Audit 389324

Allowable Costs/Cost Principles Federal agency: U.S. Department of Health and Human Services Federal program title: Social Services Block Grant Assistance Listing Numbers: 93.667 Award Period: January 1, 2024 – June 30, 2027 Type of Finding: • Material Weakness in Internal Control over Compliance • Material Noncompliance (Modified Opinion) Criteria: Per 2 CFR §200.405 and §200.430, costs must be allocable to a particular federal award in proportion to the benefits received, and payroll charges must be supported by underlying records that accurately reflect the work performed. Condition: During testing of payroll and other expense transactions, it was noted that the Organization does not have an appropriate or reasonable cost allocation plan. Nonpayroll related costs are not material to the grant, but if a cost required allocation among various grants, the proper methodology is not in place to ensure that happens. In addition, no contemporaneous time records or supporting allocation documentation were maintained to substantiate the payroll expenditures charged to the grant. Questioned costs: No questioned costs Context: The Organization charged costs based upon the budget, rather than in proportion to the benefits received to the programs. While costs in excess of this grant award were incurred for this program during the year, the proper controls are not in place to ensure compliance with federal regulations. Cause: Staff were not trained in the requirement to maintain accurate time and effort documentation. Effect: Due to the lack of supporting documentation, there is a risk that federal programs were charged for costs that did not directly benefit them, which could ultimately lead to potential questioned costs and repayments obligations. Repeat Finding: No Recommendation: If management were to allocate costs to various programs benefited, we recommend that they update and revise the cost allocation plan annually to reflect actual program usage including the board of directors approval. They should implement a time and effort reporting system for all shared staff and provide training to ensure compliance with federal requirements. This should include proper review and approval of all costs, explicitly documented. Views of Responsible Officials: Management agrees with the finding.

Segregation of Duties in Financial Reporting Federal agency: U.S. Department of Health and Human Services Federal program title: Social Services Block Grant Assistance Listing Numbers: 93.667 Award Period: January 1, 2024 – June 30, 2027 Type of Finding: • Material Weakness in Internal Control over Compliance Criteria: Best practices and internal control frameworks (ie, COSO) require segregation of duties to ensure that no one individual has control over all aspects of a financial transaction. This reduces the risk of error or fraud going undetected. Condition: During testing of both the annual financial report and the programmatic reports, it was identified that there is no segregation of duties between the individuals preparing the reports and those reviewing and submitting them as required by the grant terms. Questioned costs: No questioned costs Context: While reports were filed timely, there is no segregation of duties to ensure proper preparation and review procedures are performed. Cause: The organization has limited accounting staff, which makes it difficult to separate responsibilities among different employees. Effect: Without adequate segregation of duties, there is an increased risk of material misstatement in the financial statements, whether due to error or fraud. Repeat Finding: No Recommendation: Management should reassign responsibilities so that the preparation, review and submission of required reports is performed by different individuals. If staffing limitations prevent full segregation, compensating controls, such as periodic independent reviews by a supervisor or board member, should be implemented. Views of Responsible Officials of the Auditee: Management agrees with the finding.