Audit 397202

2025-001 Internal Controls over Approval of Expenditures Charged to Federal Award for U.S. DHHS 93.432 ACL Centers for Independent Living #2401MEICL-00 (Significant Deficiency in Internal Controls over Compliance) Criteria: Management is responsible for implementing controls to ensure that disbursements are properly authorized before payment. Condition and Context: Through audit procedures testing internal controls over cash disbursements charged to major federal award programs, three invoices were paid before receiving documented approval. Management indicated that, in practice, this typically occurs when invoices are processed automatically through a portal or when verbal approval is given prior to the email confirmation. Cause: The Organization’s prior approval process relied on email chains and verbal communications, which could allow invoices to be paid before formal documentation of approval. Effect: Payments made prior to documented approval increase the risk of errors or unauthorized disbursements occurring, representing a significant deficiency in internal control. Recommendation: We recommend continuing to enforce the use of QuickBooks Online and Bill.com for invoice approval to ensure that all payments are reviewed and approved prior to disbursement. Views of Responsible Officials and Planned Corrective Actions: Management agrees with this finding. Upon identification of the issue, we initiated immediate corrective actions to reinforce our internal control environment and ensure full compliance with our cash disbursement approval policy. We have completed re-training for all accounting staff to reaffirm the requirements of our payment approval policy and to emphasize the importance of verifying documented approval prior to processing any invoice, regardless of the payment method (check, automated withdrawals, or portals). Additionally, management has implemented a system upgrade, transitioning from a manual approval workflow to an automated approval process. This upgraded system is designed to require approval before an invoice can proceed to payment, thereby preventing invoices from being disbursed without documented written authorization. We expect this automated control to significantly reduce the risk of future exceptions and strengthen overall compliance. Management will continue to monitor disbursement activity to ensure ongoing adherence to policy and the effectiveness of the new control measures.

2025-002 Internal Controls over Expenditures Charged to Federal Award for U.S. DHHS 93.432 ACL Centers for Independent Living #2401MEICL-00 (Significant Deficiency in Internal Controls over Compliance and Noncompliance) Criteria: Management is responsible for the design and implementation of internal controls over expenditures charged to federal award programs. Condition and Context: Through audit procedures testing internal controls over cash disbursements charged to major federal award programs, one expense lacked readily available support beyond a credit card statement. Eventually, receipts for all but one of the purchases were retained, but it required reaching out to the purchaser to obtain and retain some of those receipts. Cause: The missing receipts appeared to have resulted from insufficient controls over the collection and retention of supporting documentation prior to posting the monthly meals journal entry by relying on the credit card statement. Effect: The absence of adequate supporting documentation increases the risk of noncompliance with Federal cost principles and could result in disallowed costs. Question Costs: Known questioned costs related to our testing totaled $161. Recommendation: We recommend that management strengthen internal controls over documentation for meals and expenses by ensuring that all receipts are properly retained and reviewed prior to recording the monthly journal entry. Views of Responsible Officials and Planned Corrective Actions: Management concurs with this finding. Maintaining complete and accurate receipt documentation is essential for ensuring proper expense coding, supporting auditability, and maintaining compliance with organizational policies and funding requirements. Upon identification of this exception, management initiated corrective actions to reinforce our internal controls over receipt retention and documentation. Accounting staff have been re-trained on our receipt tracking procedures, with an emphasis on the requirement that receipts must be obtained and retained for all meal expenses. We will continue to monitor compliance with these updated procedures to ensure their effectiveness.

2025-003 Allowable Costs/Cost Principles for U.S. DHHS 94.432 ACL Centers for Independent Living #2401MEICL-00 (Significant Deficiency in Internal Controls over Compliance and Noncompliance) Criteria: Management is responsible for ethe design and implementation of internal controls to prevent or detect and correct unallowable costs from being charged to a federal award program. Condition and Context: Through audit procedures testing internal controls over cash disbursements charged to major federal award programs, we noted that the Organization purchased alcohol beverages totaling $100 and included this cost in allocation of expenses towards the the Federal program. Cause: There is a lack of understanding allowable cost/cost principles and a lack of oversight on expenses being charged to federal award programs. Effect: Charging unallowable costs to a Federal program results in noncompliance with the Uniform Guidance and increases the risk of disallowed costs. Questioned Costs: Known questioned costs related to our testing totaled $100. Recommendation: We recommend that management enhance review and approval procedures to ensure all costs charged to Federal programs are allowable under Uniform Guidance and the related grant agreements. Additionally, management should reclassify the unallowable costs to a non-Federal funding source. Training should be sought for individuals involved in recording expenditures to federal award programs on allowable costs/cost principles. Views of Responsible Offices and Planned Corrective Actions: Management concurs in part and disagrees in part with this finding. Management has always understood that alcohol purchases may not be charged to a Federal program and are unallowable under Uniform Guidance, and we are committed to ensuring full compliance with federal cost principles. Upon identification of this exception, management initiated corrective measures to reinforce internal controls surrounding expense review and documentation. The accounting staff member did not have the itemized receipt at the time the expense was initially allocated. Had the receipt been available, the unallowable cost would have been identified, and the expense would not have been allocated to program costs. Once the receipt was reviewed, the alcohol purchase was identified as unallowable under Federal programs and allocated correctly to administration costs. To prevent similar issues moving forward, accounting staff have been re-trained on expense documentation and receipt tracking requirements, with emphasis on ensuring that itemized receipts are obtained and reviewed prior to allocation, reimbursement, or payment. Staff have also been reminded of the importance of validating expenditures against Uniform Guidance allowability requirements as part of their routine review procedures. Management will continue to monitor expense activity to ensure the effectiveness of these reinforced controls.