Cost Allocations – (Material Weakness)
Information on Federal Program:
U.S. Department of Health and Human Services
Federal Assistance Listing Number (ALN) Number: 93.676
ALN Name: Unaccompanied Alien Children Program
Contract Period: July 1, 2021 through June 30, 2022
Criteria:
In accordance with GAAP, if costs benefit multiple programs, the costs should be allocated to the programs based on the proportional benefit. Additionally, direct costs are those costs that can be identified specifically or directly assigned to such activities relatively easily with a high degree of accuracy.
Condition:
During our audit, we noted that payroll and the related personnel costs are not being charged directly or allocated to the correct cost center in the Serenic Navigator accounting system on a monthly basis. The primary cause of this issue is the way in which the Paychex payroll system was set up, where bi-weekly payroll runs are not being allocated by the system itself. In January 2022, Lincoln Hall switched from Paychex to ADP which allows for employee cost centers to be mapped. While this improved the monthly allocation process, the finance team still performs manual calculations of all allocations in Excel at the end of the fiscal year to update the allocations.
Questioned Costs:
None noted.
Context:
This is a condition identified during the audit of Lincoln Hall’s June 30, 2022 financial statements.
Effect or Potential Effect:
We were able to observe and conclude that Lincoln Hall did not have formal cost allocations in place to properly allocate certain expenses throughout the year. As a result, certain expenses could not be properly allocated throughout the year.
Repeat Finding:
This is a repeated finding from prior year. See Finding No. 2021-001 on the Summary Schedule of Prior Audit Findings.
Cause:
Certain other than personnel costs are dependent on the proper allocation of the personnel costs. The primary cause of this issue is the way in which the Paychex payroll system was set up, where bi-weekly payroll runs are not being allocated by the system itself. In January 2022, Lincoln Hall switched from Paychex to ADP which allows for employee cost centers to be mapped. While this improved the monthly allocation process, the finance team still performs manual calculations of all allocations in Excel at the end of the fiscal year to update the allocations.
Recommendation:
The inability to generate financial statements that incorporate the federal and state agency mandated cost allocations prevents Lincoln Hall from presenting functionally accurate interim financial statements. We recommend that these costs be properly allocated on a monthly basis and presented as recorded within Lincoln Hall’s general ledger system.
Allocating these costs regularly will allow Lincoln Hall to submit accurate and substantiated interim financial data to its funding sources. Additionally, properly tracking and allocating costs on a monthly basis will prevent a material reallocation of costs by function at year-end.
Views of Responsible Officials:
Lincoln Hall agrees with the finding. Lincoln Hall continues to take steps to improve this process. See Lincoln Hall's further response to this finding as described in the accompanying management’s planned corrective actions, Appendix A.
Allowable Costs; Cash Management – (Material Weakness)
Information on Federal Program:
U.S. Department of Health and Human Services
ALN Number: 93.676
ALN Name: Unaccompanied Alien Children Program
Contract Period: 07/01/2021 - 6/30/2022
Criteria:
In accordance with the Uniform Guidance §200.405, if costs benefit multiple programs, the costs should be allocated to the programs based on the proportional benefit. Per the Uniform Guidance §200.413, direct costs are those costs that can be identified specifically or directly assigned to such activities relatively easily with a high degree of accuracy. Additionally, Uniform Guidance §200.302 states that the non-federal entity’s financial management systems, including records documenting compliance with federal statutes, regulations, and the terms and conditions of the federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the federal statutes, regulations, and the terms and conditions of the federal award.
Condition:
During our audit, we noted that certain payroll expenses are not being charged directly or allocated to the correct cost center in the accounting system on a monthly basis.
Questioned Costs:
None noted.
Context:
This is a condition identified per review of Lincoln Hall’s compliance with allowable costs and cash management.
Effect or Potential Effect:
We were able to observe and conclude that Lincoln Hall did not have cost allocations in place to properly allocate expenses throughout the year.
Repeat Finding:
This is a repeated finding from prior year. See Finding No. 2021-002 on the Summary Schedule of Prior Audit Findings.
Cause:
The primary cause of this issue is the way in which the Paychex payroll system was set up, where bi-weekly payroll runs are not being allocated by the system itself. In January 2022, Lincoln Hall switched from Paychex to ADP which allows for employee cost centers to be mapped. While this improved the monthly allocation process, the finance team still performs manual calculations of all allocations in Excel at the end of the fiscal year to update the allocations. Certain other than personnel costs are dependent on the proper allocation of the personnel costs.
Recommendation:
The inability to generate financial statements that incorporate the federal and state agency mandated cost allocations prevents Lincoln Hall from presenting functionally accurate interim financial statements. We recommend that these costs be properly allocated on a monthly basis and presented as recorded within Lincoln Hall’s general ledger system.
Allocating these costs regularly will allow Lincoln Hall to submit accurate and substantiated interim financial data to its funding sources. Additionally, properly tracking and allocating costs on a monthly basis will prevent a material reallocation of costs by function at year-end.
Views of Responsible Officials:
Lincoln Hall agrees with the finding. Lincoln Hall continues to take steps to improve this process. See Lincoln Hall’s further response to this finding as described in the accompanying management’s planned corrective actions, Appendix A.
Reporting – (Material Weakness)
Information on Federal Program:
U.S. Department of Health and Human Services
ALN Number: 93.676
ALN Name: Unaccompanied Alien Children Program
Contract Period: 07/01/2021 - 6/30/2022
Criteria:
In accordance with the Uniform Guidance §200.327, providers must submit Federal Financial Report (SF-425) and Program Progress Reports (SF-PPR), for which the instructions state that quarterly and semi-annual interim reports shall be submitted no later than 30 days after the end of each reporting period, and annual reports shall be submitted no later than 90 days after the end of each reporting period. Furthermore, all fields in the SF-425 form must be filled out appropriately. Additionally, the Uniform Guidance report needs to be filed with the Federal Audit Clearinghouse within the shorter of 30 days of issuing the Uniform Guidance report or nine months after year-end.
Condition:
During our audit, we noted that two SF-PPR quarterly reports, two quarterly SF-425 reports, and the annual required financial reporting were not filed on time; certain of these reports did not follow the period reporting requirements of the grant (e.g., the October to December report requirement was reported using November to January). Further, the Uniform Guidance report was not submitted on time.
Questioned Costs:
None noted.
Context:
This is a condition identified per review of Lincoln Hall’s compliance with reporting requirements.
Effect or Potential Effect:
We were able to observe and conclude that Lincoln Hall did not comply with certain quarterly and annual reporting requirements, including using the appropriate basis of accounting.
Repeat Finding:
This is a repeated finding from prior year. See Finding No. 2021-003 on the Summary Schedule of Prior Audit Findings.
Cause:
Timing and interpretation of the filing requirements were not met.
Recommendation:
Management should submit reports timely, ensure that the reports are prepared following the period required for each report, and use the correct (accrual) basis of accounting.
Views of Responsible Officials:
Lincoln Hall agrees with the finding. Lincoln Hall continues to take steps to improve this process. See Lincoln Hall’s further response to this finding as described in the accompanying management’s planned corrective actions, Appendix A.
Activities Allowed or Unallowed; Allowable Costs/Cost Principles (Material Weakness)
Information on Federal Program:
U.S. Department of Health and Human Services
ALN Number: 93.676
ALN Name: Unaccompanied Alien Children Program
Contract Period: 07/01/2021 - 6/30/2022
Criteria:
The Uniform Guidance Section §200.403(g) states that for costs to be allowable under federal awards, they must be adequately documented, and there must be sufficient documentation.
Condition:
During our testing of personnel costs, we noted that management’s method of allocating shared costs is performed after the fiscal year ended, instead of performing timely allocations throughout the fiscal year.
Questioned Costs:
Not determinable.
Context:
This is a condition identified per our compliance testing of personnel costs.
Repeat Finding:
This is a repeated finding from prior year. See Finding No. 2021-004 on the Summary Schedule of Prior Audit Findings.
Cause:
The primary cause of this issue is the way in which the Paychex payroll system was set up, where bi-weekly payroll runs are not being allocated by the system itself. In January 2022, Lincoln Hall switched from Paychex to ADP which allows for employee cost centers to be mapped. While this improved the monthly allocation process, the finance team still performs manual calculations of all allocations in Excel at the end of the fiscal year to update the allocations.
Effect or Potential Effect:
We were unable to confirm the allowability, validity, and completeness of the expenses.
Recommendation:
The inability to generate timely financial statements that incorporate the federal and state agency mandated cost allocations prevents Lincoln Hall from presenting functionally accurate interim financial statements. We recommend that these costs be properly allocated on a monthly basis and presented as recorded within Lincoln Hall’s general ledger system. Allocating these costs regularly will allow Lincoln Hall to submit accurate and substantiated interim financial data to its funding sources. Additionally, properly tracking and allocating costs on a monthly basis will prevent a material reallocation of costs by function at year-end.
Views of Responsible Official:
Lincoln Hall agrees with the finding. Lincoln Hall continues to take steps to improve this process. See Lincoln Hall’s further response to this finding as described in the accompanying management’s planned corrective actions, Appendix A.
Cost Allocations – (Material Weakness)
Information on Federal Program:
U.S. Department of Health and Human Services
Federal Assistance Listing Number (ALN) Number: 93.676
ALN Name: Unaccompanied Alien Children Program
Contract Period: July 1, 2021 through June 30, 2022
Criteria:
In accordance with GAAP, if costs benefit multiple programs, the costs should be allocated to the programs based on the proportional benefit. Additionally, direct costs are those costs that can be identified specifically or directly assigned to such activities relatively easily with a high degree of accuracy.
Condition:
During our audit, we noted that payroll and the related personnel costs are not being charged directly or allocated to the correct cost center in the Serenic Navigator accounting system on a monthly basis. The primary cause of this issue is the way in which the Paychex payroll system was set up, where bi-weekly payroll runs are not being allocated by the system itself. In January 2022, Lincoln Hall switched from Paychex to ADP which allows for employee cost centers to be mapped. While this improved the monthly allocation process, the finance team still performs manual calculations of all allocations in Excel at the end of the fiscal year to update the allocations.
Questioned Costs:
None noted.
Context:
This is a condition identified during the audit of Lincoln Hall’s June 30, 2022 financial statements.
Effect or Potential Effect:
We were able to observe and conclude that Lincoln Hall did not have formal cost allocations in place to properly allocate certain expenses throughout the year. As a result, certain expenses could not be properly allocated throughout the year.
Repeat Finding:
This is a repeated finding from prior year. See Finding No. 2021-001 on the Summary Schedule of Prior Audit Findings.
Cause:
Certain other than personnel costs are dependent on the proper allocation of the personnel costs. The primary cause of this issue is the way in which the Paychex payroll system was set up, where bi-weekly payroll runs are not being allocated by the system itself. In January 2022, Lincoln Hall switched from Paychex to ADP which allows for employee cost centers to be mapped. While this improved the monthly allocation process, the finance team still performs manual calculations of all allocations in Excel at the end of the fiscal year to update the allocations.
Recommendation:
The inability to generate financial statements that incorporate the federal and state agency mandated cost allocations prevents Lincoln Hall from presenting functionally accurate interim financial statements. We recommend that these costs be properly allocated on a monthly basis and presented as recorded within Lincoln Hall’s general ledger system.
Allocating these costs regularly will allow Lincoln Hall to submit accurate and substantiated interim financial data to its funding sources. Additionally, properly tracking and allocating costs on a monthly basis will prevent a material reallocation of costs by function at year-end.
Views of Responsible Officials:
Lincoln Hall agrees with the finding. Lincoln Hall continues to take steps to improve this process. See Lincoln Hall's further response to this finding as described in the accompanying management’s planned corrective actions, Appendix A.
Allowable Costs; Cash Management – (Material Weakness)
Information on Federal Program:
U.S. Department of Health and Human Services
ALN Number: 93.676
ALN Name: Unaccompanied Alien Children Program
Contract Period: 07/01/2021 - 6/30/2022
Criteria:
In accordance with the Uniform Guidance §200.405, if costs benefit multiple programs, the costs should be allocated to the programs based on the proportional benefit. Per the Uniform Guidance §200.413, direct costs are those costs that can be identified specifically or directly assigned to such activities relatively easily with a high degree of accuracy. Additionally, Uniform Guidance §200.302 states that the non-federal entity’s financial management systems, including records documenting compliance with federal statutes, regulations, and the terms and conditions of the federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the federal statutes, regulations, and the terms and conditions of the federal award.
Condition:
During our audit, we noted that certain payroll expenses are not being charged directly or allocated to the correct cost center in the accounting system on a monthly basis.
Questioned Costs:
None noted.
Context:
This is a condition identified per review of Lincoln Hall’s compliance with allowable costs and cash management.
Effect or Potential Effect:
We were able to observe and conclude that Lincoln Hall did not have cost allocations in place to properly allocate expenses throughout the year.
Repeat Finding:
This is a repeated finding from prior year. See Finding No. 2021-002 on the Summary Schedule of Prior Audit Findings.
Cause:
The primary cause of this issue is the way in which the Paychex payroll system was set up, where bi-weekly payroll runs are not being allocated by the system itself. In January 2022, Lincoln Hall switched from Paychex to ADP which allows for employee cost centers to be mapped. While this improved the monthly allocation process, the finance team still performs manual calculations of all allocations in Excel at the end of the fiscal year to update the allocations. Certain other than personnel costs are dependent on the proper allocation of the personnel costs.
Recommendation:
The inability to generate financial statements that incorporate the federal and state agency mandated cost allocations prevents Lincoln Hall from presenting functionally accurate interim financial statements. We recommend that these costs be properly allocated on a monthly basis and presented as recorded within Lincoln Hall’s general ledger system.
Allocating these costs regularly will allow Lincoln Hall to submit accurate and substantiated interim financial data to its funding sources. Additionally, properly tracking and allocating costs on a monthly basis will prevent a material reallocation of costs by function at year-end.
Views of Responsible Officials:
Lincoln Hall agrees with the finding. Lincoln Hall continues to take steps to improve this process. See Lincoln Hall’s further response to this finding as described in the accompanying management’s planned corrective actions, Appendix A.
Reporting – (Material Weakness)
Information on Federal Program:
U.S. Department of Health and Human Services
ALN Number: 93.676
ALN Name: Unaccompanied Alien Children Program
Contract Period: 07/01/2021 - 6/30/2022
Criteria:
In accordance with the Uniform Guidance §200.327, providers must submit Federal Financial Report (SF-425) and Program Progress Reports (SF-PPR), for which the instructions state that quarterly and semi-annual interim reports shall be submitted no later than 30 days after the end of each reporting period, and annual reports shall be submitted no later than 90 days after the end of each reporting period. Furthermore, all fields in the SF-425 form must be filled out appropriately. Additionally, the Uniform Guidance report needs to be filed with the Federal Audit Clearinghouse within the shorter of 30 days of issuing the Uniform Guidance report or nine months after year-end.
Condition:
During our audit, we noted that two SF-PPR quarterly reports, two quarterly SF-425 reports, and the annual required financial reporting were not filed on time; certain of these reports did not follow the period reporting requirements of the grant (e.g., the October to December report requirement was reported using November to January). Further, the Uniform Guidance report was not submitted on time.
Questioned Costs:
None noted.
Context:
This is a condition identified per review of Lincoln Hall’s compliance with reporting requirements.
Effect or Potential Effect:
We were able to observe and conclude that Lincoln Hall did not comply with certain quarterly and annual reporting requirements, including using the appropriate basis of accounting.
Repeat Finding:
This is a repeated finding from prior year. See Finding No. 2021-003 on the Summary Schedule of Prior Audit Findings.
Cause:
Timing and interpretation of the filing requirements were not met.
Recommendation:
Management should submit reports timely, ensure that the reports are prepared following the period required for each report, and use the correct (accrual) basis of accounting.
Views of Responsible Officials:
Lincoln Hall agrees with the finding. Lincoln Hall continues to take steps to improve this process. See Lincoln Hall’s further response to this finding as described in the accompanying management’s planned corrective actions, Appendix A.
Activities Allowed or Unallowed; Allowable Costs/Cost Principles (Material Weakness)
Information on Federal Program:
U.S. Department of Health and Human Services
ALN Number: 93.676
ALN Name: Unaccompanied Alien Children Program
Contract Period: 07/01/2021 - 6/30/2022
Criteria:
The Uniform Guidance Section §200.403(g) states that for costs to be allowable under federal awards, they must be adequately documented, and there must be sufficient documentation.
Condition:
During our testing of personnel costs, we noted that management’s method of allocating shared costs is performed after the fiscal year ended, instead of performing timely allocations throughout the fiscal year.
Questioned Costs:
Not determinable.
Context:
This is a condition identified per our compliance testing of personnel costs.
Repeat Finding:
This is a repeated finding from prior year. See Finding No. 2021-004 on the Summary Schedule of Prior Audit Findings.
Cause:
The primary cause of this issue is the way in which the Paychex payroll system was set up, where bi-weekly payroll runs are not being allocated by the system itself. In January 2022, Lincoln Hall switched from Paychex to ADP which allows for employee cost centers to be mapped. While this improved the monthly allocation process, the finance team still performs manual calculations of all allocations in Excel at the end of the fiscal year to update the allocations.
Effect or Potential Effect:
We were unable to confirm the allowability, validity, and completeness of the expenses.
Recommendation:
The inability to generate timely financial statements that incorporate the federal and state agency mandated cost allocations prevents Lincoln Hall from presenting functionally accurate interim financial statements. We recommend that these costs be properly allocated on a monthly basis and presented as recorded within Lincoln Hall’s general ledger system. Allocating these costs regularly will allow Lincoln Hall to submit accurate and substantiated interim financial data to its funding sources. Additionally, properly tracking and allocating costs on a monthly basis will prevent a material reallocation of costs by function at year-end.
Views of Responsible Official:
Lincoln Hall agrees with the finding. Lincoln Hall continues to take steps to improve this process. See Lincoln Hall’s further response to this finding as described in the accompanying management’s planned corrective actions, Appendix A.