AL 93.967 – Significant Deficiency – Procurement, Suspension and Debarment Criteria: In accordance with 2 CFR 200.206(d), non-federal entities are restricted from making contracts with parties that are debarred, suspended, or otherwise excluded from receiving federal awards or participating in federal. Condition: During our audit, we noted that KHDA did not review the debarment status of vendors prior to entering into a contract to purchase goods or services with those vendors. During the year ended June 30, 2025, KHDA spent approximately $1,058,004, with 3 vendors without performing a check on their debarment status. As part of the audit, we performed a debarment check and noted that the vendors had not been debarred. Cause: KHDA’s internal control system did not operate as designed to incorporate debarment status checks for vendors with which KHDA is spending significant amounts of federal grant funding. Effect: KHDA could enter into a contract with a party that has been debarred, suspended, or otherwise excluded from receiving federal awards or participating in federal awards Recommendation: We recommend that KHDA follow its internal control policy that requires that debarment status is checked prior to contracting with a party for the purchase of goods or services, and that records of the debarment check are stored in the vendor files. Management’s Response: Staff have been trained on the federal requirements and the organization has updated internal policies to reflect the compliance requirements. A Finance Committee has been formed to oversee federal compliance issues.
AL 93.354 – Material Weakness - Cash Management Criteria: Per 2 CFR 200.305(b), non-Federal entities must minimize the time elapsing between the transfer of funds from the pass-through entity and disbursement for program purposes. Funds under this grant should only be requested to reimburse expenditures for services that have already been provided. Condition: During our testing, we noted the Kentucky Health Departments Association (KHDA) drew down federal funds in excess of actual expenditures under the grant during the year ended June 30, 2025. As of June 30, 2025, cumulative drawdowns exceeded cumulative allowable expenditures by approximately $98,989. Cause: KDHA did not have adequate internal control procedures in place to ensure drawdowns were limited to expenditures for services that had already been provided. Effect: KHDA was not in compliance with federal cash management requirements. KHDA must spend the excess reimbursements on allowable grant expenses prior to the end of the grant’s period of performance, or KHDA may be required to return those funds to the grantor. Recommendation: We recommend KHDA implement procedures to ensure drawdowns are limited to immediate cash needs and are supported by actual expenditures incurred prior to the date of the drawdown. Management should periodically reconcile cumulative drawdowns to expenditures. Management’s Response: Staff have been trained on the federal requirements, and the organization has updated internal policies to reflect the compliance requirements. A Finance Committee has been formed to oversee federal compliance issues.
AL 93.354 – Material Weakness - Cash Management Criteria: Per 2 CFR 200.305(b), non-Federal entities must minimize the time elapsing between the transfer of funds from the pass-through entity and disbursement for program purposes. Funds under this grant should only be drawn down to meet immediate cash needs. Condition: During our testing, we noted the Kentucky Health Departments Association (KHDA) drew down federal funds without minimizing the amount of time between when those funds were received, and when they were disbursed for program purposes. During the year ended June 30, 2025, we noted approximately $163,690 of drawdowns that were not disbursed within thirty days of when the transfer of funds was received from the pass-through entity, which is the period of time KHDA determined be administratively feasible. Cause: KDHA did not have adequate internal control procedures in place to ensure drawdowns were limited to immediate cash needs and that disbursements for program purposes limited the time elapsing from when funds were received from the pass-through entity. Effect: KHDA was not in compliance with federal cash management requirements. These practices may subject KHDA to financial sanctions, repayment of excess funds, or increased oversight by the pass-through entity. Recommendation: We recommend KHDA implement procedures to ensure drawdowns are limited to immediate cash needs and that all program disbursements are scheduled to minimize the time elapsing between the transfer of funds from the pass-through entity and disbursement for program purposes. Management’s Response: Staff have been trained on the federal requirements, and the organization has updated internal policies to reflect the compliance requirements. A Finance Committee has been formed to oversee federal compliance issues.