Finding 2025-003: Matching Requirement Not Monitored - Material Weakness Federal Program: Substance Abuse and Mental Health Services Projects of Regional and National Significance Assistance Listing Number: 93.243 Federal Agency: U.S. Department of Health and Human Services Federal Award Identification Numbers: 5H79TI084739-02, 5H79TI084739-03 Award Year: 2024 and 2025 Criteria: The grant agreement requires the recipient to provide and document a specified nonfederal matching contribution as a condition of the award. In addition, 2 CFR § 200.306 establishes requirements applicable to cost sharing or matching contributions, including that such contributions be verifiable from the non-Federal entity's records. Accordingly, the grantee is required to maintain sufficient records to demonstrate compliance with the matching requirements of the federal award. Condition: The grantee did not maintain a process to identify, track, or document qualifying matching contributions during the grant period. As a result, management was unable to provide sufficient documentation to demonstrate whether the required matching contribution had been met, and we were unable to perform procedures to determine compliance with the matching requirement. Cause: Management has not established procedures or internal controls to identify, monitor, calculate, and document qualifying matching contributions throughout the grant period. Effect: Without adequate tracking and supporting documentation, the grantee is unable to demonstrate compliance with the matching requirement. As a result, there is an increased risk that required matching contributions may not be met or may not be adequately supported, which could result in noncompliance with the terms and conditions of the federal award and potential disallowance or repayment of federal funds. Questioned Costs: None noted. Context: The required matching contribution for the 2024 grant year was $58,400 and was not considered material for purposes of the audit. The required matching contribution for the 2025 grant year was $175,000 and was considered material. Because the grantee did not maintain records identifying and tracking qualifying matching contributions, a population of matching contributions was not available from which to select a sample. Accordingly, no sample was selected, and statistical sampling was not applicable. As a result, we were unable to perform testing to determine whether the required matching contribution for the 2025 grant year was met. Recommendation: We recommend that management implement procedures to identify, track and document qualifying matching contributions throughout the grant period. These procedures should include periodic monitoring of accumulated matching contributions, retention of sufficient supporting documentation and supervisory review to ensure compliance with the matching requirements of the grant agreement. Views of Responsible Officials: Management acknowledges this finding and will address remediation in management's corrective action plan.
Finding 2025-004: Inadequate Supporting Documentation and Review Controls Over Federal Expenditures and Payroll - Material Weakness Federal Program: Substance Abuse and Mental Health Services Projects of Regional and National Significance Assistance Listing Number: 93.243 Federal Agency: U.S. Department of Health and Human Services Federal Award Identification Numbers: 5H79TI084239-04, 5H79TI084739-02, 5H79TI084739-03 5H79TI082707-05 Award Year: 2024 and 2025 Criteria: In accordance with 2 CFR Part 200 (Uniform Guidance), costs charged to Federal awards must be adequately documented, allowable, allocable, reasonable, and consistently treated. Additionally, internal controls should provide for appropriate review and approval of expenditures and payroll transactions to help ensure only allowable costs are charged to Federal awards. Condition: During testing of 40 expenditure transactions for compliance with the Allowable Costs/Cost Principles compliance requirement, the auditee was unable to provide supporting documentation for three transactions selected for testing. As a result, the allowability of these costs could not be determined, and there was no documentation to demonstrate that the transactions were incurred and recorded within the correct period of performance. In addition, multiple expenditure transactions lacked evidence of supervisory review and approval in accordance with the entity's established internal control procedures. During testing of 40 payroll transactions across four pay periods, auditors noted that individual payroll transactions demonstrated evidence of review by employees' direct supervisors and the Chief Financial Officer. However, the auditee's policy also requires the Chief Executive Officer to review and approve the payroll summary prior to payroll processing. Evidence of the CEO's review and approval was observed for only one of the four payroll summaries tested. The remaining three payroll summaries, representing 29 of the 40 payroll transactions tested, lacked documented evidence that the required final review and approval control had been performed. Cause: The auditee did not maintain adequate documentation to support all expenditures charged to the Federal award and did not consistently perform or document supervisory review and approval of expenditures and payroll transactions. Effect: Without adequate supporting documentation and documented review and approval procedures, the auditee cannot demonstrate that costs charged to the Federal award were allowable, reasonable, allocable, and properly authorized. This increases the risk that unallowable or unauthorized costs may be charged to Federal programs. Questioned Costs: None noted. Context: The auditors tested a nonstatistical sample of 40 expenditure transactions and 40 payroll transactions for compliance with the Allowable Costs/Cost Principles compliance requirement. Of the 40 expenditure transactions tested, the auditee was unable to provide supporting documentation for three transactions, and multiple expenditure transactions lacked documented supervisory review and approval. Payroll testing included 40 payroll transactions selected from four payroll periods. While all individual payroll transactions evidenced review by employees' direct supervisors and the Chief Financial Officer, only one of the four payroll summaries tested included documented evidence of the Chief Executive Officer's required review and approval. The remaining three payroll summaries, representing 29 of the 40 payroll transactions tested, lacked evidence that the required final-level review control had been performed. The transactions tested were selected using a nonstatistical sampling approach and were not intended to be statistically representative of the population. Recommendation: We recommend the auditee strengthen its internal controls over Federal expenditures by maintaining complete supporting documentation for all transactions charged to Federal awards and ensuring that all expenditure and payroll transactions receive documented supervisory review and approval prior to payment or inclusion in payroll processing. Management should periodically monitor compliance with these procedures to ensure they are consistently followed. Views of Responsible Officials: Management acknowledges this finding and will address remediation in management's corrective action plan.
Finding 2025-005: Inadequate Controls Over Federal Reimbursement Draw Requests - Significant Deficiency Federal Program: Substance Abuse and Mental Health Services Projects of Regional and National Significance Assistance Listing Number: 93.243 Federal Agency: U.S. Department of Health and Human Services Federal Award Identification Numbers: 5H79TI084239-03, 5H79TI084239-04, 5H79TI084739-02, 5H79TI084739-03, 5H79TI082707-05 Award Year: 2024 and 2025 Criteria: Per 2 CFR § 200.305(b), payment methods must minimize the time elapsing between the transfer of federal funds and the disbursement of those funds by the recipient. For reimbursement payment methods, draw requests should be based solely on allowable, allocable, and paid expenditures. Effective internal controls, as required by 2 CFR § 200.303, include supervisory review of supporting documentation to verify the accuracy, completeness, and allowability of expenditures prior to submitting reimbursement requests. Condition: For 10 of 10 reimbursement draw requests tested, Mending Hearts’ did not maintain controls to ensure draw requests were supported by a review of actual expenditures paid prior to submission. Specifically, reimbursement requests were not tied directly to actual expenditures incurred and paid by Mending Hearts. In addition, there was no documented review of supporting invoices, payment documentation, schedules, or other reports to verify that expenditures had been paid with Mending Hearts’ funds before reimbursement was requested. Cause: Management has not established or implemented formal procedures requiring reimbursement requests to be reconciled to paid expenditures and independently reviewed prior to submission. Effect: Without adequate review procedures, Mending Hearts is at increased risk of requesting reimbursement for expenditures that have not yet been paid, are unsupported, or are otherwise unallowable. This increases the risk of noncompliance with federal cash management requirements and may result in questioned costs, repayment of federal funds, or other administrative action. Questioned Costs: None noted. Context: This condition was identified through testing of 10 reimbursement draw requests selected from the population of federal reimbursement requests submitted during the audit period. Exceptions were noted in all 10 items tested. The transactions tested were selected using a nonstatistical sampling approach and were not intended to be statistically representative of the population. Recommendation: We recommend that management implement formal cash management procedures requiring all reimbursement draw requests to be supported by detailed expenditure schedules and documentation demonstrating that expenditures have been paid with Organization funds. Prior to submitting reimbursement requests, an independent review should be performed and documented to verify that all requested amounts are accurate, supported, allowable, and based on actual paid expenditures. Views of Responsible Officials: Management acknowledges this finding and will address remediation in management's corrective action plan.
Finding 2025-006: Reporting and Expenditure Cutoff - Material Weakness Federal Program: Substance Abuse and Mental Health Services Projects of Regional and National Significance Assistance Listing Number: 93.243 Federal Agency: U.S. Department of Health and Human Services Federal Award Identification Number: 5H79TI084739-02 Award Year: 2024 Criteria: Recipients of federal awards are required to submit financial reports in accordance with the reporting requirements and deadlines established by the applicable grant agreement and federal program requirements. Amounts reported should relate to the applicable grant period and should accurately reflect the financial activity of that period. Condition: During our testing of reporting requirements for two grants, we noted the financial report for one grant was not submitted within the required reporting timeframe. In addition, the report included expenditures and related receipts attributable to the subsequent grant period rather than limiting reported activity to the period covered by the report. Cause: Management did not have adequate procedures in place to ensure that required reports were submitted timely and that reported expenditures and receipts were limited to activity applicable to the appropriate grant period. Effect: Failure to submit required reports timely may result in noncompliance with federal award requirements. Additionally, including activity from a subsequent grant period may result in inaccurate reporting of grant activity and could affect the federal awarding agency's ability to appropriately monitor the award. Questioned Costs: None noted. Context: The audit procedures included testing the reporting compliance for two grants. One of the two grants tested had a report that was submitted after the required due date and included financial activity related to the subsequent grant period. No reporting exceptions were identified for the other grant tested. The transactions tested were selected using a nonstatistical sampling approach and were not intended to be statistically representative of the population. Recommendation: We recommend that management strengthen its procedures over federal award reporting to ensure that required reports are prepared and submitted by established deadlines. Such procedures should also include a review of reported expenditures and receipts to verify that amounts are attributable to the applicable reporting and grant period prior to submission. Views of Responsible Officials: Management acknowledges this finding and will address remediation in management's corrective action plan.