Audit 384680

Internal Control over Compliance Significant Deficiency Federal Grantor: U.S. Department of Health and Human Services Federal Program: Centers for Independent Living Assistance Listing Number: 93.432 Criteria: 2 CFR 200.303 (Uniform Guidance) – Internal Controls is the regulation that requires Federal entities receiving Federal awards to establish and maintain effective internal controls over those awards to ensure compliance with Federal statutes, regulations, and the award terms. These controls must include processes to monitor compliance, take prompt action on non-compliance, and safeguard sensitive information. Condition and Context: Internal controls designed relating to the major program’s direct and material compliance requirements were not operating effectively. Cause: Management was not following the Organization’s approved control activities for federal awards. Effect: Without effective internal controls, material non-compliance due to error or fraud could occur and not be detected. Questioned Costs: None. Context: We tested internal control over compliance for the direct and material compliance requirements of the Organization’s major program.Recommendation: We recommend management review and reinforce the Organization’s established control activities related to federal awards. This should include comprehensive training for staff involved in federal program administration, regular monitoring to ensure controls are consistently applied, and periodic internal audits to assess the effectiveness of compliance systems. We also recommend documenting all significant control activities and monitoring procedures, including review and approval, for future audit purposes. By strengthening adherence to approved control activities, the Organization will reduce the risk of potential non-compliance with federal requirements. Views of Responsible Official: Immediate Control Reinforcement and Staff Training - The Executive Director and the Program Manager have already started identifying specific areas of each contract and grant for federal awards. The Executive Director will call a meeting between all managers to go over each contract and grants together with information that has already been reviewed. It will be important to observe specific instances when controls were created, and documentation was not accurate. Staff will be trained regarding the agency budget, and each role and responsibility of their program to better understand how their service delivery affects organizational funding. Monthly monitoring of grant funding from all managers will be important for transparency and prudent decision making. All managers will receive frequent training to keep up with any changes or new processes that will impact federal funding. Monitoring and Periodic Internal Auditing - The Executive Director, Program Manager, and Finance manager will meet every month before the Finance Committee meeting to go over the progression of spending. The Executive Director and Finance Manager will keep record of all information that will be helpful for the next audit regarding federal grants. Written corrective action plans will be created for each area of noncompliance. Finance Manager will be responsible for maintaining accurate budget updates and will inform Executive Director of any updates and changes as soon as they happen to ensure full transparency and preparation. Failure to do so will result in disciplinary consequences. All information will be presented to the Board of Directors whether at the monthly Board meeting or at the request for a special meeting. Documentation and Formalization - The Executive Director will meet with the Finance Manager to understand what process is used for quality assurance and documentation the finance staff uses. Any improvements necessary will be implemented as soon as possible after evaluating all processes. An evaluation of the software used for tracking all grant funding will be done and any quality assurance improvements will be implemented as soon as possible. Federal grants compliance adherence will be included in performance reviews and documented.