expenditures by implementing the following measures:
1. Implement a Formal Expenditure Review and Approval Policy – Establish a
policy requiring that all expenditures charged to grants be reviewed and
approved by an appropriate individual before being recorded in the system.
2. Require Documentation of Review and Approval – Ensure that invoices,
payroll allocations, and other cost support documents include a signature,
initials, or system-generated approval to confirm review.
3. Utilize System-Based Controls – If possible, configure the financial system
to require electronic approval for all grant-related expenditures before costs
are recorded.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management partially agrees with the finding. While we acknowledge that
documentation of expenditure approval was not always retrievable, we believe
the expenditures reviewed were all appropriate. Finding 2023-005 refers to the
auditors' assessment of expenditure review and approval processes that occurred
in Calendar Year 2023. During Calendar Year 2023, Prism relied on email
routing of expenditures for review and approval. As of this writing, Prism
Health North Texas' expenditure review and approval processes already meet or
exceed the recommendations above.
Action Taken:
Expenditure Review – All expenditures charged to grants are reviewed and
approved by two qualified individuals.
Documentation of Review and Approval –
Such review and approval for non-payroll expenditures occur in and are
documented in the SAP Concur software before the costs are recorded in
the accounting system (Abila).
Such review and approval for payroll-related expenditures occur via and
are documented via a combination of methods, also before they are
recorded in Abila.
Employees report their time, including how much time was
devoted to grant activities, in the ExponentHR payroll system,
and their supervisors approve both the time and the allocation in
that system.
Programmatic measures that also support grant billing ("units")
are calculated from activity documented in the athenaOne
electronic health record (EHR).
Payroll allocation is calculated by one person, based on the
ExponentHR documentation and the units, then reviewed and
imported into Abila by a second person. The unposted
transactions are reviewed again before posting.
Utilize System-Based Controls – In place as above.
_________________________________________________________
Finding number: 2023-006 Significant Deficiency in Internal Control Over Compliance:
Allowable Costs and Activities
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914
Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917
Federal Program #2 HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Name of pass-through
entity:
Multiple
Repeat finding: No
Criteria: 2 CFR §200.405 requires that costs be allocable to the federal program based on
relative benefits received and be supported by appropriate documentation.
For personnel costs, 2 CFR §200.430(i) requires that compensation for
employees whose time is charged to federal awards be based on records that
accurately reflect the work performed, such as time and effort reporting or
equivalent documentation. For shared costs, 2 CFR §200.412-200.414 requires
that cost allocations be based on documented methodologies that are reasonable
and supported by underlying calculations.
Condition: The Organization does not have formalized internal controls to support the
rationale for allocation of shared costs and employee time across federal
programs. Specifically:
Time and effort is being tracked and maintained by employees, including
hours charged to the specific efforts for the programs. Often, employees
charge hours to specific programs in excess of amounts allocated to the
program as expenditures. The specific amount of employee salaries and
wages that are allocated to specific federal programs for reimbursement, and
which are less than the amounts reflected in the time and effort records, are
determined by members of the finance staff. The rationale for the amount
actually allocated for reimbursement, if less than the amount reflected in the
time and effort records, is not documented.
Review and approval of the allocation of employee compensation to specific
federal programs reimbursement requests is not maintained.
Cause: The deficiency exists because the Organization has not implemented a structured
process for documenting the extent to which allowable compensation costs will
be allocated for reimbursement to specific federal programs in instances where
the allowable compensation cost exceeds the amount allocated for
reimbursement.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Possible effect: The absence of documented allocation methodologies in instances where
allowable compensation costs exceed the amount allocated for reimbursement
increases the risk that:
Costs may be improperly allocated between federal programs, resulting in
potential noncompliance with federal cost principles.
Federal expenditures may be misstated, impacting financial and grant
reporting.
Although questioned costs were not identified, the lack of specific supporting
documentation and controls represents a significant deficiency in internal control
over compliance.
Questioned cost: None identified at this time.
Recommendation: We recommend that the Organization implement the following corrective
actions:
1. Develop and Implement a Written Cost Allocation Policy – Establish a
formal policy outlining the methodology for allocating shared costs and
personnel time across programs, especially in instances where allowable
costs exceed amounts allocated for reimbursement, ensuring compliance
with 2 CFR Part 200 cost principles.
2. Document Allocation Methodologies for Shared Costs – Ensure that
allocations for shared costs (e.g., rent, utilities, and administrative expenses)
are based on a reasonable and documented methodology that can be
reviewed and reperformed.
3. Retain Evidence of Implementation of Internal Controls - Implement review
and approval controls over all requests for reimbursement, including review
and approval of allocation of personnel and shared costs to specific funding
sources. In circumstances where costs can be appropriately allocated to
multiple funding sources, document the rationale for allocating the specific
amount to each funding source.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management respectfully disagrees with this Finding.
Under Condition, the finding states, “Time and effort is being tracked and
maintained by employees, including hours charged to the specific efforts for the
programs.…” This is not accurate. Employees report their time worked each
day, including the amount of time they worked on different projects if
applicable. Employees report this in our commercial HRIS/Payroll system,
where it is maintained and where it is reviewed and approved by the employee’s
manager. The employees report the time they worked and which project(s) they
worked on, their managers review and approve the time and the distribution, and
the data is tracked and maintained in our HRIS/Payroll system (ExponentHR).
Also under Condition, the finding states, “The specific amount of employee
salaries and wages that are allocated to specific federal programs for
reimbursement, and which are less than the amounts reflected in time and effort
records, are determined by members of the finance staff.” It is correct that we
would have to invoice sponsors for less than the total cost of an employee’s
allocated time and effort if a sponsor’s budget is not sufficient to cover that full
amount. This is the correct procedure to follow. Employees correctly continue
documenting their hours worked on a specific project even if the budget is
expended and the accounting staff can no longer bill the sponsor. If a particular
grant does not have sufficient sponsor funds, then the Grants Accounting staff
reduce the bill accordingly.
Also under Condition, the finding states, “The rationale for the amount actually
allocated for reimbursement, if less than the amount reflected in time and effort
records, is not documented”. This is incorrect. Our monthly invoices to each
sponsor accumulate, with each invoice clearly showing not only that month’s
expense but also the year-to-date expense and remaining balance, which forces
the sponsor invoice to stop at an amount less than the total cost of employees’
time and effort when the budget is exhausted.
Also under Condition, the finding states, “Review and approval of the allocation
of employee compensation to specific federal programs reimbursement requests
is not maintained.” Each employee records their hours worked, and the
project(s) on which they worked those hours, in our HRIS/Payroll system. The
employee’s manager reviews and approves both the hours worked and the
projects on which the hours were worked. This review and approval is
maintained in our HRIS/Payroll system. Financial staff calculate the amount to
allocate to specific federal programs based on these HRIS/Payroll system records
(or other records such as clinical units produced, based on the terms of each
grant). Separate accounting staff review the sponsor invoice and post the
Receivable once they deem the invoice correct.
Under Cause, the finding states, “…..the Organization has not implemented a
structured process for documenting the extent to which allowable [emphasis
added] compensation costs will be allocated for reimbursement to specific
federal programs in instances where the allowable compensation cost exceeds
the amount allocated for reimbursement.” This means that we do not have a
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
process for documenting how much of a payroll expense already deemed
allowable on a particular grant will actually be invoiced there. We disagree and
believe that the presence and documentation of a limited sponsor budget, along
with cumulative tracking and documentation of compensation expenses against
that budget, proves and documents why sometimes full compensation costs are
not charged to a grant.
Under Possible Effect, the finding addresses possible effects of “the absence of
documented allocation methodologies.” We don’t agree that our process could
lead to improper allocation between federal programs (as the finding states) nor
to misstating federal expenditures (as the finding states). When a sponsor’s
budget is insufficient to cover its appropriately allocated compensation costs,
those costs are paid from unrestricted, non-federal funds. As also noted in the
finding, no questioned costs were identified.
Finding number: 2023-004 – Material Weakness in Internal Control Over Preparation,
Reconciliation, and Retention of the Schedule of Expenditures of Federal
Awards (SEFA)
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number: 93.914
Federal Program #2 HIV Care Formula Grants): CFDA Number: 93.917
Federal Program #3: HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
Name of pass-through
entity:
Multiple
Repeat finding: No
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Criteria: Under 2 CFR §200.510(b), recipients of federal funds are required to prepare a
Schedule of Expenditures of Federal Awards (SEFA) that fairly presents federal
expenditures for each grant program and is derived from and supported by the
entity's accounting records. Additionally, 2 CFR §200.302 requires that financial
management systems adequately identify and account for federal awards to
ensure accuracy and compliance with applicable federal requirements. Best
practices dictate that federal expenditures should be reconciled regularly to the
general ledger, and supporting documentation should be maintained to
substantiate amounts reported on the SEFA.
Condition: The Organization lacked adequate controls over the preparation, reconciliation,
and retention of records related to the SEFA. Specifically:
The SEFA incorrectly reported certain federal awards as non-federal awards.
The SEFA is prepared based on amounts requested for reimbursement
instead of directly based on expenditures incurred.
Reconciliation schedules that tied SEFA expenditures directly back to the
expenses recorded in the general ledger could not be located.
Expenses recorded in the general ledger represent expenses incurred to
operate the program in addition to direct grant expenditures; the
Organization only requests reimbursement for direct program expenditures
allowable under the program.
Documentation of Excel-based reconciliations did not agree to reported
monthly expenditures, indicating manual reclassification entries between
program codes that were not clearly supported.
Cause: The deficiencies noted were primarily due to:
Lack of system controls to ensure that state and federal expenditures were
separately tracked from non-grant funds spent within the same source codes.
Turnover in grants management personnel, which resulted in missing,
incomplete, or inaccurate reconciling records.
Possible effect: Without a complete and accurate SEFA, the Organization risks noncompliance
with Uniform Guidance reporting requirements, which could impact its ability to
receive and administer federal funds in the future. Additionally, inaccurate
SEFA reporting increases the risk of errors in administering funds, questioned
costs, and over or under expenditure of grants.
Questioned cost: None identified at this time.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Recommendation: We recommend that the Organization implement the following measures to
improve SEFA preparation and record retention:
1. Develop a Standardized SEFA Reconciliation Process – Implement formal
policies and procedures requiring that SEFA expenditures be reconciled to
the general ledger on a monthly basis, with documentation maintained for
audit purposes.
2. Enhance System Controls for Grant Expenditures – Modify the financial
system to allow for the proper segregation of state and federal expenditures
from non-grant funds, ensuring that expenditures are properly classified at
the time of entry.
3. Require Monthly Documentation Reviews – Establish a control requiring
management to review and approve SEFA reconciliation schedules on a
monthly or quarterly basis to ensure accuracy and completeness.
4. Implement a Centralized Documentation Retention Policy – Require that all
SEFA-related reconciliation records, including general ledger tie-outs and
manual adjustments, be retained in a centralized, accessible location.
5. Provide Grants Management Training – Conduct training for grants
management and accounting personnel on SEFA preparation requirements,
including Uniform Guidance compliance and best practices for
documentation and reconciliation.
6. By implementing these measures, the Organization can improve its internal
controls over SEFA preparation, ensure compliance with Uniform Guidance,
and reduce the risk of reporting inaccuracies.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management partially agrees with the finding. While we acknowledge that
documentation supporting SEFA reconciliation was incomplete, we believe that
federal expenditures were properly accounted for. We would like to address
some of the auditors' points individually:
"The SEFA is prepared based on amounts requested for reimbursement instead
of directly based on expenditures incurred." Most grant awards do not fully fund
the programs they support, most grant awards do not run concurrently with Prism
Health North Texas' fiscal year (i.e., with the Calendar Year), and most grant
awards are not spent in equal monthly amounts. It is correct that the 2023 SEFA
was based on grant-appropriate expenditures that occurred during Calendar Year
2023 and were submitted to those grant sponsors for reimbursement. This will
not necessarily reach the full cost to Prism for each grant-supported program, nor
is it likely to exactly match any annual grant award amount.
"Expenses recorded in the general ledger represent expenses incurred to operate
the program in addition to direct grant expenditures; the Organization only
requests reimbursement for direct program expenditures allowable under the
program." As we confirmed verbally with the audit partner on April 25, 2025,
this statement is intended to provide information and context and is not a
criticism or intended to point out any problem. As stated above, most grant
awards do not fully fund the programs they support; therefore, the general ledger
necessarily includes both expenses the sponsor will reimburse and expenses the
sponsor will not reimburse.
Nonetheless, we are enhancing our reconciliation procedures and documentation
practices to fully meet audit requirements. Finding 2023-004 refers to the
auditors' assessment of the SEFA preparation and reconciliation processes that
occurred in Calendar Year 2023. As of this writing, Prism Health North Texas
has already changed its SEFA preparation and reconciliation processes and
meets many of the recommendations above.
Action Taken:
Documentation Retention – On April 25, 2025, management created a structured
and easily accessible system for storing all relevant information for all grants
management personnel.
A logical naming system for files identifying the SEFA period, the
funding agency and identified general ledger expenditures claimed on
the SEFA.
We are now documenting the difference between all GL transactions and
those submitted for sponsor reimbursement (i.e., SEFA
components) in a single document per fund code, arranged by
fiscal year. Previously this documentation was kept by invoice and
arranged by grant year.
Management will continue to ensure all expenditure-related support,
such as invoices and purchase orders, is saved electronically to all
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
financial transactions.
SEFA Reconciliation – Management has decided to move from an annual to
quarterly SEFA reconciliation process to enhance the frequency of management
oversight in SEFA draft preparation. VP of Finance will prepare the SEFA for
independent review by the CFO. This will be put into a written
policy/procedure.
System Enhancements – Prism's current accounting system does not
accommodate this. However, Prism is already in the later stages of selecting a
new Enterprise Resource Planning (ERP) solution, with this as one of our key
selection criteria. Our new ERP should allow for expenditures within the same
cost center to be identified as grant-reimbursable or non-grant-reimbursable at
the time of entry. We have identified opportunities in new financial
management software solutions that we are scheduled to demo May 12th and the
16th of 2025. Opportunities such as:
The ability to tag grant-reimbursable transactions, to segment our award
cost center into two important categories.
The full cost to manage a specific program.
Identified cost claimed on the SEFA.
Dedicated grant modules that will allow us to establish business rules
and workflows to streamline and digitize critical aspects of grant
management.
Staff Engagement – Cross department coordination meetings occur monthly
between the Finance organization and the Grants Management team to continue
to foster alignment and collaboration in our grant cycles. A general overview of
SEFA, including how to prepare and organize the monthly reconciliations, has
already occurred with some of the grants accountants.
_________________________________________________________
Finding number: 2023-005 Significant Deficiency in Internal Control Over Compliance:
Allowable Costs and Activities
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914
Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917
Federal Program #3 HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
Name of pass-through
entity:
Multiple
Repeat finding: No
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Criteria: Under 2 CFR §200.303, recipients of federal funds must establish and maintain
effective internal controls to ensure compliance with federal statutes,
regulations, and the terms of grant agreements. 2 CFR §200.403 specifies that
costs charged to federal programs must be allowable, necessary, reasonable, and
allocable to the respective award. Additionally, 2 CFR §200.302 requires
financial management systems to provide effective control and accountability
over federal funds, including documented approval of expenditures.
A best practice for grant compliance is to implement a documented approval
process for expenditures charged to federal programs, ensuring that all costs are
reviewed and supported by adequate documentation before reimbursement
requests are submitted.
Condition: The Organization did not have readily-available documented evidence of review
and approval for expenditures charged to federal grants during the fiscal year.
Specifically:
The financial system did not capture or document approval of expenditures
before they were charged to federal programs.
No formalized system existed to retain evidence of grant-related expenditure
reviews.
While the prior Chief Financial Officer (CFO) manually reviewed each
invoice, there was no indication of approval on the supporting
documentation, making it impossible to verify that an appropriate review
occurred before costs were charged to the grants.
Cause: The issue arose due to the Organization's reliance on a manual review process
conducted by the previous CFO, without requiring a formal approval signature or
electronic system control to document review. This lack of a structured approval
process resulted in insufficient evidence to support compliance with federal
allowable cost requirements.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Possible effect: Without a documented approval process, the Organization cannot demonstrate
that expenditures charged to the grants were properly reviewed for allowability,
reasonableness, and allocability in accordance with federal regulations. This
increases the risk that:
Unallowable or misclassified expenditures could be charged to the grants
without detection.
Noncompliance with federal grant requirements could result in questioned
costs or additional oversight from funding agencies.
Financial statement and grant reporting inaccuracies may occur if
expenditures are not properly reviewed and approved.
Although no specific unallowable costs were identified during the audit, the lack
of documented review represents a significant deficiency in internal control over
compliance.
Questioned cost: None identified at this time.
Recommendation: We recommend that the Organization strengthen its internal controls over grant
expenditures by implementing the following measures:
1. Implement a Formal Expenditure Review and Approval Policy – Establish a
policy requiring that all expenditures charged to grants be reviewed and
approved by an appropriate individual before being recorded in the system.
2. Require Documentation of Review and Approval – Ensure that invoices,
payroll allocations, and other cost support documents include a signature,
initials, or system-generated approval to confirm review.
3. Utilize System-Based Controls – If possible, configure the financial system
to require electronic approval for all grant-related expenditures before costs
are recorded.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management partially agrees with the finding. While we acknowledge that
documentation of expenditure approval was not always retrievable, we believe
the expenditures reviewed were all appropriate. Finding 2023-005 refers to the
auditors' assessment of expenditure review and approval processes that occurred
in Calendar Year 2023. During Calendar Year 2023, Prism relied on email
routing of expenditures for review and approval. As of this writing, Prism
Health North Texas' expenditure review and approval processes already meet or
exceed the recommendations above.
Action Taken:
Expenditure Review – All expenditures charged to grants are reviewed and
approved by two qualified individuals.
Documentation of Review and Approval –
Such review and approval for non-payroll expenditures occur in and are
documented in the SAP Concur software before the costs are recorded in
the accounting system (Abila).
Such review and approval for payroll-related expenditures occur via and
are documented via a combination of methods, also before they are
recorded in Abila.
Employees report their time, including how much time was
devoted to grant activities, in the ExponentHR payroll system,
and their supervisors approve both the time and the allocation in
that system.
Programmatic measures that also support grant billing ("units")
are calculated from activity documented in the athenaOne
electronic health record (EHR).
Payroll allocation is calculated by one person, based on the
ExponentHR documentation and the units, then reviewed and
imported into Abila by a second person. The unposted
transactions are reviewed again before posting.
Utilize System-Based Controls – In place as above.
_________________________________________________________
Finding number: 2023-006 Significant Deficiency in Internal Control Over Compliance:
Allowable Costs and Activities
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914
Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917
Federal Program #2 HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Name of pass-through
entity:
Multiple
Repeat finding: No
Criteria: 2 CFR §200.405 requires that costs be allocable to the federal program based on
relative benefits received and be supported by appropriate documentation.
For personnel costs, 2 CFR §200.430(i) requires that compensation for
employees whose time is charged to federal awards be based on records that
accurately reflect the work performed, such as time and effort reporting or
equivalent documentation. For shared costs, 2 CFR §200.412-200.414 requires
that cost allocations be based on documented methodologies that are reasonable
and supported by underlying calculations.
Condition: The Organization does not have formalized internal controls to support the
rationale for allocation of shared costs and employee time across federal
programs. Specifically:
Time and effort is being tracked and maintained by employees, including
hours charged to the specific efforts for the programs. Often, employees
charge hours to specific programs in excess of amounts allocated to the
program as expenditures. The specific amount of employee salaries and
wages that are allocated to specific federal programs for reimbursement, and
which are less than the amounts reflected in the time and effort records, are
determined by members of the finance staff. The rationale for the amount
actually allocated for reimbursement, if less than the amount reflected in the
time and effort records, is not documented.
Review and approval of the allocation of employee compensation to specific
federal programs reimbursement requests is not maintained.
Cause: The deficiency exists because the Organization has not implemented a structured
process for documenting the extent to which allowable compensation costs will
be allocated for reimbursement to specific federal programs in instances where
the allowable compensation cost exceeds the amount allocated for
reimbursement.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Possible effect: The absence of documented allocation methodologies in instances where
allowable compensation costs exceed the amount allocated for reimbursement
increases the risk that:
Costs may be improperly allocated between federal programs, resulting in
potential noncompliance with federal cost principles.
Federal expenditures may be misstated, impacting financial and grant
reporting.
Although questioned costs were not identified, the lack of specific supporting
documentation and controls represents a significant deficiency in internal control
over compliance.
Questioned cost: None identified at this time.
Recommendation: We recommend that the Organization implement the following corrective
actions:
1. Develop and Implement a Written Cost Allocation Policy – Establish a
formal policy outlining the methodology for allocating shared costs and
personnel time across programs, especially in instances where allowable
costs exceed amounts allocated for reimbursement, ensuring compliance
with 2 CFR Part 200 cost principles.
2. Document Allocation Methodologies for Shared Costs – Ensure that
allocations for shared costs (e.g., rent, utilities, and administrative expenses)
are based on a reasonable and documented methodology that can be
reviewed and reperformed.
3. Retain Evidence of Implementation of Internal Controls - Implement review
and approval controls over all requests for reimbursement, including review
and approval of allocation of personnel and shared costs to specific funding
sources. In circumstances where costs can be appropriately allocated to
multiple funding sources, document the rationale for allocating the specific
amount to each funding source.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management respectfully disagrees with this Finding.
Under Condition, the finding states, “Time and effort is being tracked and
maintained by employees, including hours charged to the specific efforts for the
programs.…” This is not accurate. Employees report their time worked each
day, including the amount of time they worked on different projects if
applicable. Employees report this in our commercial HRIS/Payroll system,
where it is maintained and where it is reviewed and approved by the employee’s
manager. The employees report the time they worked and which project(s) they
worked on, their managers review and approve the time and the distribution, and
the data is tracked and maintained in our HRIS/Payroll system (ExponentHR).
Also under Condition, the finding states, “The specific amount of employee
salaries and wages that are allocated to specific federal programs for
reimbursement, and which are less than the amounts reflected in time and effort
records, are determined by members of the finance staff.” It is correct that we
would have to invoice sponsors for less than the total cost of an employee’s
allocated time and effort if a sponsor’s budget is not sufficient to cover that full
amount. This is the correct procedure to follow. Employees correctly continue
documenting their hours worked on a specific project even if the budget is
expended and the accounting staff can no longer bill the sponsor. If a particular
grant does not have sufficient sponsor funds, then the Grants Accounting staff
reduce the bill accordingly.
Also under Condition, the finding states, “The rationale for the amount actually
allocated for reimbursement, if less than the amount reflected in time and effort
records, is not documented”. This is incorrect. Our monthly invoices to each
sponsor accumulate, with each invoice clearly showing not only that month’s
expense but also the year-to-date expense and remaining balance, which forces
the sponsor invoice to stop at an amount less than the total cost of employees’
time and effort when the budget is exhausted.
Also under Condition, the finding states, “Review and approval of the allocation
of employee compensation to specific federal programs reimbursement requests
is not maintained.” Each employee records their hours worked, and the
project(s) on which they worked those hours, in our HRIS/Payroll system. The
employee’s manager reviews and approves both the hours worked and the
projects on which the hours were worked. This review and approval is
maintained in our HRIS/Payroll system. Financial staff calculate the amount to
allocate to specific federal programs based on these HRIS/Payroll system records
(or other records such as clinical units produced, based on the terms of each
grant). Separate accounting staff review the sponsor invoice and post the
Receivable once they deem the invoice correct.
Under Cause, the finding states, “…..the Organization has not implemented a
structured process for documenting the extent to which allowable [emphasis
added] compensation costs will be allocated for reimbursement to specific
federal programs in instances where the allowable compensation cost exceeds
the amount allocated for reimbursement.” This means that we do not have a
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
process for documenting how much of a payroll expense already deemed
allowable on a particular grant will actually be invoiced there. We disagree and
believe that the presence and documentation of a limited sponsor budget, along
with cumulative tracking and documentation of compensation expenses against
that budget, proves and documents why sometimes full compensation costs are
not charged to a grant.
Under Possible Effect, the finding addresses possible effects of “the absence of
documented allocation methodologies.” We don’t agree that our process could
lead to improper allocation between federal programs (as the finding states) nor
to misstating federal expenditures (as the finding states). When a sponsor’s
budget is insufficient to cover its appropriately allocated compensation costs,
those costs are paid from unrestricted, non-federal funds. As also noted in the
finding, no questioned costs were identified.
Finding number: 2023-004 – Material Weakness in Internal Control Over Preparation,
Reconciliation, and Retention of the Schedule of Expenditures of Federal
Awards (SEFA)
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number: 93.914
Federal Program #2 HIV Care Formula Grants): CFDA Number: 93.917
Federal Program #3: HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
Name of pass-through
entity:
Multiple
Repeat finding: No
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Criteria: Under 2 CFR §200.510(b), recipients of federal funds are required to prepare a
Schedule of Expenditures of Federal Awards (SEFA) that fairly presents federal
expenditures for each grant program and is derived from and supported by the
entity's accounting records. Additionally, 2 CFR §200.302 requires that financial
management systems adequately identify and account for federal awards to
ensure accuracy and compliance with applicable federal requirements. Best
practices dictate that federal expenditures should be reconciled regularly to the
general ledger, and supporting documentation should be maintained to
substantiate amounts reported on the SEFA.
Condition: The Organization lacked adequate controls over the preparation, reconciliation,
and retention of records related to the SEFA. Specifically:
The SEFA incorrectly reported certain federal awards as non-federal awards.
The SEFA is prepared based on amounts requested for reimbursement
instead of directly based on expenditures incurred.
Reconciliation schedules that tied SEFA expenditures directly back to the
expenses recorded in the general ledger could not be located.
Expenses recorded in the general ledger represent expenses incurred to
operate the program in addition to direct grant expenditures; the
Organization only requests reimbursement for direct program expenditures
allowable under the program.
Documentation of Excel-based reconciliations did not agree to reported
monthly expenditures, indicating manual reclassification entries between
program codes that were not clearly supported.
Cause: The deficiencies noted were primarily due to:
Lack of system controls to ensure that state and federal expenditures were
separately tracked from non-grant funds spent within the same source codes.
Turnover in grants management personnel, which resulted in missing,
incomplete, or inaccurate reconciling records.
Possible effect: Without a complete and accurate SEFA, the Organization risks noncompliance
with Uniform Guidance reporting requirements, which could impact its ability to
receive and administer federal funds in the future. Additionally, inaccurate
SEFA reporting increases the risk of errors in administering funds, questioned
costs, and over or under expenditure of grants.
Questioned cost: None identified at this time.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Recommendation: We recommend that the Organization implement the following measures to
improve SEFA preparation and record retention:
1. Develop a Standardized SEFA Reconciliation Process – Implement formal
policies and procedures requiring that SEFA expenditures be reconciled to
the general ledger on a monthly basis, with documentation maintained for
audit purposes.
2. Enhance System Controls for Grant Expenditures – Modify the financial
system to allow for the proper segregation of state and federal expenditures
from non-grant funds, ensuring that expenditures are properly classified at
the time of entry.
3. Require Monthly Documentation Reviews – Establish a control requiring
management to review and approve SEFA reconciliation schedules on a
monthly or quarterly basis to ensure accuracy and completeness.
4. Implement a Centralized Documentation Retention Policy – Require that all
SEFA-related reconciliation records, including general ledger tie-outs and
manual adjustments, be retained in a centralized, accessible location.
5. Provide Grants Management Training – Conduct training for grants
management and accounting personnel on SEFA preparation requirements,
including Uniform Guidance compliance and best practices for
documentation and reconciliation.
6. By implementing these measures, the Organization can improve its internal
controls over SEFA preparation, ensure compliance with Uniform Guidance,
and reduce the risk of reporting inaccuracies.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management partially agrees with the finding. While we acknowledge that
documentation supporting SEFA reconciliation was incomplete, we believe that
federal expenditures were properly accounted for. We would like to address
some of the auditors' points individually:
"The SEFA is prepared based on amounts requested for reimbursement instead
of directly based on expenditures incurred." Most grant awards do not fully fund
the programs they support, most grant awards do not run concurrently with Prism
Health North Texas' fiscal year (i.e., with the Calendar Year), and most grant
awards are not spent in equal monthly amounts. It is correct that the 2023 SEFA
was based on grant-appropriate expenditures that occurred during Calendar Year
2023 and were submitted to those grant sponsors for reimbursement. This will
not necessarily reach the full cost to Prism for each grant-supported program, nor
is it likely to exactly match any annual grant award amount.
"Expenses recorded in the general ledger represent expenses incurred to operate
the program in addition to direct grant expenditures; the Organization only
requests reimbursement for direct program expenditures allowable under the
program." As we confirmed verbally with the audit partner on April 25, 2025,
this statement is intended to provide information and context and is not a
criticism or intended to point out any problem. As stated above, most grant
awards do not fully fund the programs they support; therefore, the general ledger
necessarily includes both expenses the sponsor will reimburse and expenses the
sponsor will not reimburse.
Nonetheless, we are enhancing our reconciliation procedures and documentation
practices to fully meet audit requirements. Finding 2023-004 refers to the
auditors' assessment of the SEFA preparation and reconciliation processes that
occurred in Calendar Year 2023. As of this writing, Prism Health North Texas
has already changed its SEFA preparation and reconciliation processes and
meets many of the recommendations above.
Action Taken:
Documentation Retention – On April 25, 2025, management created a structured
and easily accessible system for storing all relevant information for all grants
management personnel.
A logical naming system for files identifying the SEFA period, the
funding agency and identified general ledger expenditures claimed on
the SEFA.
We are now documenting the difference between all GL transactions and
those submitted for sponsor reimbursement (i.e., SEFA
components) in a single document per fund code, arranged by
fiscal year. Previously this documentation was kept by invoice and
arranged by grant year.
Management will continue to ensure all expenditure-related support,
such as invoices and purchase orders, is saved electronically to all
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
financial transactions.
SEFA Reconciliation – Management has decided to move from an annual to
quarterly SEFA reconciliation process to enhance the frequency of management
oversight in SEFA draft preparation. VP of Finance will prepare the SEFA for
independent review by the CFO. This will be put into a written
policy/procedure.
System Enhancements – Prism's current accounting system does not
accommodate this. However, Prism is already in the later stages of selecting a
new Enterprise Resource Planning (ERP) solution, with this as one of our key
selection criteria. Our new ERP should allow for expenditures within the same
cost center to be identified as grant-reimbursable or non-grant-reimbursable at
the time of entry. We have identified opportunities in new financial
management software solutions that we are scheduled to demo May 12th and the
16th of 2025. Opportunities such as:
The ability to tag grant-reimbursable transactions, to segment our award
cost center into two important categories.
The full cost to manage a specific program.
Identified cost claimed on the SEFA.
Dedicated grant modules that will allow us to establish business rules
and workflows to streamline and digitize critical aspects of grant
management.
Staff Engagement – Cross department coordination meetings occur monthly
between the Finance organization and the Grants Management team to continue
to foster alignment and collaboration in our grant cycles. A general overview of
SEFA, including how to prepare and organize the monthly reconciliations, has
already occurred with some of the grants accountants.
_________________________________________________________
Finding number: 2023-005 Significant Deficiency in Internal Control Over Compliance:
Allowable Costs and Activities
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914
Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917
Federal Program #3 HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
Name of pass-through
entity:
Multiple
Repeat finding: No
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Criteria: Under 2 CFR §200.303, recipients of federal funds must establish and maintain
effective internal controls to ensure compliance with federal statutes,
regulations, and the terms of grant agreements. 2 CFR §200.403 specifies that
costs charged to federal programs must be allowable, necessary, reasonable, and
allocable to the respective award. Additionally, 2 CFR §200.302 requires
financial management systems to provide effective control and accountability
over federal funds, including documented approval of expenditures.
A best practice for grant compliance is to implement a documented approval
process for expenditures charged to federal programs, ensuring that all costs are
reviewed and supported by adequate documentation before reimbursement
requests are submitted.
Condition: The Organization did not have readily-available documented evidence of review
and approval for expenditures charged to federal grants during the fiscal year.
Specifically:
The financial system did not capture or document approval of expenditures
before they were charged to federal programs.
No formalized system existed to retain evidence of grant-related expenditure
reviews.
While the prior Chief Financial Officer (CFO) manually reviewed each
invoice, there was no indication of approval on the supporting
documentation, making it impossible to verify that an appropriate review
occurred before costs were charged to the grants.
Cause: The issue arose due to the Organization's reliance on a manual review process
conducted by the previous CFO, without requiring a formal approval signature or
electronic system control to document review. This lack of a structured approval
process resulted in insufficient evidence to support compliance with federal
allowable cost requirements.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Possible effect: Without a documented approval process, the Organization cannot demonstrate
that expenditures charged to the grants were properly reviewed for allowability,
reasonableness, and allocability in accordance with federal regulations. This
increases the risk that:
Unallowable or misclassified expenditures could be charged to the grants
without detection.
Noncompliance with federal grant requirements could result in questioned
costs or additional oversight from funding agencies.
Financial statement and grant reporting inaccuracies may occur if
expenditures are not properly reviewed and approved.
Although no specific unallowable costs were identified during the audit, the lack
of documented review represents a significant deficiency in internal control over
compliance.
Questioned cost: None identified at this time.
Recommendation: We recommend that the Organization strengthen its internal controls over grant
expenditures by implementing the following measures:
1. Implement a Formal Expenditure Review and Approval Policy – Establish a
policy requiring that all expenditures charged to grants be reviewed and
approved by an appropriate individual before being recorded in the system.
2. Require Documentation of Review and Approval – Ensure that invoices,
payroll allocations, and other cost support documents include a signature,
initials, or system-generated approval to confirm review.
3. Utilize System-Based Controls – If possible, configure the financial system
to require electronic approval for all grant-related expenditures before costs
are recorded.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management partially agrees with the finding. While we acknowledge that
documentation of expenditure approval was not always retrievable, we believe
the expenditures reviewed were all appropriate. Finding 2023-005 refers to the
auditors' assessment of expenditure review and approval processes that occurred
in Calendar Year 2023. During Calendar Year 2023, Prism relied on email
routing of expenditures for review and approval. As of this writing, Prism
Health North Texas' expenditure review and approval processes already meet or
exceed the recommendations above.
Action Taken:
Expenditure Review – All expenditures charged to grants are reviewed and
approved by two qualified individuals.
Documentation of Review and Approval –
Such review and approval for non-payroll expenditures occur in and are
documented in the SAP Concur software before the costs are recorded in
the accounting system (Abila).
Such review and approval for payroll-related expenditures occur via and
are documented via a combination of methods, also before they are
recorded in Abila.
Employees report their time, including how much time was
devoted to grant activities, in the ExponentHR payroll system,
and their supervisors approve both the time and the allocation in
that system.
Programmatic measures that also support grant billing ("units")
are calculated from activity documented in the athenaOne
electronic health record (EHR).
Payroll allocation is calculated by one person, based on the
ExponentHR documentation and the units, then reviewed and
imported into Abila by a second person. The unposted
transactions are reviewed again before posting.
Utilize System-Based Controls – In place as above.
_________________________________________________________
Finding number: 2023-006 Significant Deficiency in Internal Control Over Compliance:
Allowable Costs and Activities
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914
Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917
Federal Program #2 HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Name of pass-through
entity:
Multiple
Repeat finding: No
Criteria: 2 CFR §200.405 requires that costs be allocable to the federal program based on
relative benefits received and be supported by appropriate documentation.
For personnel costs, 2 CFR §200.430(i) requires that compensation for
employees whose time is charged to federal awards be based on records that
accurately reflect the work performed, such as time and effort reporting or
equivalent documentation. For shared costs, 2 CFR §200.412-200.414 requires
that cost allocations be based on documented methodologies that are reasonable
and supported by underlying calculations.
Condition: The Organization does not have formalized internal controls to support the
rationale for allocation of shared costs and employee time across federal
programs. Specifically:
Time and effort is being tracked and maintained by employees, including
hours charged to the specific efforts for the programs. Often, employees
charge hours to specific programs in excess of amounts allocated to the
program as expenditures. The specific amount of employee salaries and
wages that are allocated to specific federal programs for reimbursement, and
which are less than the amounts reflected in the time and effort records, are
determined by members of the finance staff. The rationale for the amount
actually allocated for reimbursement, if less than the amount reflected in the
time and effort records, is not documented.
Review and approval of the allocation of employee compensation to specific
federal programs reimbursement requests is not maintained.
Cause: The deficiency exists because the Organization has not implemented a structured
process for documenting the extent to which allowable compensation costs will
be allocated for reimbursement to specific federal programs in instances where
the allowable compensation cost exceeds the amount allocated for
reimbursement.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Possible effect: The absence of documented allocation methodologies in instances where
allowable compensation costs exceed the amount allocated for reimbursement
increases the risk that:
Costs may be improperly allocated between federal programs, resulting in
potential noncompliance with federal cost principles.
Federal expenditures may be misstated, impacting financial and grant
reporting.
Although questioned costs were not identified, the lack of specific supporting
documentation and controls represents a significant deficiency in internal control
over compliance.
Questioned cost: None identified at this time.
Recommendation: We recommend that the Organization implement the following corrective
actions:
1. Develop and Implement a Written Cost Allocation Policy – Establish a
formal policy outlining the methodology for allocating shared costs and
personnel time across programs, especially in instances where allowable
costs exceed amounts allocated for reimbursement, ensuring compliance
with 2 CFR Part 200 cost principles.
2. Document Allocation Methodologies for Shared Costs – Ensure that
allocations for shared costs (e.g., rent, utilities, and administrative expenses)
are based on a reasonable and documented methodology that can be
reviewed and reperformed.
3. Retain Evidence of Implementation of Internal Controls - Implement review
and approval controls over all requests for reimbursement, including review
and approval of allocation of personnel and shared costs to specific funding
sources. In circumstances where costs can be appropriately allocated to
multiple funding sources, document the rationale for allocating the specific
amount to each funding source.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management respectfully disagrees with this Finding.
Under Condition, the finding states, “Time and effort is being tracked and
maintained by employees, including hours charged to the specific efforts for the
programs.…” This is not accurate. Employees report their time worked each
day, including the amount of time they worked on different projects if
applicable. Employees report this in our commercial HRIS/Payroll system,
where it is maintained and where it is reviewed and approved by the employee’s
manager. The employees report the time they worked and which project(s) they
worked on, their managers review and approve the time and the distribution, and
the data is tracked and maintained in our HRIS/Payroll system (ExponentHR).
Also under Condition, the finding states, “The specific amount of employee
salaries and wages that are allocated to specific federal programs for
reimbursement, and which are less than the amounts reflected in time and effort
records, are determined by members of the finance staff.” It is correct that we
would have to invoice sponsors for less than the total cost of an employee’s
allocated time and effort if a sponsor’s budget is not sufficient to cover that full
amount. This is the correct procedure to follow. Employees correctly continue
documenting their hours worked on a specific project even if the budget is
expended and the accounting staff can no longer bill the sponsor. If a particular
grant does not have sufficient sponsor funds, then the Grants Accounting staff
reduce the bill accordingly.
Also under Condition, the finding states, “The rationale for the amount actually
allocated for reimbursement, if less than the amount reflected in time and effort
records, is not documented”. This is incorrect. Our monthly invoices to each
sponsor accumulate, with each invoice clearly showing not only that month’s
expense but also the year-to-date expense and remaining balance, which forces
the sponsor invoice to stop at an amount less than the total cost of employees’
time and effort when the budget is exhausted.
Also under Condition, the finding states, “Review and approval of the allocation
of employee compensation to specific federal programs reimbursement requests
is not maintained.” Each employee records their hours worked, and the
project(s) on which they worked those hours, in our HRIS/Payroll system. The
employee’s manager reviews and approves both the hours worked and the
projects on which the hours were worked. This review and approval is
maintained in our HRIS/Payroll system. Financial staff calculate the amount to
allocate to specific federal programs based on these HRIS/Payroll system records
(or other records such as clinical units produced, based on the terms of each
grant). Separate accounting staff review the sponsor invoice and post the
Receivable once they deem the invoice correct.
Under Cause, the finding states, “…..the Organization has not implemented a
structured process for documenting the extent to which allowable [emphasis
added] compensation costs will be allocated for reimbursement to specific
federal programs in instances where the allowable compensation cost exceeds
the amount allocated for reimbursement.” This means that we do not have a
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
process for documenting how much of a payroll expense already deemed
allowable on a particular grant will actually be invoiced there. We disagree and
believe that the presence and documentation of a limited sponsor budget, along
with cumulative tracking and documentation of compensation expenses against
that budget, proves and documents why sometimes full compensation costs are
not charged to a grant.
Under Possible Effect, the finding addresses possible effects of “the absence of
documented allocation methodologies.” We don’t agree that our process could
lead to improper allocation between federal programs (as the finding states) nor
to misstating federal expenditures (as the finding states). When a sponsor’s
budget is insufficient to cover its appropriately allocated compensation costs,
those costs are paid from unrestricted, non-federal funds. As also noted in the
finding, no questioned costs were identified.
Finding number: 2023-004 – Material Weakness in Internal Control Over Preparation,
Reconciliation, and Retention of the Schedule of Expenditures of Federal
Awards (SEFA)
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number: 93.914
Federal Program #2 HIV Care Formula Grants): CFDA Number: 93.917
Federal Program #3: HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
Name of pass-through
entity:
Multiple
Repeat finding: No
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Criteria: Under 2 CFR §200.510(b), recipients of federal funds are required to prepare a
Schedule of Expenditures of Federal Awards (SEFA) that fairly presents federal
expenditures for each grant program and is derived from and supported by the
entity's accounting records. Additionally, 2 CFR §200.302 requires that financial
management systems adequately identify and account for federal awards to
ensure accuracy and compliance with applicable federal requirements. Best
practices dictate that federal expenditures should be reconciled regularly to the
general ledger, and supporting documentation should be maintained to
substantiate amounts reported on the SEFA.
Condition: The Organization lacked adequate controls over the preparation, reconciliation,
and retention of records related to the SEFA. Specifically:
The SEFA incorrectly reported certain federal awards as non-federal awards.
The SEFA is prepared based on amounts requested for reimbursement
instead of directly based on expenditures incurred.
Reconciliation schedules that tied SEFA expenditures directly back to the
expenses recorded in the general ledger could not be located.
Expenses recorded in the general ledger represent expenses incurred to
operate the program in addition to direct grant expenditures; the
Organization only requests reimbursement for direct program expenditures
allowable under the program.
Documentation of Excel-based reconciliations did not agree to reported
monthly expenditures, indicating manual reclassification entries between
program codes that were not clearly supported.
Cause: The deficiencies noted were primarily due to:
Lack of system controls to ensure that state and federal expenditures were
separately tracked from non-grant funds spent within the same source codes.
Turnover in grants management personnel, which resulted in missing,
incomplete, or inaccurate reconciling records.
Possible effect: Without a complete and accurate SEFA, the Organization risks noncompliance
with Uniform Guidance reporting requirements, which could impact its ability to
receive and administer federal funds in the future. Additionally, inaccurate
SEFA reporting increases the risk of errors in administering funds, questioned
costs, and over or under expenditure of grants.
Questioned cost: None identified at this time.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Recommendation: We recommend that the Organization implement the following measures to
improve SEFA preparation and record retention:
1. Develop a Standardized SEFA Reconciliation Process – Implement formal
policies and procedures requiring that SEFA expenditures be reconciled to
the general ledger on a monthly basis, with documentation maintained for
audit purposes.
2. Enhance System Controls for Grant Expenditures – Modify the financial
system to allow for the proper segregation of state and federal expenditures
from non-grant funds, ensuring that expenditures are properly classified at
the time of entry.
3. Require Monthly Documentation Reviews – Establish a control requiring
management to review and approve SEFA reconciliation schedules on a
monthly or quarterly basis to ensure accuracy and completeness.
4. Implement a Centralized Documentation Retention Policy – Require that all
SEFA-related reconciliation records, including general ledger tie-outs and
manual adjustments, be retained in a centralized, accessible location.
5. Provide Grants Management Training – Conduct training for grants
management and accounting personnel on SEFA preparation requirements,
including Uniform Guidance compliance and best practices for
documentation and reconciliation.
6. By implementing these measures, the Organization can improve its internal
controls over SEFA preparation, ensure compliance with Uniform Guidance,
and reduce the risk of reporting inaccuracies.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management partially agrees with the finding. While we acknowledge that
documentation supporting SEFA reconciliation was incomplete, we believe that
federal expenditures were properly accounted for. We would like to address
some of the auditors' points individually:
"The SEFA is prepared based on amounts requested for reimbursement instead
of directly based on expenditures incurred." Most grant awards do not fully fund
the programs they support, most grant awards do not run concurrently with Prism
Health North Texas' fiscal year (i.e., with the Calendar Year), and most grant
awards are not spent in equal monthly amounts. It is correct that the 2023 SEFA
was based on grant-appropriate expenditures that occurred during Calendar Year
2023 and were submitted to those grant sponsors for reimbursement. This will
not necessarily reach the full cost to Prism for each grant-supported program, nor
is it likely to exactly match any annual grant award amount.
"Expenses recorded in the general ledger represent expenses incurred to operate
the program in addition to direct grant expenditures; the Organization only
requests reimbursement for direct program expenditures allowable under the
program." As we confirmed verbally with the audit partner on April 25, 2025,
this statement is intended to provide information and context and is not a
criticism or intended to point out any problem. As stated above, most grant
awards do not fully fund the programs they support; therefore, the general ledger
necessarily includes both expenses the sponsor will reimburse and expenses the
sponsor will not reimburse.
Nonetheless, we are enhancing our reconciliation procedures and documentation
practices to fully meet audit requirements. Finding 2023-004 refers to the
auditors' assessment of the SEFA preparation and reconciliation processes that
occurred in Calendar Year 2023. As of this writing, Prism Health North Texas
has already changed its SEFA preparation and reconciliation processes and
meets many of the recommendations above.
Action Taken:
Documentation Retention – On April 25, 2025, management created a structured
and easily accessible system for storing all relevant information for all grants
management personnel.
A logical naming system for files identifying the SEFA period, the
funding agency and identified general ledger expenditures claimed on
the SEFA.
We are now documenting the difference between all GL transactions and
those submitted for sponsor reimbursement (i.e., SEFA
components) in a single document per fund code, arranged by
fiscal year. Previously this documentation was kept by invoice and
arranged by grant year.
Management will continue to ensure all expenditure-related support,
such as invoices and purchase orders, is saved electronically to all
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
financial transactions.
SEFA Reconciliation – Management has decided to move from an annual to
quarterly SEFA reconciliation process to enhance the frequency of management
oversight in SEFA draft preparation. VP of Finance will prepare the SEFA for
independent review by the CFO. This will be put into a written
policy/procedure.
System Enhancements – Prism's current accounting system does not
accommodate this. However, Prism is already in the later stages of selecting a
new Enterprise Resource Planning (ERP) solution, with this as one of our key
selection criteria. Our new ERP should allow for expenditures within the same
cost center to be identified as grant-reimbursable or non-grant-reimbursable at
the time of entry. We have identified opportunities in new financial
management software solutions that we are scheduled to demo May 12th and the
16th of 2025. Opportunities such as:
The ability to tag grant-reimbursable transactions, to segment our award
cost center into two important categories.
The full cost to manage a specific program.
Identified cost claimed on the SEFA.
Dedicated grant modules that will allow us to establish business rules
and workflows to streamline and digitize critical aspects of grant
management.
Staff Engagement – Cross department coordination meetings occur monthly
between the Finance organization and the Grants Management team to continue
to foster alignment and collaboration in our grant cycles. A general overview of
SEFA, including how to prepare and organize the monthly reconciliations, has
already occurred with some of the grants accountants.
_________________________________________________________
Finding number: 2023-005 Significant Deficiency in Internal Control Over Compliance:
Allowable Costs and Activities
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914
Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917
Federal Program #3 HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
Name of pass-through
entity:
Multiple
Repeat finding: No
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Criteria: Under 2 CFR §200.303, recipients of federal funds must establish and maintain
effective internal controls to ensure compliance with federal statutes,
regulations, and the terms of grant agreements. 2 CFR §200.403 specifies that
costs charged to federal programs must be allowable, necessary, reasonable, and
allocable to the respective award. Additionally, 2 CFR §200.302 requires
financial management systems to provide effective control and accountability
over federal funds, including documented approval of expenditures.
A best practice for grant compliance is to implement a documented approval
process for expenditures charged to federal programs, ensuring that all costs are
reviewed and supported by adequate documentation before reimbursement
requests are submitted.
Condition: The Organization did not have readily-available documented evidence of review
and approval for expenditures charged to federal grants during the fiscal year.
Specifically:
The financial system did not capture or document approval of expenditures
before they were charged to federal programs.
No formalized system existed to retain evidence of grant-related expenditure
reviews.
While the prior Chief Financial Officer (CFO) manually reviewed each
invoice, there was no indication of approval on the supporting
documentation, making it impossible to verify that an appropriate review
occurred before costs were charged to the grants.
Cause: The issue arose due to the Organization's reliance on a manual review process
conducted by the previous CFO, without requiring a formal approval signature or
electronic system control to document review. This lack of a structured approval
process resulted in insufficient evidence to support compliance with federal
allowable cost requirements.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Possible effect: Without a documented approval process, the Organization cannot demonstrate
that expenditures charged to the grants were properly reviewed for allowability,
reasonableness, and allocability in accordance with federal regulations. This
increases the risk that:
Unallowable or misclassified expenditures could be charged to the grants
without detection.
Noncompliance with federal grant requirements could result in questioned
costs or additional oversight from funding agencies.
Financial statement and grant reporting inaccuracies may occur if
expenditures are not properly reviewed and approved.
Although no specific unallowable costs were identified during the audit, the lack
of documented review represents a significant deficiency in internal control over
compliance.
Questioned cost: None identified at this time.
Recommendation: We recommend that the Organization strengthen its internal controls over grant
expenditures by implementing the following measures:
1. Implement a Formal Expenditure Review and Approval Policy – Establish a
policy requiring that all expenditures charged to grants be reviewed and
approved by an appropriate individual before being recorded in the system.
2. Require Documentation of Review and Approval – Ensure that invoices,
payroll allocations, and other cost support documents include a signature,
initials, or system-generated approval to confirm review.
3. Utilize System-Based Controls – If possible, configure the financial system
to require electronic approval for all grant-related expenditures before costs
are recorded.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management partially agrees with the finding. While we acknowledge that
documentation of expenditure approval was not always retrievable, we believe
the expenditures reviewed were all appropriate. Finding 2023-005 refers to the
auditors' assessment of expenditure review and approval processes that occurred
in Calendar Year 2023. During Calendar Year 2023, Prism relied on email
routing of expenditures for review and approval. As of this writing, Prism
Health North Texas' expenditure review and approval processes already meet or
exceed the recommendations above.
Action Taken:
Expenditure Review – All expenditures charged to grants are reviewed and
approved by two qualified individuals.
Documentation of Review and Approval –
Such review and approval for non-payroll expenditures occur in and are
documented in the SAP Concur software before the costs are recorded in
the accounting system (Abila).
Such review and approval for payroll-related expenditures occur via and
are documented via a combination of methods, also before they are
recorded in Abila.
Employees report their time, including how much time was
devoted to grant activities, in the ExponentHR payroll system,
and their supervisors approve both the time and the allocation in
that system.
Programmatic measures that also support grant billing ("units")
are calculated from activity documented in the athenaOne
electronic health record (EHR).
Payroll allocation is calculated by one person, based on the
ExponentHR documentation and the units, then reviewed and
imported into Abila by a second person. The unposted
transactions are reviewed again before posting.
Utilize System-Based Controls – In place as above.
_________________________________________________________
Finding number: 2023-006 Significant Deficiency in Internal Control Over Compliance:
Allowable Costs and Activities
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914
Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917
Federal Program #2 HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Name of pass-through
entity:
Multiple
Repeat finding: No
Criteria: 2 CFR §200.405 requires that costs be allocable to the federal program based on
relative benefits received and be supported by appropriate documentation.
For personnel costs, 2 CFR §200.430(i) requires that compensation for
employees whose time is charged to federal awards be based on records that
accurately reflect the work performed, such as time and effort reporting or
equivalent documentation. For shared costs, 2 CFR §200.412-200.414 requires
that cost allocations be based on documented methodologies that are reasonable
and supported by underlying calculations.
Condition: The Organization does not have formalized internal controls to support the
rationale for allocation of shared costs and employee time across federal
programs. Specifically:
Time and effort is being tracked and maintained by employees, including
hours charged to the specific efforts for the programs. Often, employees
charge hours to specific programs in excess of amounts allocated to the
program as expenditures. The specific amount of employee salaries and
wages that are allocated to specific federal programs for reimbursement, and
which are less than the amounts reflected in the time and effort records, are
determined by members of the finance staff. The rationale for the amount
actually allocated for reimbursement, if less than the amount reflected in the
time and effort records, is not documented.
Review and approval of the allocation of employee compensation to specific
federal programs reimbursement requests is not maintained.
Cause: The deficiency exists because the Organization has not implemented a structured
process for documenting the extent to which allowable compensation costs will
be allocated for reimbursement to specific federal programs in instances where
the allowable compensation cost exceeds the amount allocated for
reimbursement.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Possible effect: The absence of documented allocation methodologies in instances where
allowable compensation costs exceed the amount allocated for reimbursement
increases the risk that:
Costs may be improperly allocated between federal programs, resulting in
potential noncompliance with federal cost principles.
Federal expenditures may be misstated, impacting financial and grant
reporting.
Although questioned costs were not identified, the lack of specific supporting
documentation and controls represents a significant deficiency in internal control
over compliance.
Questioned cost: None identified at this time.
Recommendation: We recommend that the Organization implement the following corrective
actions:
1. Develop and Implement a Written Cost Allocation Policy – Establish a
formal policy outlining the methodology for allocating shared costs and
personnel time across programs, especially in instances where allowable
costs exceed amounts allocated for reimbursement, ensuring compliance
with 2 CFR Part 200 cost principles.
2. Document Allocation Methodologies for Shared Costs – Ensure that
allocations for shared costs (e.g., rent, utilities, and administrative expenses)
are based on a reasonable and documented methodology that can be
reviewed and reperformed.
3. Retain Evidence of Implementation of Internal Controls - Implement review
and approval controls over all requests for reimbursement, including review
and approval of allocation of personnel and shared costs to specific funding
sources. In circumstances where costs can be appropriately allocated to
multiple funding sources, document the rationale for allocating the specific
amount to each funding source.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management respectfully disagrees with this Finding.
Under Condition, the finding states, “Time and effort is being tracked and
maintained by employees, including hours charged to the specific efforts for the
programs.…” This is not accurate. Employees report their time worked each
day, including the amount of time they worked on different projects if
applicable. Employees report this in our commercial HRIS/Payroll system,
where it is maintained and where it is reviewed and approved by the employee’s
manager. The employees report the time they worked and which project(s) they
worked on, their managers review and approve the time and the distribution, and
the data is tracked and maintained in our HRIS/Payroll system (ExponentHR).
Also under Condition, the finding states, “The specific amount of employee
salaries and wages that are allocated to specific federal programs for
reimbursement, and which are less than the amounts reflected in time and effort
records, are determined by members of the finance staff.” It is correct that we
would have to invoice sponsors for less than the total cost of an employee’s
allocated time and effort if a sponsor’s budget is not sufficient to cover that full
amount. This is the correct procedure to follow. Employees correctly continue
documenting their hours worked on a specific project even if the budget is
expended and the accounting staff can no longer bill the sponsor. If a particular
grant does not have sufficient sponsor funds, then the Grants Accounting staff
reduce the bill accordingly.
Also under Condition, the finding states, “The rationale for the amount actually
allocated for reimbursement, if less than the amount reflected in time and effort
records, is not documented”. This is incorrect. Our monthly invoices to each
sponsor accumulate, with each invoice clearly showing not only that month’s
expense but also the year-to-date expense and remaining balance, which forces
the sponsor invoice to stop at an amount less than the total cost of employees’
time and effort when the budget is exhausted.
Also under Condition, the finding states, “Review and approval of the allocation
of employee compensation to specific federal programs reimbursement requests
is not maintained.” Each employee records their hours worked, and the
project(s) on which they worked those hours, in our HRIS/Payroll system. The
employee’s manager reviews and approves both the hours worked and the
projects on which the hours were worked. This review and approval is
maintained in our HRIS/Payroll system. Financial staff calculate the amount to
allocate to specific federal programs based on these HRIS/Payroll system records
(or other records such as clinical units produced, based on the terms of each
grant). Separate accounting staff review the sponsor invoice and post the
Receivable once they deem the invoice correct.
Under Cause, the finding states, “…..the Organization has not implemented a
structured process for documenting the extent to which allowable [emphasis
added] compensation costs will be allocated for reimbursement to specific
federal programs in instances where the allowable compensation cost exceeds
the amount allocated for reimbursement.” This means that we do not have a
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
process for documenting how much of a payroll expense already deemed
allowable on a particular grant will actually be invoiced there. We disagree and
believe that the presence and documentation of a limited sponsor budget, along
with cumulative tracking and documentation of compensation expenses against
that budget, proves and documents why sometimes full compensation costs are
not charged to a grant.
Under Possible Effect, the finding addresses possible effects of “the absence of
documented allocation methodologies.” We don’t agree that our process could
lead to improper allocation between federal programs (as the finding states) nor
to misstating federal expenditures (as the finding states). When a sponsor’s
budget is insufficient to cover its appropriately allocated compensation costs,
those costs are paid from unrestricted, non-federal funds. As also noted in the
finding, no questioned costs were identified.
Finding number: 2023-004 – Material Weakness in Internal Control Over Preparation,
Reconciliation, and Retention of the Schedule of Expenditures of Federal
Awards (SEFA)
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number: 93.914
Federal Program #2 HIV Care Formula Grants): CFDA Number: 93.917
Federal Program #3: HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
Name of pass-through
entity:
Multiple
Repeat finding: No
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Criteria: Under 2 CFR §200.510(b), recipients of federal funds are required to prepare a
Schedule of Expenditures of Federal Awards (SEFA) that fairly presents federal
expenditures for each grant program and is derived from and supported by the
entity's accounting records. Additionally, 2 CFR §200.302 requires that financial
management systems adequately identify and account for federal awards to
ensure accuracy and compliance with applicable federal requirements. Best
practices dictate that federal expenditures should be reconciled regularly to the
general ledger, and supporting documentation should be maintained to
substantiate amounts reported on the SEFA.
Condition: The Organization lacked adequate controls over the preparation, reconciliation,
and retention of records related to the SEFA. Specifically:
The SEFA incorrectly reported certain federal awards as non-federal awards.
The SEFA is prepared based on amounts requested for reimbursement
instead of directly based on expenditures incurred.
Reconciliation schedules that tied SEFA expenditures directly back to the
expenses recorded in the general ledger could not be located.
Expenses recorded in the general ledger represent expenses incurred to
operate the program in addition to direct grant expenditures; the
Organization only requests reimbursement for direct program expenditures
allowable under the program.
Documentation of Excel-based reconciliations did not agree to reported
monthly expenditures, indicating manual reclassification entries between
program codes that were not clearly supported.
Cause: The deficiencies noted were primarily due to:
Lack of system controls to ensure that state and federal expenditures were
separately tracked from non-grant funds spent within the same source codes.
Turnover in grants management personnel, which resulted in missing,
incomplete, or inaccurate reconciling records.
Possible effect: Without a complete and accurate SEFA, the Organization risks noncompliance
with Uniform Guidance reporting requirements, which could impact its ability to
receive and administer federal funds in the future. Additionally, inaccurate
SEFA reporting increases the risk of errors in administering funds, questioned
costs, and over or under expenditure of grants.
Questioned cost: None identified at this time.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Recommendation: We recommend that the Organization implement the following measures to
improve SEFA preparation and record retention:
1. Develop a Standardized SEFA Reconciliation Process – Implement formal
policies and procedures requiring that SEFA expenditures be reconciled to
the general ledger on a monthly basis, with documentation maintained for
audit purposes.
2. Enhance System Controls for Grant Expenditures – Modify the financial
system to allow for the proper segregation of state and federal expenditures
from non-grant funds, ensuring that expenditures are properly classified at
the time of entry.
3. Require Monthly Documentation Reviews – Establish a control requiring
management to review and approve SEFA reconciliation schedules on a
monthly or quarterly basis to ensure accuracy and completeness.
4. Implement a Centralized Documentation Retention Policy – Require that all
SEFA-related reconciliation records, including general ledger tie-outs and
manual adjustments, be retained in a centralized, accessible location.
5. Provide Grants Management Training – Conduct training for grants
management and accounting personnel on SEFA preparation requirements,
including Uniform Guidance compliance and best practices for
documentation and reconciliation.
6. By implementing these measures, the Organization can improve its internal
controls over SEFA preparation, ensure compliance with Uniform Guidance,
and reduce the risk of reporting inaccuracies.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management partially agrees with the finding. While we acknowledge that
documentation supporting SEFA reconciliation was incomplete, we believe that
federal expenditures were properly accounted for. We would like to address
some of the auditors' points individually:
"The SEFA is prepared based on amounts requested for reimbursement instead
of directly based on expenditures incurred." Most grant awards do not fully fund
the programs they support, most grant awards do not run concurrently with Prism
Health North Texas' fiscal year (i.e., with the Calendar Year), and most grant
awards are not spent in equal monthly amounts. It is correct that the 2023 SEFA
was based on grant-appropriate expenditures that occurred during Calendar Year
2023 and were submitted to those grant sponsors for reimbursement. This will
not necessarily reach the full cost to Prism for each grant-supported program, nor
is it likely to exactly match any annual grant award amount.
"Expenses recorded in the general ledger represent expenses incurred to operate
the program in addition to direct grant expenditures; the Organization only
requests reimbursement for direct program expenditures allowable under the
program." As we confirmed verbally with the audit partner on April 25, 2025,
this statement is intended to provide information and context and is not a
criticism or intended to point out any problem. As stated above, most grant
awards do not fully fund the programs they support; therefore, the general ledger
necessarily includes both expenses the sponsor will reimburse and expenses the
sponsor will not reimburse.
Nonetheless, we are enhancing our reconciliation procedures and documentation
practices to fully meet audit requirements. Finding 2023-004 refers to the
auditors' assessment of the SEFA preparation and reconciliation processes that
occurred in Calendar Year 2023. As of this writing, Prism Health North Texas
has already changed its SEFA preparation and reconciliation processes and
meets many of the recommendations above.
Action Taken:
Documentation Retention – On April 25, 2025, management created a structured
and easily accessible system for storing all relevant information for all grants
management personnel.
A logical naming system for files identifying the SEFA period, the
funding agency and identified general ledger expenditures claimed on
the SEFA.
We are now documenting the difference between all GL transactions and
those submitted for sponsor reimbursement (i.e., SEFA
components) in a single document per fund code, arranged by
fiscal year. Previously this documentation was kept by invoice and
arranged by grant year.
Management will continue to ensure all expenditure-related support,
such as invoices and purchase orders, is saved electronically to all
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
financial transactions.
SEFA Reconciliation – Management has decided to move from an annual to
quarterly SEFA reconciliation process to enhance the frequency of management
oversight in SEFA draft preparation. VP of Finance will prepare the SEFA for
independent review by the CFO. This will be put into a written
policy/procedure.
System Enhancements – Prism's current accounting system does not
accommodate this. However, Prism is already in the later stages of selecting a
new Enterprise Resource Planning (ERP) solution, with this as one of our key
selection criteria. Our new ERP should allow for expenditures within the same
cost center to be identified as grant-reimbursable or non-grant-reimbursable at
the time of entry. We have identified opportunities in new financial
management software solutions that we are scheduled to demo May 12th and the
16th of 2025. Opportunities such as:
The ability to tag grant-reimbursable transactions, to segment our award
cost center into two important categories.
The full cost to manage a specific program.
Identified cost claimed on the SEFA.
Dedicated grant modules that will allow us to establish business rules
and workflows to streamline and digitize critical aspects of grant
management.
Staff Engagement – Cross department coordination meetings occur monthly
between the Finance organization and the Grants Management team to continue
to foster alignment and collaboration in our grant cycles. A general overview of
SEFA, including how to prepare and organize the monthly reconciliations, has
already occurred with some of the grants accountants.
_________________________________________________________
Finding number: 2023-005 Significant Deficiency in Internal Control Over Compliance:
Allowable Costs and Activities
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914
Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917
Federal Program #3 HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
Name of pass-through
entity:
Multiple
Repeat finding: No
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Criteria: Under 2 CFR §200.303, recipients of federal funds must establish and maintain
effective internal controls to ensure compliance with federal statutes,
regulations, and the terms of grant agreements. 2 CFR §200.403 specifies that
costs charged to federal programs must be allowable, necessary, reasonable, and
allocable to the respective award. Additionally, 2 CFR §200.302 requires
financial management systems to provide effective control and accountability
over federal funds, including documented approval of expenditures.
A best practice for grant compliance is to implement a documented approval
process for expenditures charged to federal programs, ensuring that all costs are
reviewed and supported by adequate documentation before reimbursement
requests are submitted.
Condition: The Organization did not have readily-available documented evidence of review
and approval for expenditures charged to federal grants during the fiscal year.
Specifically:
The financial system did not capture or document approval of expenditures
before they were charged to federal programs.
No formalized system existed to retain evidence of grant-related expenditure
reviews.
While the prior Chief Financial Officer (CFO) manually reviewed each
invoice, there was no indication of approval on the supporting
documentation, making it impossible to verify that an appropriate review
occurred before costs were charged to the grants.
Cause: The issue arose due to the Organization's reliance on a manual review process
conducted by the previous CFO, without requiring a formal approval signature or
electronic system control to document review. This lack of a structured approval
process resulted in insufficient evidence to support compliance with federal
allowable cost requirements.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Possible effect: Without a documented approval process, the Organization cannot demonstrate
that expenditures charged to the grants were properly reviewed for allowability,
reasonableness, and allocability in accordance with federal regulations. This
increases the risk that:
Unallowable or misclassified expenditures could be charged to the grants
without detection.
Noncompliance with federal grant requirements could result in questioned
costs or additional oversight from funding agencies.
Financial statement and grant reporting inaccuracies may occur if
expenditures are not properly reviewed and approved.
Although no specific unallowable costs were identified during the audit, the lack
of documented review represents a significant deficiency in internal control over
compliance.
Questioned cost: None identified at this time.
Recommendation: We recommend that the Organization strengthen its internal controls over grant
expenditures by implementing the following measures:
1. Implement a Formal Expenditure Review and Approval Policy – Establish a
policy requiring that all expenditures charged to grants be reviewed and
approved by an appropriate individual before being recorded in the system.
2. Require Documentation of Review and Approval – Ensure that invoices,
payroll allocations, and other cost support documents include a signature,
initials, or system-generated approval to confirm review.
3. Utilize System-Based Controls – If possible, configure the financial system
to require electronic approval for all grant-related expenditures before costs
are recorded.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management partially agrees with the finding. While we acknowledge that
documentation of expenditure approval was not always retrievable, we believe
the expenditures reviewed were all appropriate. Finding 2023-005 refers to the
auditors' assessment of expenditure review and approval processes that occurred
in Calendar Year 2023. During Calendar Year 2023, Prism relied on email
routing of expenditures for review and approval. As of this writing, Prism
Health North Texas' expenditure review and approval processes already meet or
exceed the recommendations above.
Action Taken:
Expenditure Review – All expenditures charged to grants are reviewed and
approved by two qualified individuals.
Documentation of Review and Approval –
Such review and approval for non-payroll expenditures occur in and are
documented in the SAP Concur software before the costs are recorded in
the accounting system (Abila).
Such review and approval for payroll-related expenditures occur via and
are documented via a combination of methods, also before they are
recorded in Abila.
Employees report their time, including how much time was
devoted to grant activities, in the ExponentHR payroll system,
and their supervisors approve both the time and the allocation in
that system.
Programmatic measures that also support grant billing ("units")
are calculated from activity documented in the athenaOne
electronic health record (EHR).
Payroll allocation is calculated by one person, based on the
ExponentHR documentation and the units, then reviewed and
imported into Abila by a second person. The unposted
transactions are reviewed again before posting.
Utilize System-Based Controls – In place as above.
_________________________________________________________
Finding number: 2023-006 Significant Deficiency in Internal Control Over Compliance:
Allowable Costs and Activities
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914
Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917
Federal Program #2 HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Name of pass-through
entity:
Multiple
Repeat finding: No
Criteria: 2 CFR §200.405 requires that costs be allocable to the federal program based on
relative benefits received and be supported by appropriate documentation.
For personnel costs, 2 CFR §200.430(i) requires that compensation for
employees whose time is charged to federal awards be based on records that
accurately reflect the work performed, such as time and effort reporting or
equivalent documentation. For shared costs, 2 CFR §200.412-200.414 requires
that cost allocations be based on documented methodologies that are reasonable
and supported by underlying calculations.
Condition: The Organization does not have formalized internal controls to support the
rationale for allocation of shared costs and employee time across federal
programs. Specifically:
Time and effort is being tracked and maintained by employees, including
hours charged to the specific efforts for the programs. Often, employees
charge hours to specific programs in excess of amounts allocated to the
program as expenditures. The specific amount of employee salaries and
wages that are allocated to specific federal programs for reimbursement, and
which are less than the amounts reflected in the time and effort records, are
determined by members of the finance staff. The rationale for the amount
actually allocated for reimbursement, if less than the amount reflected in the
time and effort records, is not documented.
Review and approval of the allocation of employee compensation to specific
federal programs reimbursement requests is not maintained.
Cause: The deficiency exists because the Organization has not implemented a structured
process for documenting the extent to which allowable compensation costs will
be allocated for reimbursement to specific federal programs in instances where
the allowable compensation cost exceeds the amount allocated for
reimbursement.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Possible effect: The absence of documented allocation methodologies in instances where
allowable compensation costs exceed the amount allocated for reimbursement
increases the risk that:
Costs may be improperly allocated between federal programs, resulting in
potential noncompliance with federal cost principles.
Federal expenditures may be misstated, impacting financial and grant
reporting.
Although questioned costs were not identified, the lack of specific supporting
documentation and controls represents a significant deficiency in internal control
over compliance.
Questioned cost: None identified at this time.
Recommendation: We recommend that the Organization implement the following corrective
actions:
1. Develop and Implement a Written Cost Allocation Policy – Establish a
formal policy outlining the methodology for allocating shared costs and
personnel time across programs, especially in instances where allowable
costs exceed amounts allocated for reimbursement, ensuring compliance
with 2 CFR Part 200 cost principles.
2. Document Allocation Methodologies for Shared Costs – Ensure that
allocations for shared costs (e.g., rent, utilities, and administrative expenses)
are based on a reasonable and documented methodology that can be
reviewed and reperformed.
3. Retain Evidence of Implementation of Internal Controls - Implement review
and approval controls over all requests for reimbursement, including review
and approval of allocation of personnel and shared costs to specific funding
sources. In circumstances where costs can be appropriately allocated to
multiple funding sources, document the rationale for allocating the specific
amount to each funding source.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management respectfully disagrees with this Finding.
Under Condition, the finding states, “Time and effort is being tracked and
maintained by employees, including hours charged to the specific efforts for the
programs.…” This is not accurate. Employees report their time worked each
day, including the amount of time they worked on different projects if
applicable. Employees report this in our commercial HRIS/Payroll system,
where it is maintained and where it is reviewed and approved by the employee’s
manager. The employees report the time they worked and which project(s) they
worked on, their managers review and approve the time and the distribution, and
the data is tracked and maintained in our HRIS/Payroll system (ExponentHR).
Also under Condition, the finding states, “The specific amount of employee
salaries and wages that are allocated to specific federal programs for
reimbursement, and which are less than the amounts reflected in time and effort
records, are determined by members of the finance staff.” It is correct that we
would have to invoice sponsors for less than the total cost of an employee’s
allocated time and effort if a sponsor’s budget is not sufficient to cover that full
amount. This is the correct procedure to follow. Employees correctly continue
documenting their hours worked on a specific project even if the budget is
expended and the accounting staff can no longer bill the sponsor. If a particular
grant does not have sufficient sponsor funds, then the Grants Accounting staff
reduce the bill accordingly.
Also under Condition, the finding states, “The rationale for the amount actually
allocated for reimbursement, if less than the amount reflected in time and effort
records, is not documented”. This is incorrect. Our monthly invoices to each
sponsor accumulate, with each invoice clearly showing not only that month’s
expense but also the year-to-date expense and remaining balance, which forces
the sponsor invoice to stop at an amount less than the total cost of employees’
time and effort when the budget is exhausted.
Also under Condition, the finding states, “Review and approval of the allocation
of employee compensation to specific federal programs reimbursement requests
is not maintained.” Each employee records their hours worked, and the
project(s) on which they worked those hours, in our HRIS/Payroll system. The
employee’s manager reviews and approves both the hours worked and the
projects on which the hours were worked. This review and approval is
maintained in our HRIS/Payroll system. Financial staff calculate the amount to
allocate to specific federal programs based on these HRIS/Payroll system records
(or other records such as clinical units produced, based on the terms of each
grant). Separate accounting staff review the sponsor invoice and post the
Receivable once they deem the invoice correct.
Under Cause, the finding states, “…..the Organization has not implemented a
structured process for documenting the extent to which allowable [emphasis
added] compensation costs will be allocated for reimbursement to specific
federal programs in instances where the allowable compensation cost exceeds
the amount allocated for reimbursement.” This means that we do not have a
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
process for documenting how much of a payroll expense already deemed
allowable on a particular grant will actually be invoiced there. We disagree and
believe that the presence and documentation of a limited sponsor budget, along
with cumulative tracking and documentation of compensation expenses against
that budget, proves and documents why sometimes full compensation costs are
not charged to a grant.
Under Possible Effect, the finding addresses possible effects of “the absence of
documented allocation methodologies.” We don’t agree that our process could
lead to improper allocation between federal programs (as the finding states) nor
to misstating federal expenditures (as the finding states). When a sponsor’s
budget is insufficient to cover its appropriately allocated compensation costs,
those costs are paid from unrestricted, non-federal funds. As also noted in the
finding, no questioned costs were identified.