Finding Number 2021-001 (Material Weakness) Material Adjustments to Financial Statements Statement of Condition: Material adjustments were necessary to reconcile various accounts, including receivables, property, plant and equipment, intercompany accounts, accrued expenses, grant revenue and expenses to underlying documentation. In addition, several revenue items were not posted in the proper period. Questioned Costs: None Criteria: Management is responsible for establishing and maintaining internal controls to ensure the fair presentation of the financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP). Cause: During the year under audit and in subsequent years, there was sustained turnover and shortage in all levels of the finance department, leading to conflicting priorities and procedures, a lack of reconciliations, and a growing backlog of transaction processing. Effect: Client prepared accounting records were not properly presented in accordance with GAAP. Recommendation: We recommend that all statement of financial position items be reviewed at year end and adjustments properly recorded in the financial management system prior to the audit. Timely reconciliations should be performed by qualified personnel and reviewed by management for accuracy. We also recommend efforts be made to increase staffing and provide adequate training to the finance department staff.
Finding Number 2021-002 (Compliance Finding and Material Weakness) Late Filing of Uniform Guidance Audit Statement of Condition: The Organization did not comply with Uniform Guidance reporting requirements. Questioned Costs: None Criteria: Uniform Guidance requires entities to electronically file the required data collection form within nine months of year-end. Cause: Sustained shortage and turnover of staffing within the finance department. Effect: The Organization will not qualify as a low risk entity for federal single audit filing and could potentially lose future federal funding. Recommendation: We recommend that all accounts be reviewed at year end and adjustments properly recorded in the financial management system prior to the audit. We also recommend efforts be made to increase staffing and provide adequate training to the finance department staff as well as to timely file all Federal Clearing House required reports.
Finding Number 2021-003 Internal Controls over Allowable Costs/Cost Principles Activities, U.S. Department of Housing and Urban Development, Passed Through Arizona Department of Economic Security, Aging Cluster, ALN 93.044/93.045/93.053, July 1, 2020 through June 30, 2021 (Significant Deficiency). Statement of Condition: For nine selections of thirteen tested, the sign-in sheets for meals billed for reimbursement were not reviewed by PCOA personnel. Questioned Costs: None Criteria: The Organization must comply with allowable costs/cost principle compliance standards as set by the U.S. Department of Health and Human Services. Controls over client sign-in sheets maintained by service providers related to meals billed for reimbursement are inadequate to ensure accurate and complete reporting to the Arizona Department of Economic Security. Cause: The Organization’s personnel were not reviewing client sign-in sheets maintained by service providers that support meals billed for reimbursement. Effect: The Organization may bill the Arizona Department of Economic Security for more meals than were served. Recommendation: We recommend a process of review of sign-in sheets for meals served be consistently implemented.
Finding Number 2021-004 Internal Controls and Compliance over Allowable Costs/Cost Principles Activities, U.S. Department of Housing and Urban Development, Passed Through Arizona Department of Economic Security, Aging Cluster, ALN 93.044/93.045/93.053, July 1, 2020 through June 30, 2021 (Significant Deficiency). Statement of Condition: Employee time charged to programs, federally funded and non-federally funded, was not tracked. Questioned Costs: Unknown Criteria: Federal requirements call for charges for salaries and wages to be based upon records that accurately reflect the actual work performed and be supported by a system of internal controls that reasonably assure that the charges are accurate, allowable, and properly allocated. The records should support the distribution of the employee’s salary or wages among the specific activities (grants) charged. Cause: The Organization’s does not have an adequate time and effort policy. Effect: Salary and wage allocations may not be accurate on salary and wage costs charged to specific grants. While there is an allocation done by management for each employee, which appears reasonable, the Organization has not maintained records of time and effort in accordance with applicable cost principles. Recommendation: We recommend that the Organization’s time and effort policy be implemented in order to comply with applicable cost principles. Charges for salaries and wages must be supported by records indicating the total number of hours worked each day, with a breakdown by specific program. These should be signed by the employee and other responsible individual with knowledge of the employee’s activity. These should then be reviewed and reconciled with the budget by grant.
Finding Number 2021-005 Internal Controls over Allowable Costs/Cost Principles Activities, U.S. Department of Housing and Urban Development, Passed Through Arizona Department of Economic Security, Aging Cluster, ALN 93.044/93.045/93.053, July 1, 2020 through June 30, 2021 (Significant Deficiency). Statement of Condition: Six payroll registers of eight tested did not show evidence of approval by the Chief Financial Officer. Questioned Costs: None Criteria: The Organization must comply with allowable costs/cost principle compliance standards as set by the U.S. Department of Health and Human Services. Controls over payroll were not followed adequately to ensure accurate and complete payroll expense. Cause: The Organization’s controls over payroll were not followed. Effect: Payroll expense charged to the Aging Cluster programs may not be accurate. Recommendation: We recommend that the Organization more closely follow its controls over payroll expenses.
Finding Number 2021-006 Internal Controls over Allowable Costs/Cost Principles Activities, U.S. Department of Housing and Urban Development, Passed Through Arizona Department of Economic Security, Aging Cluster, ALN 93.044/93.045/93.053, July 1, 2020 through June 30, 2021 (Significant Deficiency). Statement of Condition: Two personnel action notices were unable to be located by the Organization, and one personnel action notice did not match an employee’s pay rate per the payroll register. Questioned Costs: None Criteria: The Organization must comply with allowable costs/cost principle compliance standards as set by the U.S. Department of Health and Human Services. Controls over payroll were not followed adequately to ensure accurate and complete payroll expense. Cause: The Organization’s controls over pay rate changes were not followed. Effect: Payroll expense charged to the Aging Cluster programs may not be accurate. Recommendation: We recommend that the Organization more closely follow its controls over pay rate changes.
Finding Number 2021-007 Internal Controls over Allowable Costs/Cost Principles Activities, U.S. Department of Housing and Urban Development, Passed Through Arizona Department of Economic Security, Aging Cluster, ALN 93.044/93.045/93.053, July 1, 2020 through June 30, 2021 (Significant Deficiency). Statement of Condition: Forty reimbursement requests of forty tested did not show indication of review before submission to Arizona Department of Economic Security Questioned Costs: None Criteria: The Organization must comply with allowable costs/cost principle compliance standards as set by the U.S. Department of Health and Human Services. Controls over reimbursement request submissions were not followed adequately to ensure accurate and complete cost reimbursement requests. Cause: The Organization’s controls over reimbursement request submissions were not followed. Effect: Expenses charged to the Aging Cluster programs may not be accurate. Recommendation: We recommend that the Organization more closely follow its controls over reimbursement requests.
Finding Number 2021-008 Internal Controls and Compliance over Reporting, U.S. Department of Housing and Urban Development, Passed Through Arizona Department of Economic Security, Aging Cluster, ALN 93.044/93.045/93.053, July 1, 2020 through June 30, 2021 (Material Weakness). Statement of Condition: All reports required by the United States Department of Health and Human Services were not completed and submitted. Questioned Costs: None Criteria: The Organization must comply with reporting compliance standards as set forth by the U.S. Department of Health and Human Services. Controls over the Organization’s billing process were not followed. Cause: The Organization’s personnel were unaware of the reporting requirements. Effect: The Organization is not in compliance with the Aging Cluster reporting requirements. Recommendation: We recommend that the Organization create and implement controls over reporting requirements for its grants. We also recommend that all program staff receive proper training on program compliance matters.
Finding Number 2021-009 Internal Controls, U.S. Department of Housing and Urban Development, Passed Through Arizona Department of Economic Security, Aging Cluster, Aging Cluster, ALN 93.044/93.045/93.053, July 1, 2020 through June 30, 2021 (Material Weakness). Statement of Condition: The Organization does not have a control requiring internal review with signature approval of the Schedule of Expenditures of Federal Awards before submitting to external auditors. Questioned Costs: None Criteria: There was no internal review with signature approval of the Schedule of Expenditures of Federal Awards at the Organization before submitting to external auditors. Cause: The Organization did not have adequate controls in place ensuring the Schedule of Expenditures of Federal Awards was reviewed internally with signature approval to ensure accuracy before submitting to external auditors. Effect: Amounts on the Schedule of Expenditures of Federal Awards could be incorrect, or federal expenditures could be missing from the schedule. Recommendation: We recommend the Organization create and implement controls to ensure the Schedule of Expenditures of Federal Awards is reviewed internally with signature approval before submitting to external auditors.