Type of finding: Significant Deficiency in Internal Control over Compliance - Allowable Costs and Cost Principles Summary: This finding is considered to be a significant deficiency in internal controls which affects the entity as a whole, including its federal awards. Refer to the Financial Statement Findings section above for further information regarding this finding. Questioned costs: None. Criteria: The objective of Assistance Listing 93.912, Rural Healthcare Services Programs (RHSP), is to improve access to and delivery of rural health care services, including prevention, treatment, and recovery services. The Organization’s fiscal policies require expenditures to be approved in advance to ensure adequate financial resources are available. The policies also require all checks to include two signatures, one of which must be an authorized Board member; purchases of non-expendable personal property and other purchases or contracts exceeding $5,000 to be supported by three competitive quotes; and all nonrecurring expenditures to be approved at least monthly. Context: During our testing of 40 expense transactions for the RHSP grant, we noted there was no documentation supporting that the expenditures were approved in advance of the purchase, which is a control indicated in the Organization’s policy. Instead, the board reviewed expenditures through the statement of activities - modified cash basis and approved them post-payment. Cause: The non-compliance with the Organization’s adopted procurement policies is attributable to the Organization’s insufficient staffing to properly segregate duties. Effect: The bypassing of the Organization’s adopted procurement policies results in increased risk of unauthorized, fraudulent, or inaccurate purchases going unnoticed, resulting in potential misappropriation of funds or material misstatement of expenditures. Recommendation: We recommend that management follow the methods of procurement as outlined in their adopted Fiscal Policies and Procedures. View of Responsible Officials: There is no disagreement with this audit finding.
Type of finding: Significant Deficiency in Internal Control over Compliance - Reporting Summary: This finding is considered to be a significant deficiency in internal controls which affects the entity as a whole, including its federal awards. Refer to the Financial Statement Findings section above for further information regarding this finding. Questioned costs: None. Criteria: The objective of the Assistance Listing 93.912, RHSP, is to improve services for substance use disorder (SUD) and opioid use disorder (OUD) through prevention, treatment, and recovery services. Management is responsible for establishing and maintaining internal controls, including formal policies and procedures for the review and approval of journal entries, adjustments to expenditures, and account reconciliations, to ensure expenditures reported to granting agencies are complete, accurate, allowable, and properly supported. Context: During our audit, we noted that the Organization did not maintain a formal, documented process for the review and approval of manual journal entries, expenditure adjustments, or account reconciliations. Although certain review procedures may have been performed, the reviews were informal and not consistently documented to evidence who reviewed the items, when the review occurred, or whether exceptions were resolved. Cause: The Organization had limited staffing and did not formally assign or document independent review responsibilities for journal entries, expenditure adjustments, and account reconciliations, which limited its ability to maintain adequate segregation of duties and consistent evidence of review. Effect: The absence of formal review and approval controls over journal entries, expenditure adjustments, and account reconciliations increases the risk that unallowable, unsupported, inaccurate, or improperly classified costs may be reported to federal agencies and not be detected in a timely manner. Recommendation: We recommend that management implement and document a formal review and approval process for manual journal entries, expenditure adjustments, and account reconciliations. The process should identify the preparer and reviewer, require dated evidence of review, document resolution of exceptions, and include a final review before grant reports are submitted. View of Responsible Officials: There is no disagreement with this audit finding.