Audit 401196

Significant deficiency in internal controls over compliance related to allowable costs/cost principles compliance requirements. Federal Agency: U.S. Department of Health and Human Services Program Title: Protection and Advocacy for Individuals with Mental Illness Assistance Listing Number: 93.138 Awards Number: 1X98SM089592-01, 1X98SM090426-01 Award Period: 10/01/2023 - 9/30/2025, 10/01/2024 - 9/30/2026 Criteria 2 U.S. Code of Federal Regulations (CFR) 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) Subpart E require expenditures allocated to federal awards be supported by a system of internal controls which provides reasonable assurance that charges are accurate, allowable, properly allocated, and supported by adequate documentation. Condition/Context For the year ended September 30, 2025, in a sample of 40 non-payroll transactions, there were five instances of nonpayroll costs being charged to the award that were not supported by proper documentation of the allocation applied. Effect/Potential Effect DRW did not fully comply with the allowable cost principles as specified in Uniform Guidance. As a result, there may be charges to the award that are not adequately supported with documentation and may be unallowable. Questioned Costs $1,249 - Known questioned costs were computed based on the accumulation of the portion of transactions tested that lacked adequate documentation of allocation. Cause DRW’s internal controls related to nonpayroll costs allocation was not sufficient to prevent or detect errors in compliance with the standards and to ensure consistent treatment with policies and procedures. Repeat Finding Yes Recommendation We recommend that DRW implement internal controls to ensure that all costs charged to the federal awards are supported by proper documentation. Views of Responsible Officials Management agrees with the finding and has provided the corrective action plan following the Single Audit Report.