Audit 369997

Criteria: 2 CFR section 200.303 states in part: “The non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . .” Additionally, 31 CFR section 205.33 states in part: (a) “…the timing and amount of funds transfers must be as close as is administratively feasible.. .” Condition: An effective internal control system was not in place to ensure compliance with requirements related to the grant agreement and the Cash Management compliance requirements. Cause: The Corporation's management has not developed a system of internal controls to ensure compliance with the compliance requirements listed above. Effect: There was no formal review/approval of claim reimbursements outside of who prepares them. The failure to establish an effective internal control system places the Corporation at risk of noncompliance with the grant agreement and the compliance requirements. A lack of effective reviews could have also allowed noncompliance with the compliance requirements and allowed misuse, mismanagement, and improper period recognition of federal funds and assets. Claim reimbursements were not drawn in a timely or consistent manner. For example, claims were drawn anywhere from six- twelve months after costs were incurred or not at all. A lack of timely claim submission could result in failure to fully expend the grant within the period of performance and proper revenue recognition. Recommendation: We recommend that the Corporation establish policies and procedures to ensure that reimbursement claims prepared are reviewed and approved. The reimbursement claim should be compared to supporting documentation to ensure accuracy of the claim reimbursement form. Reimbursement claims should also be prepared and submitted timely to help ensure proper period recognition and adequate reimbursement. Views of Responsible Officials and Corrective Actions: During 2025, Hamilton County Area Neighborhood Development, Inc. (HAND) hired a controller to assist with the preparation of the parent company and subsidiaries financials while instituting improved internal control policies. As such, HAND with the assistance of its controller will establish effective internal control systems to ensure compliance with the requirements for grant agreements and cash management compliance requirements.