Audit 400935

Federal Agency: U.S. Department of Health and Human Services Federal Program: Substance Abuse and Mental Health Services Projects of Regional and National Significance Assistance Listing Number: 93.243 Pass Through Agency: N/A Pass Through Entity Identifying Number: N/A Award Period: October 1, 2022 – September 30, 2023 Type of Finding: Significant Deficiency in Internal Control over Compliance and Other Matters Condition/Context: Although the Organization had processes and procedures in place to properly charge award programs for employee time and effort worked, these processes and procedures were not formally documented. The Organization initially charged employee costs to award programs based on budget. The monthly reimbursement claims were adjusted to actual costs based on management’s review of actual time and effort. However, the actual time and effort documentation was either not retained or not formally documented for all employees testing. Criteria: In accordance with the Compliance Supplement, Part 6 – Internal Control, 2 CFR section 200.303 requires that nonfederal entities receiving federal awards establish and maintain internal control over the federal awards that provides reasonable assurance that the nonfederal entity is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. In accordance with 2 CFR Part 200.430(g), Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity; (iv) Encompass both federally assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity (See paragraph (h)(1)(ii) above for treatment of incidental work for IHEs.); and (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity; (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that: (A) The system for establishing the estimates produces reasonable approximations of the activity actually performed; (B) Significant changes in the corresponding work activity (as defined by the non-Federal entity's written policies) are identified and entered into the records in a timely manner. Short term (such as one or two months) fluctuation between workload categories need not be considered as long as the distribution of salaries and wages is reasonable over the longer term; and (C) The non-Federal entity's system of internal controls includes processes to review after-the-fact interim charges made to a Federal awards based on budget estimates. All necessary adjustment must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated. Cause: The Organization did not have documented internal controls designed to ensure employee payroll allocations charged to the grant reflected actual time and effort. Effect: The Organization was not in compliance with the Compliance Supplement related to establishing and maintaining internal controls over federal awards. Repeat Finding: No Questioned Costs: None Recommendation: We recommend that management implement a requirement for employees to complete level of effort forms attesting to actual time spent working on the federal program on a regular basis, but no less than annually, during the fiscal period. These forms should be reviewed by a supervisor knowledgeable of the employee's activities and grant requirements and retained thereafter.

Federal Agency: U.S. Department of Treasury Federal Program: Coronavirus State and Local Fiscal Recovery Funds (COVID-19) Assistance Listing Number: 21.027 Pass Through Agency: Mercy Care Pass Through Entity Identifying Number: 1505-0271 Award Period: October 1, 2022 – September 30, 2023 Type of Finding: Significant Deficiency in Internal Control over Compliance and Other Matters Condition/Context: Although the Organization had processes and procedures in place to properly charge award programs for employee time and effort worked, these processes and procedures were not formally documented. The Organization initially charged employee costs to award programs based on budget. The monthly reimbursement claims were adjusted to actual costs based on management’s review of actual time and effort. However, the actual time and effort documentation was either not retained or not formally documented for all employees testing. Criteria: In accordance with the Compliance Supplement, Part 6 – Internal Control, 2 CFR Section 200.303 requires that nonfederal entities receiving federal awards establish and maintain internal control over the federal awards that provides reasonable assurance that the nonfederal entity is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. In accordance with 2 CFR Part 200.430(g), Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity; (iv) Encompass both federally assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity (See paragraph (h)(1)(ii) above for treatment of incidental work for IHEs.); and (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity; (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that: (A) The system for establishing the estimates produces reasonable approximations of the activity actually performed; (B) Significant changes in the corresponding work activity (as defined by the non-Federal entity's written policies) are identified and entered into the records in a timely manner. Short term (such as one or two months) fluctuation between workload categories need not be considered as long as the distribution of salaries and wages is reasonable over the longer term; and (C) The non-Federal entity's system of internal controls includes processes to review after-the-fact interim charges made to a Federal awards based on budget estimates. All necessary adjustment must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated. Cause: The Organization did not have documented internal controls designed to ensure employee payroll allocations charged to the grant reflected actual time and effort. Effect: The Organization was not in compliance with the Compliance Supplement related to establishing and maintaining internal controls over federal awards. Repeat Finding: No Questioned Costs: None Recommendation: We recommend that management implement a requirement for employees to complete level of effort forms attesting to actual time spent working on the federal program on a regular basis, but no less than annually, during the fiscal period. These forms should be reviewed by a supervisor knowledgeable of the employee's activities and grant requirements and retained thereafter.