Audit 407898

Finding 2025-001: Approval of Disbursement – Significant Deficiency Federal Agency: Department of State Federal Program Title: Bureau of International Narcotics and Law Enforcement Affairs Federal Assistance Listing Number: 19.705 Compliance Requirement: Allowable Costs/Costs Principles Criteria Federal requirements and agency policy require that disbursements under federal awards be properly authorized, supported, and approved prior to payment. Budget owner and/or project manager approval is required to ensure expenditures are allowable, appropriate, and consistent with award terms. Accordingly, disbursements should not be processed without documented supervisory approval. Condition During disbursement testing, one instance was identified where no evidence of required approval was documented. Context Audit testing of 60 disbursement transactions identified one instance where no evidence of required approval from the budget owner or project manager was present in the system approval history prior to disbursement. The payment was processed and released without documentation demonstrating required predisbursement authorization. Cause The staffing turnover within the accounting department restricted the Organization’s ability to follow up on the necessary approval of the disbursement. Effect The lack of required approval prior to disbursement increases the risk that unauthorized or unallowable costs may be charged to the Federal award and that the entity may not be in compliance with applicable federal requirements. This deficiency also indicates ineffective internal controls over federal expenditures, which could result in questioned costs or misuse of federal funds. Questioned costs None. Identification of a repeat finding This is not a repeat finding. Recommendation Management should enhance system controls to prevent disbursements from being processed without documented required approvals, reinforce approval requirements through targeted staff training, and conduct periodic monitoring of approval histories to ensure sustained compliance. Views of responsible officials Management acknowledges the deficiency identified related to the approval of disbursements and takes compliance with federal requirements seriously. The instance noted during testing was isolated in nature and occurred during a period of staffing transition. Management believes that overall controls governing disbursement processing are designed and operating effectively. However, additional emphasis has been placed on ensuring that all required approvals are consistently documented prior to the processing of payments. The Organization will also continue to monitor adherence to these procedures and assess opportunities to strengthen controls,