Finding 2023-003 Lack of Documentation to Support Expenditures Type of Finding: Noncompliance and Material Weakness in Internal Control over Compliance Condition and Context: The Organization failed to maintain financial records that properly substantiated expenditures which limited the ability to test several compliance requirements as part of audit procedures. These issues were most prevalent in testing direct disbursements. As part of audit procedures, 81 transactions were selected in a testing sample from a population which included 315 transactions. Of the 81 transactions tested, the Organization was unable to provide sufficient source documentation to support 21 of the transactions. Further, vendor and contract files were not consistently maintained and failed to provide adequate support to detail the history, method, and selection of procurement. Criteria: According to Uniform Guidance 2 CFR §200.302(b)(3), the Organization's financial management system must maintain records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. Cause: The Organization failed to implement appropriate policies and procedures that would allow the administrative and accounting departments to obtain the necessary documentation to support incurred expenditures. The Organization also failed to implement an effective system of internal controls and processes that would require expenditure approvals which would improve the storage of appropriate documentation. Effect: The effect of not maintaining appropriate source documentation to support expenditures could result in federal funds being misused or inappropriately spent. Failure to obtain the appropriate documentation likely limits the Organization's ability to review and approve expenditures internally. The inability to submit receipts on cost reimbursement grants could lead to disallowed grant claims. Additionally, a lack of documentation prevents the Organization's funders or auditors to evaluate the expenditures and hold the organization accountable for their expenditures to ensure compliance. Consequences of these actions would lead to questioned costs that may require repayment to the funding source and potentially a loss of future funding. Questioned Costs: Known questioned costs of $27,358 were identified. " Repeat Finding: This is not a repeat finding. Recommendation: It is recommended that the Organization's management develop and implement a robust document retention system for all elements of the financial reporting cycle. Documents should be stored in way that allows for them to be recalled upon request. Views of Responsible Officials: The Organization retained a licensed CPA firm with significant expertise in financial reporting and single audit compliance. The Organization will collaborate with the CPA firm to develop a standardized process for recording and tracking gift card transactions and allotments, ensuring accountability and traceability. Develop and enforce a formal policy requiring comprehensive documentation (e.g., invoices, receipts, contracts) for all expenditures over a certain threshold (e.g., $500 or higher). This policy will include requirements for approval and justification prior to disbursement. Require all staff to complete requisition forms for supplies or purchases in advance of procurement. These forms will include itemized details, purpose of purchase, and approval signatures. The Organization will update processes to ensure vendor and contract files include critical details: procurement history, selection method, contract terms, and vendor agreements. These files will be consistently maintained and reviewed for completeness. The Organization will strengthen the credit card usage process to require staff to submit itemized receipts, purpose of purchase, and pre-approval for all credit card transactions. This will include monthly reconciliations and management review of all credit card statements. The Organization will implement periodic internal reviews to ensure compliance with the new documentation and procurement processes. The CPA firm will assist with quality checks and provide ongoing guidance.
Finding 2023-003 Lack of Documentation to Support Expenditures Type of Finding: Noncompliance and Material Weakness in Internal Control over Compliance Condition and Context: The Organization failed to maintain financial records that properly substantiated expenditures which limited the ability to test several compliance requirements as part of audit procedures. These issues were most prevalent in testing direct disbursements. As part of audit procedures, 81 transactions were selected in a testing sample from a population which included 315 transactions. Of the 81 transactions tested, the Organization was unable to provide sufficient source documentation to support 21 of the transactions. Further, vendor and contract files were not consistently maintained and failed to provide adequate support to detail the history, method, and selection of procurement. Criteria: According to Uniform Guidance 2 CFR §200.302(b)(3), the Organization's financial management system must maintain records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. Cause: The Organization failed to implement appropriate policies and procedures that would allow the administrative and accounting departments to obtain the necessary documentation to support incurred expenditures. The Organization also failed to implement an effective system of internal controls and processes that would require expenditure approvals which would improve the storage of appropriate documentation. Effect: The effect of not maintaining appropriate source documentation to support expenditures could result in federal funds being misused or inappropriately spent. Failure to obtain the appropriate documentation likely limits the Organization's ability to review and approve expenditures internally. The inability to submit receipts on cost reimbursement grants could lead to disallowed grant claims. Additionally, a lack of documentation prevents the Organization's funders or auditors to evaluate the expenditures and hold the organization accountable for their expenditures to ensure compliance. Consequences of these actions would lead to questioned costs that may require repayment to the funding source and potentially a loss of future funding. Questioned Costs: Known questioned costs of $27,358 were identified. " Repeat Finding: This is not a repeat finding. Recommendation: It is recommended that the Organization's management develop and implement a robust document retention system for all elements of the financial reporting cycle. Documents should be stored in way that allows for them to be recalled upon request. Views of Responsible Officials: The Organization retained a licensed CPA firm with significant expertise in financial reporting and single audit compliance. The Organization will collaborate with the CPA firm to develop a standardized process for recording and tracking gift card transactions and allotments, ensuring accountability and traceability. Develop and enforce a formal policy requiring comprehensive documentation (e.g., invoices, receipts, contracts) for all expenditures over a certain threshold (e.g., $500 or higher). This policy will include requirements for approval and justification prior to disbursement. Require all staff to complete requisition forms for supplies or purchases in advance of procurement. These forms will include itemized details, purpose of purchase, and approval signatures. The Organization will update processes to ensure vendor and contract files include critical details: procurement history, selection method, contract terms, and vendor agreements. These files will be consistently maintained and reviewed for completeness. The Organization will strengthen the credit card usage process to require staff to submit itemized receipts, purpose of purchase, and pre-approval for all credit card transactions. This will include monthly reconciliations and management review of all credit card statements. The Organization will implement periodic internal reviews to ensure compliance with the new documentation and procurement processes. The CPA firm will assist with quality checks and provide ongoing guidance.
Finding 2023-003 Lack of Documentation to Support Expenditures Type of Finding: Noncompliance and Material Weakness in Internal Control over Compliance Condition and Context: The Organization failed to maintain financial records that properly substantiated expenditures which limited the ability to test several compliance requirements as part of audit procedures. These issues were most prevalent in testing direct disbursements. As part of audit procedures, 81 transactions were selected in a testing sample from a population which included 315 transactions. Of the 81 transactions tested, the Organization was unable to provide sufficient source documentation to support 21 of the transactions. Further, vendor and contract files were not consistently maintained and failed to provide adequate support to detail the history, method, and selection of procurement. Criteria: According to Uniform Guidance 2 CFR §200.302(b)(3), the Organization's financial management system must maintain records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. Cause: The Organization failed to implement appropriate policies and procedures that would allow the administrative and accounting departments to obtain the necessary documentation to support incurred expenditures. The Organization also failed to implement an effective system of internal controls and processes that would require expenditure approvals which would improve the storage of appropriate documentation. Effect: The effect of not maintaining appropriate source documentation to support expenditures could result in federal funds being misused or inappropriately spent. Failure to obtain the appropriate documentation likely limits the Organization's ability to review and approve expenditures internally. The inability to submit receipts on cost reimbursement grants could lead to disallowed grant claims. Additionally, a lack of documentation prevents the Organization's funders or auditors to evaluate the expenditures and hold the organization accountable for their expenditures to ensure compliance. Consequences of these actions would lead to questioned costs that may require repayment to the funding source and potentially a loss of future funding. Questioned Costs: Known questioned costs of $27,358 were identified. " Repeat Finding: This is not a repeat finding. Recommendation: It is recommended that the Organization's management develop and implement a robust document retention system for all elements of the financial reporting cycle. Documents should be stored in way that allows for them to be recalled upon request. Views of Responsible Officials: The Organization retained a licensed CPA firm with significant expertise in financial reporting and single audit compliance. The Organization will collaborate with the CPA firm to develop a standardized process for recording and tracking gift card transactions and allotments, ensuring accountability and traceability. Develop and enforce a formal policy requiring comprehensive documentation (e.g., invoices, receipts, contracts) for all expenditures over a certain threshold (e.g., $500 or higher). This policy will include requirements for approval and justification prior to disbursement. Require all staff to complete requisition forms for supplies or purchases in advance of procurement. These forms will include itemized details, purpose of purchase, and approval signatures. The Organization will update processes to ensure vendor and contract files include critical details: procurement history, selection method, contract terms, and vendor agreements. These files will be consistently maintained and reviewed for completeness. The Organization will strengthen the credit card usage process to require staff to submit itemized receipts, purpose of purchase, and pre-approval for all credit card transactions. This will include monthly reconciliations and management review of all credit card statements. The Organization will implement periodic internal reviews to ensure compliance with the new documentation and procurement processes. The CPA firm will assist with quality checks and provide ongoing guidance.
FINDING 2023-004 Subject: Water and Waste Disposal System for Rual Communities - Reporting Federal Agency: Department of Agriculture Federal Program: Water and Waste Disposal System for Rural Communities Assistance Listings Number: 10.760 Federal Award Number and Year (or Other Identifying Number): CY 2023 Compliance Requirement: Reporting Audit Findings: Material Weakness, Modified Opinion Condition and Context The Town had not designed or implemented adequate internal controls and procedures to ensure that reports were prepared, accurate, and submitted in accordance with the applicable compliance requirements for the federal grant. The United States Department of Agriculture (USDA) requires the following reports be submitted annually: Statement of Budget, Income, and Equity (Form RD 442-2) Balance Sheet (Form RD 442-3) The Form RD 442-2 covers financial operations relating to the Town's water main replacement project and the Form RD 442-3 presents the financial status of the project. In both instances, a borrower may submit the financial data on other forms, provided the forms are in a similar format and signed and dated by the organization's official to certify the correctness of the information. Alternatively, an annual audit may be submitted in lieu of the forms. The Town was required to file each report, as noted above, during the audit period; however, the reports were not filed. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: INDIANA STATE BOARD OF ACCOUNTS 19 TOWN OF LAFONTAINE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.302(b) states in part: "The financial management system of each non-Federal entity must provide for the following . . . (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§ 200.328 and 200.329. . . ." 7 CFR 1780.47 states in part: "Borrower accounting methods, management reporting and audits. . . . (e) Borrowers exempt from audits. All borrowers who are exempt from audits, will, within 60 days following the end of each fiscal year, furnish the RUS with annual financial statements, consisting of a verification of the organization's balance sheet and statement of income and expense by an appropriate official of the organization. Forms RD 442-2, 'Statement of Budget, Income and Equity,' and 442-3 may be used. (f) Management reports. These reports will furnish management with a means of evaluating prior decisions and serve as a basis for planning future operations and financial strategies. In those cases where revenues from multiple sources are pledged as security for an RUS loan, two reports will be required; one for the project being financed by RUS and one combining the entire operation of the borrower. In those cases where RUS loans are secured by general obligation bonds or assessments and the borrower combines revenues from all sources, one management report combining all such revenues is acceptable. The following management data will be submitted by the borrower to the processing office. These reports at a minimum will include a balance sheet and income and expense statement. . . . (2) Annual management reports. Prior to the beginning of each fiscal year the following will be submitted to the processing office. (If Form RD 442-2 is used as the annual management report, enter data in column three only of Schedule 1, and complete all of Schedule 2.) (i) Two copies of the management reports and proposed 'Annual Budget'. (ii) Financial information may be reported on Form RD 442-2 which includes Schedule 1, 'Statement of Budget, Income and Equity' and Schedule 2, 'Projected Cash Flow' or information in similar format. (iii) A copy of the rate schedule in effect at the time of submission. INDIANA STATE BOARD OF ACCOUNTS 20 TOWN OF LAFONTAINE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (g) Substitute for management reports. When RUS loans are secured by the general obligation of the public body or tax assessments which total 100 percent of the debt service requirements, the State program official may authorize an annual audit to substitute for other management reports if the audit is received within nine months after the end of the audit period." Cause The Town incorrectly assumed that the reports were filed by the engineering firm coordinating the grant. Effect Without the proper implementation of an effectively designed system of internal controls, the Town cannot ensure the required reports are filed with the awarding agency. As such, the USDA does not have accurate and current information to discern the financial status of the Town's project. Furthermore, noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the Town. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the Town's management design and implement a system of internal controls to ensure that all required reports are filed. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
2023-002- Activities Allowed and Allowable Costs Federal Assistance Listing Number: 84.287C Name of Program or Cluster: Twenty-First Century Community Learning Centers Agency: U.S. Department of Education Name of Passed-Through Entity: State of New Jersey Department of Education Criteria: According to the 21 CCLC grant agreement’s terms and conditions, a grantee is required to maintain a financial management system that includes the following: (1) accurate, current and complete disclosure of all financial activities related to 21 CCLC’s grant agreement in accordance with generally accepted accounting principles (“GAAP”), (2) records clearly identify the source and application of all funds used for the purposes described in the approved grant application, (3) effective internal and accounting controls over all funds, property and other assets. The grantee shall have in place a system for safeguarding all such assets and shall ensure that they are used solely for authorized purposes. (4) a comparison of actual outlays with budgeted amounts. Financial information shall be correlated with performance and productivity data and shall result in unit cost information. (5) accounting records that are supported by source documentation, and (6) procedures for determining the reasonableness and allowability of costs in a manner that is consistent with the Uniform Guidance. Activities Allowed and Allowable Costs compliance requirements applicable to 21 CCLC include: (1) Expenditures must be allowable under 2 CFR §200.403 (federal cost principles) and align with the grant’s specific terms and objectives and (2) Documentation of expenditures must meet the standards outlined in 2 CFR §200.302 (financial management and internal controls). Condition: In September 2024, legal counsel conducted a formal investigation and identified a potential misappropriation of funds regarding a vendor who submitted twelve invoices for goods and services to be used by children in the after-school programs across three Paterson schools amounting to $94,560 during a nine-month period covering May 2023 through February 2024. According to the formal investigation, there was insufficient evidence that the Organizations actually received the goods and services purchased from this vendor as shipping receipts, purchase orders or other verification support were not provided. Payments were made to the vendor with only an approved invoice. Cause: The lack of proper support documentation stems from insufficient internal controls over compliance due to inadequate segregation of duties, training and understanding of federal grant compliance requirements by staff responsible for grant administration as well as weak management oversight. The Organizations’ grant program administrators lack proper segregation of duties. There should be different individuals responsible for initiating purchase orders, receiving goods, approving invoices, and processing payments. There is no consistent oversight over expense/vendor verification and proper documentation processes, which include purchase orders and receiving reports that must be attached to invoices for verification. Effect: The Organizations’ 21 CCLC grant program was not in compliance with the federal grant terms and conditions, which can result in a potential repayment or “clawback” of misused grant funds by the grantor due to unverified expenditures and also lead to audit penalties or loss of future funding. Questioned Costs: $94,560. Repeat Finding: No. Recommendations: We recommend that the Organizations implement policies and procedures to comply with the federal grant terms and conditions in an effort to provide proper support documentation for verification of the existence that goods were received and services performed. These policies include the following: Recommendation #1 – A policy implemented for deliveries that arrive at the Organizations and that are made directly to the schools (“Units”). The arrival of a delivery must be documented at the Organizations and any deliveries made to the Units must be documented by the Unit Director and/or the individual who is making the delivery. All receiving reports and receipts should be matched to an invoice. Recommendation #2 – The Organizations must renew and enforce its policies regarding documentation the Units are responsible for submitting to the Program Director and/or the Organizations to ensure supplies and materials are received as well as activities and events provided by grant funds are properly documented and maintained. (1) There must be a policy related to the use of daily reports (known as “End of Day Reports”) that Unit Directors submit to the Program Director. The reports should be a template created by the Organizations or Program Director that the Unit Directors have available to them, which must identify what activities occurred on that day, whether parents were provided with anything at drop off or given out to the children and whether the Units accepted any deliveries and from whom. (2) The Unit Directors must also maintain "sign-in sheets". A policy must also be implemented regarding the use of sign-in sheets at the Units. The policy should have a clear mandate, purpose and outline the significance of maintaining these sign-in sheets as it relates to the grant program. The sign-in sheets must contain the number of the Unit, the name of the Director and Assistant Director, the name and a description of the correlating activity or event, whether any items, supplies, materials or kits were given to the children during the activity or event or provided at pickup time for the children to use at home, the number of children that participated in the activity or event, as well as the date and approximate time. The sign-in sheets should be emailed to the Program Director who will need to save these sheets in an online file. These files must be kept separately in a repository for each specific Unit by grant year. Other documentation that should be kept on file to further support the events and activities that occurred includes pictures of the children using the materials or participating in the activity or event. Unit Directors must be required to submit these files to the Program Director within a specified amount of time following an event or activity. Views of Responsible Officials: See corrective action plan attached.
2023-002- Activities Allowed and Allowable Costs Federal Assistance Listing Number: 84.287C Name of Program or Cluster: Twenty-First Century Community Learning Centers Agency: U.S. Department of Education Name of Passed-Through Entity: State of New Jersey Department of Education Criteria: According to the 21 CCLC grant agreement’s terms and conditions, a grantee is required to maintain a financial management system that includes the following: (1) accurate, current and complete disclosure of all financial activities related to 21 CCLC’s grant agreement in accordance with generally accepted accounting principles (“GAAP”), (2) records clearly identify the source and application of all funds used for the purposes described in the approved grant application, (3) effective internal and accounting controls over all funds, property and other assets. The grantee shall have in place a system for safeguarding all such assets and shall ensure that they are used solely for authorized purposes. (4) a comparison of actual outlays with budgeted amounts. Financial information shall be correlated with performance and productivity data and shall result in unit cost information. (5) accounting records that are supported by source documentation, and (6) procedures for determining the reasonableness and allowability of costs in a manner that is consistent with the Uniform Guidance. Activities Allowed and Allowable Costs compliance requirements applicable to 21 CCLC include: (1) Expenditures must be allowable under 2 CFR §200.403 (federal cost principles) and align with the grant’s specific terms and objectives and (2) Documentation of expenditures must meet the standards outlined in 2 CFR §200.302 (financial management and internal controls). Condition: In September 2024, legal counsel conducted a formal investigation and identified a potential misappropriation of funds regarding a vendor who submitted twelve invoices for goods and services to be used by children in the after-school programs across three Paterson schools amounting to $94,560 during a nine-month period covering May 2023 through February 2024. According to the formal investigation, there was insufficient evidence that the Organizations actually received the goods and services purchased from this vendor as shipping receipts, purchase orders or other verification support were not provided. Payments were made to the vendor with only an approved invoice. Cause: The lack of proper support documentation stems from insufficient internal controls over compliance due to inadequate segregation of duties, training and understanding of federal grant compliance requirements by staff responsible for grant administration as well as weak management oversight. The Organizations’ grant program administrators lack proper segregation of duties. There should be different individuals responsible for initiating purchase orders, receiving goods, approving invoices, and processing payments. There is no consistent oversight over expense/vendor verification and proper documentation processes, which include purchase orders and receiving reports that must be attached to invoices for verification. Effect: The Organizations’ 21 CCLC grant program was not in compliance with the federal grant terms and conditions, which can result in a potential repayment or “clawback” of misused grant funds by the grantor due to unverified expenditures and also lead to audit penalties or loss of future funding. Questioned Costs: $94,560. Repeat Finding: No. Recommendations: We recommend that the Organizations implement policies and procedures to comply with the federal grant terms and conditions in an effort to provide proper support documentation for verification of the existence that goods were received and services performed. These policies include the following: Recommendation #1 – A policy implemented for deliveries that arrive at the Organizations and that are made directly to the schools (“Units”). The arrival of a delivery must be documented at the Organizations and any deliveries made to the Units must be documented by the Unit Director and/or the individual who is making the delivery. All receiving reports and receipts should be matched to an invoice. Recommendation #2 – The Organizations must renew and enforce its policies regarding documentation the Units are responsible for submitting to the Program Director and/or the Organizations to ensure supplies and materials are received as well as activities and events provided by grant funds are properly documented and maintained. (1) There must be a policy related to the use of daily reports (known as “End of Day Reports”) that Unit Directors submit to the Program Director. The reports should be a template created by the Organizations or Program Director that the Unit Directors have available to them, which must identify what activities occurred on that day, whether parents were provided with anything at drop off or given out to the children and whether the Units accepted any deliveries and from whom. (2) The Unit Directors must also maintain "sign-in sheets". A policy must also be implemented regarding the use of sign-in sheets at the Units. The policy should have a clear mandate, purpose and outline the significance of maintaining these sign-in sheets as it relates to the grant program. The sign-in sheets must contain the number of the Unit, the name of the Director and Assistant Director, the name and a description of the correlating activity or event, whether any items, supplies, materials or kits were given to the children during the activity or event or provided at pickup time for the children to use at home, the number of children that participated in the activity or event, as well as the date and approximate time. The sign-in sheets should be emailed to the Program Director who will need to save these sheets in an online file. These files must be kept separately in a repository for each specific Unit by grant year. Other documentation that should be kept on file to further support the events and activities that occurred includes pictures of the children using the materials or participating in the activity or event. Unit Directors must be required to submit these files to the Program Director within a specified amount of time following an event or activity. Views of Responsible Officials: See corrective action plan attached.
31 CFR § 35.4(c) requires, in part, recipients, during the period of performance, to provide the Secretary of the U.S. Department of Treasury periodic reports providing detailed accounting of the uses of funds, modifications to a State or Territory's tax revenue sources, and such other information as the Secretary may require for the administration of this section. 2 CFR 1000.10 provides that, except for the deviations set forth elsewhere in this Part, the Department of Treasury adopts the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards set forth at 2 CFR Part 200. 2 CFR 200.302(b) states, in part, that the financial management system of each non-Federal entity must provide for the accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§ 200.328 and 200.329. The County was required to submit a Project and Expenditure Report by October 31, 2023, to the U.S Department of the Treasury through the Treasury’s Portal. However, the lack of adequate control procedures in place for reporting resulted in the County omitting $2,000,851 in expenditures that were reported on their 2023 Schedule of Expenditures of Federal Awards from their 2023 third quarter Project and Expenditure Report. We also noted the County submitted the 2023 fourth quarter Project and Expenditure Report on March 7, 2024 instead of the required date of January 31 2024. The County should establish a proper control process over reporting to ensure the timely, complete, and accurate submission of the Project and Expenditure Reports. This will help reduce the risk of Treasury taking action against the County for failure to comply with programmatic requirements.
31 CFR § 35.4(c) requires, in part, recipients, during the period of performance, to provide the Secretary of the U.S. Department of Treasury periodic reports providing detailed accounting of the uses of funds, modifications to a State or Territory's tax revenue sources, and such other information as the Secretary may require for the administration of this section. 2 CFR 1000.10 provides that, except for the deviations set forth elsewhere in this Part, the Department of Treasury adopts the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards set forth at 2 CFR Part 200. 2 CFR 200.302(b) states, in part, that the financial management system of each non-Federal entity must provide for the accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§ 200.328 and 200.329. The County was required to submit a Project and Expenditure Report by October 31, 2023, to the U.S Department of the Treasury through the Treasury’s Portal. However, the lack of adequate control procedures in place for reporting resulted in the County omitting $2,000,851 in expenditures that were reported on their 2023 Schedule of Expenditures of Federal Awards from their 2023 third quarter Project and Expenditure Report. We also noted the County submitted the 2023 fourth quarter Project and Expenditure Report on March 7, 2024 instead of the required date of January 31 2024. The County should establish a proper control process over reporting to ensure the timely, complete, and accurate submission of the Project and Expenditure Reports. This will help reduce the risk of Treasury taking action against the County for failure to comply with programmatic requirements.
Identification of a Repeat Finding: This is a repeat finding from the immediate previous audit, 2022-001. Criteria: Uniform Guidance requires written procedures for cash management and determining the allowability of costs in accordance with Subpart E – Cost Principles. Condition: Ozarks Regional YMCA did not have written procedures for cash management (2 CFR 200.302(b)(6)) and allowable costs determination (2 CFR 200.302(b)(7)) in accordance with Uniform Guidance requirements. Questioned Costs: $0 Cause: Ozarks Regional YMCA’s written policies and procedures were not updated to include required Uniform Guidance policies. Effect: Employees of Ozarks Regional YMCA could enter into a transaction that is not in compliance with Uniform Guidance requirements. Recommendation: We recommend Ozarks Regional YMCA draft and adopt written procedures in accordance with Uniform Guidance requirements. Views of Responsible Officials and Planned Corrective Action: Management agrees with the finding and has developed and implemented the appropriate policies and procedures effective September 2024.
Finding 2023-001; Lack of Written Policies and Procedures Condition: The Organization does not have written policies and procedures in place for the administration and management of federal awards, as required by the Uniform Guidance (2 CFR Part 200). Specifically, the organization lacks documented procedures for financial management, internal controls, allowable costs, procurement, and other key operational areas. Criteria: According to 2 CFR § 200.302(b)(7), non-federal entities must have written procedures to implement the requirements of § 200.305 (Payment) and must maintain written procedures for determining the allowability of costs in accordance with Subpart E—Cost Principles of this part and the terms and conditions of the federal award. Additionally, 2 CFR § 200.303 requires non-federal entities to establish and maintain effective internal controls, including written policies and procedures, to ensure compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Cause: The absence of written policies and procedures appears to be due to a lack of awareness of the specific requirements under the Uniform Guidance, coupled with insufficient resources allocated to the development of these necessary internal controls. Effect: Without written policies and procedures, the Organization is at risk of non-compliance with federal regulations, which could lead to unallowable costs being charged to federal awards, inefficient or improper use of federal funds, and potential disallowance of costs during audits. This deficiency could also reduce the Organization's ability to ensure consistency and accountability in the management of federal funds. Recommendation: The Organization should develop and implement comprehensive written policies and procedures in accordance with the requirements of the Uniform Guidance. These should include, but not be limited to, the following areas: 1. Financial management, including procedures for payments and cash management. 2. Internal controls to ensure compliance with federal requirements. 3. Determination of allowable costs in accordance with federal regulations and the terms and conditions of the award. 4. Time and effort reporting and compensation. The Organization should also ensure that staff are adequately trained in these policies and procedures to enhance compliance and operational efficiency. Views of Responsible Officials of Auditee: In response to the finding, management will take action to develop and implement the necessary written policies and procedures by June 30, 2025. Comprehensive training will be provided to all relevant staff to ensure compliance with federal requirements.
Criteria: 2 CFR Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Subpart D – Post Federal Awards Requirements, Standards for Financial and Program Management, and §200.302 (b), Financial Management. Identification, in its accounts, of all federal awards received and expended and the federal program under which they were received. Federal program and federal award identification must include, as applicable, the federal assistance listing title and number, federal award identification number, name of the federal agency, and name of the pass-through entity, if any. Additional Criteria: 2 CFR Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Subpart F – Audit Requirements, §200.510, Financial Statements. Schedule of Expenditures of Federal Awards – The auditee also must prepare a schedule of expenditures of federal awards for the period covered by the auditee’s financial statements, which must include the total federal awards expended, as determined in accordance with §200.502, Basis for Determining Federal Awards Expended. At a minimum, the schedule must provide total federal awards expended for each individual federal program and the federal assistance listing number or other identifying number when the federal assistance listing information is not available. For a cluster of programs, also provide the total for the cluster. Condition: PCRI did not maintain a complete schedule of expenditures of federal awards. Cause: PCRI did not adequately track which government grants were federally-funded, resulting in an incomplete schedule of expenditures of federal awards. Effect: Failure to prepare an accurate and complete schedule of expenditures of federal awards results in noncompliance with 2 CFR Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Subpart D – Post Federal Awards Requirements, Standards for Financial and Program Management, §200.302, Financial Management, and Subpart F – Audit Requirements, §200.510, Financial Statements. Recommendation: We recommend that PCRI document and implement policies and procedures to ensure the schedule of expenditures of federal awards is accurate and complete in accordance with 2 CFR Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Subpart D – Post Federal Awards Requirements, Standards for Financial and Program Management, §200.302, Financial Management, and Subpart F – Audit Requirements, §200.510, Financial Statements, in order to obtain accurate calculations of major federal programs for the Single Audit and to ensure that PCRI is in compliance with all of the reporting requirements as to identify the source and application of funds for federally-funded activities.
Criteria: 2 CFR Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Subpart D – Post Federal Awards Requirements, Standards for Financial and Program Management, and §200.302 (b), Financial Management. Identification, in its accounts, of all federal awards received and expended and the federal program under which they were received. Federal program and federal award identification must include, as applicable, the federal assistance listing title and number, federal award identification number, name of the federal agency, and name of the pass-through entity, if any. Additional Criteria: 2 CFR Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Subpart F – Audit Requirements, §200.510, Financial Statements. Schedule of Expenditures of Federal Awards – The auditee also must prepare a schedule of expenditures of federal awards for the period covered by the auditee’s financial statements, which must include the total federal awards expended, as determined in accordance with §200.502, Basis for Determining Federal Awards Expended. At a minimum, the schedule must provide total federal awards expended for each individual federal program and the federal assistance listing number or other identifying number when the federal assistance listing information is not available. For a cluster of programs, also provide the total for the cluster. Condition: PCRI did not maintain a complete schedule of expenditures of federal awards. Cause: PCRI did not adequately track which government grants were federally-funded, resulting in an incomplete schedule of expenditures of federal awards. Effect: Failure to prepare an accurate and complete schedule of expenditures of federal awards results in noncompliance with 2 CFR Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Subpart D – Post Federal Awards Requirements, Standards for Financial and Program Management, §200.302, Financial Management, and Subpart F – Audit Requirements, §200.510, Financial Statements. Recommendation: We recommend that PCRI document and implement policies and procedures to ensure the schedule of expenditures of federal awards is accurate and complete in accordance with 2 CFR Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Subpart D – Post Federal Awards Requirements, Standards for Financial and Program Management, §200.302, Financial Management, and Subpart F – Audit Requirements, §200.510, Financial Statements, in order to obtain accurate calculations of major federal programs for the Single Audit and to ensure that PCRI is in compliance with all of the reporting requirements as to identify the source and application of funds for federally-funded activities.
Finding number: 2023-004 – Material Weakness in Internal Control Over Preparation, Reconciliation, and Retention of the Schedule of Expenditures of Federal Awards (SEFA) Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number: 93.914 Federal Program #2 HIV Care Formula Grants): CFDA Number: 93.917 Federal Program #3: HIV Prevention Activities: CFDA Number: 93.941 Name of federal agency: U.S. Department of Health and Human Services (HHS) Name of pass-through entity: Multiple Repeat finding: No AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Criteria: Under 2 CFR §200.510(b), recipients of federal funds are required to prepare a Schedule of Expenditures of Federal Awards (SEFA) that fairly presents federal expenditures for each grant program and is derived from and supported by the entity's accounting records. Additionally, 2 CFR §200.302 requires that financial management systems adequately identify and account for federal awards to ensure accuracy and compliance with applicable federal requirements. Best practices dictate that federal expenditures should be reconciled regularly to the general ledger, and supporting documentation should be maintained to substantiate amounts reported on the SEFA. Condition: The Organization lacked adequate controls over the preparation, reconciliation, and retention of records related to the SEFA. Specifically: The SEFA incorrectly reported certain federal awards as non-federal awards. The SEFA is prepared based on amounts requested for reimbursement instead of directly based on expenditures incurred. Reconciliation schedules that tied SEFA expenditures directly back to the expenses recorded in the general ledger could not be located. Expenses recorded in the general ledger represent expenses incurred to operate the program in addition to direct grant expenditures; the Organization only requests reimbursement for direct program expenditures allowable under the program. Documentation of Excel-based reconciliations did not agree to reported monthly expenditures, indicating manual reclassification entries between program codes that were not clearly supported. Cause: The deficiencies noted were primarily due to: Lack of system controls to ensure that state and federal expenditures were separately tracked from non-grant funds spent within the same source codes. Turnover in grants management personnel, which resulted in missing, incomplete, or inaccurate reconciling records. Possible effect: Without a complete and accurate SEFA, the Organization risks noncompliance with Uniform Guidance reporting requirements, which could impact its ability to receive and administer federal funds in the future. Additionally, inaccurate SEFA reporting increases the risk of errors in administering funds, questioned costs, and over or under expenditure of grants. Questioned cost: None identified at this time. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Recommendation: We recommend that the Organization implement the following measures to improve SEFA preparation and record retention: 1. Develop a Standardized SEFA Reconciliation Process – Implement formal policies and procedures requiring that SEFA expenditures be reconciled to the general ledger on a monthly basis, with documentation maintained for audit purposes. 2. Enhance System Controls for Grant Expenditures – Modify the financial system to allow for the proper segregation of state and federal expenditures from non-grant funds, ensuring that expenditures are properly classified at the time of entry. 3. Require Monthly Documentation Reviews – Establish a control requiring management to review and approve SEFA reconciliation schedules on a monthly or quarterly basis to ensure accuracy and completeness. 4. Implement a Centralized Documentation Retention Policy – Require that all SEFA-related reconciliation records, including general ledger tie-outs and manual adjustments, be retained in a centralized, accessible location. 5. Provide Grants Management Training – Conduct training for grants management and accounting personnel on SEFA preparation requirements, including Uniform Guidance compliance and best practices for documentation and reconciliation. 6. By implementing these measures, the Organization can improve its internal controls over SEFA preparation, ensure compliance with Uniform Guidance, and reduce the risk of reporting inaccuracies. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Views of responsible officials: Management partially agrees with the finding. While we acknowledge that documentation supporting SEFA reconciliation was incomplete, we believe that federal expenditures were properly accounted for. We would like to address some of the auditors' points individually: "The SEFA is prepared based on amounts requested for reimbursement instead of directly based on expenditures incurred." Most grant awards do not fully fund the programs they support, most grant awards do not run concurrently with Prism Health North Texas' fiscal year (i.e., with the Calendar Year), and most grant awards are not spent in equal monthly amounts. It is correct that the 2023 SEFA was based on grant-appropriate expenditures that occurred during Calendar Year 2023 and were submitted to those grant sponsors for reimbursement. This will not necessarily reach the full cost to Prism for each grant-supported program, nor is it likely to exactly match any annual grant award amount. "Expenses recorded in the general ledger represent expenses incurred to operate the program in addition to direct grant expenditures; the Organization only requests reimbursement for direct program expenditures allowable under the program." As we confirmed verbally with the audit partner on April 25, 2025, this statement is intended to provide information and context and is not a criticism or intended to point out any problem. As stated above, most grant awards do not fully fund the programs they support; therefore, the general ledger necessarily includes both expenses the sponsor will reimburse and expenses the sponsor will not reimburse. Nonetheless, we are enhancing our reconciliation procedures and documentation practices to fully meet audit requirements. Finding 2023-004 refers to the auditors' assessment of the SEFA preparation and reconciliation processes that occurred in Calendar Year 2023. As of this writing, Prism Health North Texas has already changed its SEFA preparation and reconciliation processes and meets many of the recommendations above. Action Taken: Documentation Retention – On April 25, 2025, management created a structured and easily accessible system for storing all relevant information for all grants management personnel. A logical naming system for files identifying the SEFA period, the funding agency and identified general ledger expenditures claimed on the SEFA. We are now documenting the difference between all GL transactions and those submitted for sponsor reimbursement (i.e., SEFA components) in a single document per fund code, arranged by fiscal year. Previously this documentation was kept by invoice and arranged by grant year. Management will continue to ensure all expenditure-related support, such as invoices and purchase orders, is saved electronically to all AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) financial transactions. SEFA Reconciliation – Management has decided to move from an annual to quarterly SEFA reconciliation process to enhance the frequency of management oversight in SEFA draft preparation. VP of Finance will prepare the SEFA for independent review by the CFO. This will be put into a written policy/procedure. System Enhancements – Prism's current accounting system does not accommodate this. However, Prism is already in the later stages of selecting a new Enterprise Resource Planning (ERP) solution, with this as one of our key selection criteria. Our new ERP should allow for expenditures within the same cost center to be identified as grant-reimbursable or non-grant-reimbursable at the time of entry. We have identified opportunities in new financial management software solutions that we are scheduled to demo May 12th and the 16th of 2025. Opportunities such as: The ability to tag grant-reimbursable transactions, to segment our award cost center into two important categories. The full cost to manage a specific program. Identified cost claimed on the SEFA. Dedicated grant modules that will allow us to establish business rules and workflows to streamline and digitize critical aspects of grant management. Staff Engagement – Cross department coordination meetings occur monthly between the Finance organization and the Grants Management team to continue to foster alignment and collaboration in our grant cycles. A general overview of SEFA, including how to prepare and organize the monthly reconciliations, has already occurred with some of the grants accountants. _________________________________________________________
Finding number: 2023-005 Significant Deficiency in Internal Control Over Compliance: Allowable Costs and Activities Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914 Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917 Federal Program #3 HIV Prevention Activities: CFDA Number: 93.941 Name of federal agency: U.S. Department of Health and Human Services (HHS) Name of pass-through entity: Multiple Repeat finding: No AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Criteria: Under 2 CFR §200.303, recipients of federal funds must establish and maintain effective internal controls to ensure compliance with federal statutes, regulations, and the terms of grant agreements. 2 CFR §200.403 specifies that costs charged to federal programs must be allowable, necessary, reasonable, and allocable to the respective award. Additionally, 2 CFR §200.302 requires financial management systems to provide effective control and accountability over federal funds, including documented approval of expenditures. A best practice for grant compliance is to implement a documented approval process for expenditures charged to federal programs, ensuring that all costs are reviewed and supported by adequate documentation before reimbursement requests are submitted. Condition: The Organization did not have readily-available documented evidence of review and approval for expenditures charged to federal grants during the fiscal year. Specifically: The financial system did not capture or document approval of expenditures before they were charged to federal programs. No formalized system existed to retain evidence of grant-related expenditure reviews. While the prior Chief Financial Officer (CFO) manually reviewed each invoice, there was no indication of approval on the supporting documentation, making it impossible to verify that an appropriate review occurred before costs were charged to the grants. Cause: The issue arose due to the Organization's reliance on a manual review process conducted by the previous CFO, without requiring a formal approval signature or electronic system control to document review. This lack of a structured approval process resulted in insufficient evidence to support compliance with federal allowable cost requirements. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Possible effect: Without a documented approval process, the Organization cannot demonstrate that expenditures charged to the grants were properly reviewed for allowability, reasonableness, and allocability in accordance with federal regulations. This increases the risk that: Unallowable or misclassified expenditures could be charged to the grants without detection. Noncompliance with federal grant requirements could result in questioned costs or additional oversight from funding agencies. Financial statement and grant reporting inaccuracies may occur if expenditures are not properly reviewed and approved. Although no specific unallowable costs were identified during the audit, the lack of documented review represents a significant deficiency in internal control over compliance. Questioned cost: None identified at this time. Recommendation: We recommend that the Organization strengthen its internal controls over grant expenditures by implementing the following measures: 1. Implement a Formal Expenditure Review and Approval Policy – Establish a policy requiring that all expenditures charged to grants be reviewed and approved by an appropriate individual before being recorded in the system. 2. Require Documentation of Review and Approval – Ensure that invoices, payroll allocations, and other cost support documents include a signature, initials, or system-generated approval to confirm review. 3. Utilize System-Based Controls – If possible, configure the financial system to require electronic approval for all grant-related expenditures before costs are recorded. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Views of responsible officials: Management partially agrees with the finding. While we acknowledge that documentation of expenditure approval was not always retrievable, we believe the expenditures reviewed were all appropriate. Finding 2023-005 refers to the auditors' assessment of expenditure review and approval processes that occurred in Calendar Year 2023. During Calendar Year 2023, Prism relied on email routing of expenditures for review and approval. As of this writing, Prism Health North Texas' expenditure review and approval processes already meet or exceed the recommendations above. Action Taken: Expenditure Review – All expenditures charged to grants are reviewed and approved by two qualified individuals. Documentation of Review and Approval – Such review and approval for non-payroll expenditures occur in and are documented in the SAP Concur software before the costs are recorded in the accounting system (Abila). Such review and approval for payroll-related expenditures occur via and are documented via a combination of methods, also before they are recorded in Abila. Employees report their time, including how much time was devoted to grant activities, in the ExponentHR payroll system, and their supervisors approve both the time and the allocation in that system. Programmatic measures that also support grant billing ("units") are calculated from activity documented in the athenaOne electronic health record (EHR). Payroll allocation is calculated by one person, based on the ExponentHR documentation and the units, then reviewed and imported into Abila by a second person. The unposted transactions are reviewed again before posting. Utilize System-Based Controls – In place as above. _________________________________________________________
Finding number: 2023-004 – Material Weakness in Internal Control Over Preparation, Reconciliation, and Retention of the Schedule of Expenditures of Federal Awards (SEFA) Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number: 93.914 Federal Program #2 HIV Care Formula Grants): CFDA Number: 93.917 Federal Program #3: HIV Prevention Activities: CFDA Number: 93.941 Name of federal agency: U.S. Department of Health and Human Services (HHS) Name of pass-through entity: Multiple Repeat finding: No AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Criteria: Under 2 CFR §200.510(b), recipients of federal funds are required to prepare a Schedule of Expenditures of Federal Awards (SEFA) that fairly presents federal expenditures for each grant program and is derived from and supported by the entity's accounting records. Additionally, 2 CFR §200.302 requires that financial management systems adequately identify and account for federal awards to ensure accuracy and compliance with applicable federal requirements. Best practices dictate that federal expenditures should be reconciled regularly to the general ledger, and supporting documentation should be maintained to substantiate amounts reported on the SEFA. Condition: The Organization lacked adequate controls over the preparation, reconciliation, and retention of records related to the SEFA. Specifically: The SEFA incorrectly reported certain federal awards as non-federal awards. The SEFA is prepared based on amounts requested for reimbursement instead of directly based on expenditures incurred. Reconciliation schedules that tied SEFA expenditures directly back to the expenses recorded in the general ledger could not be located. Expenses recorded in the general ledger represent expenses incurred to operate the program in addition to direct grant expenditures; the Organization only requests reimbursement for direct program expenditures allowable under the program. Documentation of Excel-based reconciliations did not agree to reported monthly expenditures, indicating manual reclassification entries between program codes that were not clearly supported. Cause: The deficiencies noted were primarily due to: Lack of system controls to ensure that state and federal expenditures were separately tracked from non-grant funds spent within the same source codes. Turnover in grants management personnel, which resulted in missing, incomplete, or inaccurate reconciling records. Possible effect: Without a complete and accurate SEFA, the Organization risks noncompliance with Uniform Guidance reporting requirements, which could impact its ability to receive and administer federal funds in the future. Additionally, inaccurate SEFA reporting increases the risk of errors in administering funds, questioned costs, and over or under expenditure of grants. Questioned cost: None identified at this time. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Recommendation: We recommend that the Organization implement the following measures to improve SEFA preparation and record retention: 1. Develop a Standardized SEFA Reconciliation Process – Implement formal policies and procedures requiring that SEFA expenditures be reconciled to the general ledger on a monthly basis, with documentation maintained for audit purposes. 2. Enhance System Controls for Grant Expenditures – Modify the financial system to allow for the proper segregation of state and federal expenditures from non-grant funds, ensuring that expenditures are properly classified at the time of entry. 3. Require Monthly Documentation Reviews – Establish a control requiring management to review and approve SEFA reconciliation schedules on a monthly or quarterly basis to ensure accuracy and completeness. 4. Implement a Centralized Documentation Retention Policy – Require that all SEFA-related reconciliation records, including general ledger tie-outs and manual adjustments, be retained in a centralized, accessible location. 5. Provide Grants Management Training – Conduct training for grants management and accounting personnel on SEFA preparation requirements, including Uniform Guidance compliance and best practices for documentation and reconciliation. 6. By implementing these measures, the Organization can improve its internal controls over SEFA preparation, ensure compliance with Uniform Guidance, and reduce the risk of reporting inaccuracies. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Views of responsible officials: Management partially agrees with the finding. While we acknowledge that documentation supporting SEFA reconciliation was incomplete, we believe that federal expenditures were properly accounted for. We would like to address some of the auditors' points individually: "The SEFA is prepared based on amounts requested for reimbursement instead of directly based on expenditures incurred." Most grant awards do not fully fund the programs they support, most grant awards do not run concurrently with Prism Health North Texas' fiscal year (i.e., with the Calendar Year), and most grant awards are not spent in equal monthly amounts. It is correct that the 2023 SEFA was based on grant-appropriate expenditures that occurred during Calendar Year 2023 and were submitted to those grant sponsors for reimbursement. This will not necessarily reach the full cost to Prism for each grant-supported program, nor is it likely to exactly match any annual grant award amount. "Expenses recorded in the general ledger represent expenses incurred to operate the program in addition to direct grant expenditures; the Organization only requests reimbursement for direct program expenditures allowable under the program." As we confirmed verbally with the audit partner on April 25, 2025, this statement is intended to provide information and context and is not a criticism or intended to point out any problem. As stated above, most grant awards do not fully fund the programs they support; therefore, the general ledger necessarily includes both expenses the sponsor will reimburse and expenses the sponsor will not reimburse. Nonetheless, we are enhancing our reconciliation procedures and documentation practices to fully meet audit requirements. Finding 2023-004 refers to the auditors' assessment of the SEFA preparation and reconciliation processes that occurred in Calendar Year 2023. As of this writing, Prism Health North Texas has already changed its SEFA preparation and reconciliation processes and meets many of the recommendations above. Action Taken: Documentation Retention – On April 25, 2025, management created a structured and easily accessible system for storing all relevant information for all grants management personnel. A logical naming system for files identifying the SEFA period, the funding agency and identified general ledger expenditures claimed on the SEFA. We are now documenting the difference between all GL transactions and those submitted for sponsor reimbursement (i.e., SEFA components) in a single document per fund code, arranged by fiscal year. Previously this documentation was kept by invoice and arranged by grant year. Management will continue to ensure all expenditure-related support, such as invoices and purchase orders, is saved electronically to all AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) financial transactions. SEFA Reconciliation – Management has decided to move from an annual to quarterly SEFA reconciliation process to enhance the frequency of management oversight in SEFA draft preparation. VP of Finance will prepare the SEFA for independent review by the CFO. This will be put into a written policy/procedure. System Enhancements – Prism's current accounting system does not accommodate this. However, Prism is already in the later stages of selecting a new Enterprise Resource Planning (ERP) solution, with this as one of our key selection criteria. Our new ERP should allow for expenditures within the same cost center to be identified as grant-reimbursable or non-grant-reimbursable at the time of entry. We have identified opportunities in new financial management software solutions that we are scheduled to demo May 12th and the 16th of 2025. Opportunities such as: The ability to tag grant-reimbursable transactions, to segment our award cost center into two important categories. The full cost to manage a specific program. Identified cost claimed on the SEFA. Dedicated grant modules that will allow us to establish business rules and workflows to streamline and digitize critical aspects of grant management. Staff Engagement – Cross department coordination meetings occur monthly between the Finance organization and the Grants Management team to continue to foster alignment and collaboration in our grant cycles. A general overview of SEFA, including how to prepare and organize the monthly reconciliations, has already occurred with some of the grants accountants. _________________________________________________________
Finding number: 2023-005 Significant Deficiency in Internal Control Over Compliance: Allowable Costs and Activities Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914 Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917 Federal Program #3 HIV Prevention Activities: CFDA Number: 93.941 Name of federal agency: U.S. Department of Health and Human Services (HHS) Name of pass-through entity: Multiple Repeat finding: No AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Criteria: Under 2 CFR §200.303, recipients of federal funds must establish and maintain effective internal controls to ensure compliance with federal statutes, regulations, and the terms of grant agreements. 2 CFR §200.403 specifies that costs charged to federal programs must be allowable, necessary, reasonable, and allocable to the respective award. Additionally, 2 CFR §200.302 requires financial management systems to provide effective control and accountability over federal funds, including documented approval of expenditures. A best practice for grant compliance is to implement a documented approval process for expenditures charged to federal programs, ensuring that all costs are reviewed and supported by adequate documentation before reimbursement requests are submitted. Condition: The Organization did not have readily-available documented evidence of review and approval for expenditures charged to federal grants during the fiscal year. Specifically: The financial system did not capture or document approval of expenditures before they were charged to federal programs. No formalized system existed to retain evidence of grant-related expenditure reviews. While the prior Chief Financial Officer (CFO) manually reviewed each invoice, there was no indication of approval on the supporting documentation, making it impossible to verify that an appropriate review occurred before costs were charged to the grants. Cause: The issue arose due to the Organization's reliance on a manual review process conducted by the previous CFO, without requiring a formal approval signature or electronic system control to document review. This lack of a structured approval process resulted in insufficient evidence to support compliance with federal allowable cost requirements. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Possible effect: Without a documented approval process, the Organization cannot demonstrate that expenditures charged to the grants were properly reviewed for allowability, reasonableness, and allocability in accordance with federal regulations. This increases the risk that: Unallowable or misclassified expenditures could be charged to the grants without detection. Noncompliance with federal grant requirements could result in questioned costs or additional oversight from funding agencies. Financial statement and grant reporting inaccuracies may occur if expenditures are not properly reviewed and approved. Although no specific unallowable costs were identified during the audit, the lack of documented review represents a significant deficiency in internal control over compliance. Questioned cost: None identified at this time. Recommendation: We recommend that the Organization strengthen its internal controls over grant expenditures by implementing the following measures: 1. Implement a Formal Expenditure Review and Approval Policy – Establish a policy requiring that all expenditures charged to grants be reviewed and approved by an appropriate individual before being recorded in the system. 2. Require Documentation of Review and Approval – Ensure that invoices, payroll allocations, and other cost support documents include a signature, initials, or system-generated approval to confirm review. 3. Utilize System-Based Controls – If possible, configure the financial system to require electronic approval for all grant-related expenditures before costs are recorded. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Views of responsible officials: Management partially agrees with the finding. While we acknowledge that documentation of expenditure approval was not always retrievable, we believe the expenditures reviewed were all appropriate. Finding 2023-005 refers to the auditors' assessment of expenditure review and approval processes that occurred in Calendar Year 2023. During Calendar Year 2023, Prism relied on email routing of expenditures for review and approval. As of this writing, Prism Health North Texas' expenditure review and approval processes already meet or exceed the recommendations above. Action Taken: Expenditure Review – All expenditures charged to grants are reviewed and approved by two qualified individuals. Documentation of Review and Approval – Such review and approval for non-payroll expenditures occur in and are documented in the SAP Concur software before the costs are recorded in the accounting system (Abila). Such review and approval for payroll-related expenditures occur via and are documented via a combination of methods, also before they are recorded in Abila. Employees report their time, including how much time was devoted to grant activities, in the ExponentHR payroll system, and their supervisors approve both the time and the allocation in that system. Programmatic measures that also support grant billing ("units") are calculated from activity documented in the athenaOne electronic health record (EHR). Payroll allocation is calculated by one person, based on the ExponentHR documentation and the units, then reviewed and imported into Abila by a second person. The unposted transactions are reviewed again before posting. Utilize System-Based Controls – In place as above. _________________________________________________________
Finding number: 2023-004 – Material Weakness in Internal Control Over Preparation, Reconciliation, and Retention of the Schedule of Expenditures of Federal Awards (SEFA) Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number: 93.914 Federal Program #2 HIV Care Formula Grants): CFDA Number: 93.917 Federal Program #3: HIV Prevention Activities: CFDA Number: 93.941 Name of federal agency: U.S. Department of Health and Human Services (HHS) Name of pass-through entity: Multiple Repeat finding: No AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Criteria: Under 2 CFR §200.510(b), recipients of federal funds are required to prepare a Schedule of Expenditures of Federal Awards (SEFA) that fairly presents federal expenditures for each grant program and is derived from and supported by the entity's accounting records. Additionally, 2 CFR §200.302 requires that financial management systems adequately identify and account for federal awards to ensure accuracy and compliance with applicable federal requirements. Best practices dictate that federal expenditures should be reconciled regularly to the general ledger, and supporting documentation should be maintained to substantiate amounts reported on the SEFA. Condition: The Organization lacked adequate controls over the preparation, reconciliation, and retention of records related to the SEFA. Specifically: The SEFA incorrectly reported certain federal awards as non-federal awards. The SEFA is prepared based on amounts requested for reimbursement instead of directly based on expenditures incurred. Reconciliation schedules that tied SEFA expenditures directly back to the expenses recorded in the general ledger could not be located. Expenses recorded in the general ledger represent expenses incurred to operate the program in addition to direct grant expenditures; the Organization only requests reimbursement for direct program expenditures allowable under the program. Documentation of Excel-based reconciliations did not agree to reported monthly expenditures, indicating manual reclassification entries between program codes that were not clearly supported. Cause: The deficiencies noted were primarily due to: Lack of system controls to ensure that state and federal expenditures were separately tracked from non-grant funds spent within the same source codes. Turnover in grants management personnel, which resulted in missing, incomplete, or inaccurate reconciling records. Possible effect: Without a complete and accurate SEFA, the Organization risks noncompliance with Uniform Guidance reporting requirements, which could impact its ability to receive and administer federal funds in the future. Additionally, inaccurate SEFA reporting increases the risk of errors in administering funds, questioned costs, and over or under expenditure of grants. Questioned cost: None identified at this time. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Recommendation: We recommend that the Organization implement the following measures to improve SEFA preparation and record retention: 1. Develop a Standardized SEFA Reconciliation Process – Implement formal policies and procedures requiring that SEFA expenditures be reconciled to the general ledger on a monthly basis, with documentation maintained for audit purposes. 2. Enhance System Controls for Grant Expenditures – Modify the financial system to allow for the proper segregation of state and federal expenditures from non-grant funds, ensuring that expenditures are properly classified at the time of entry. 3. Require Monthly Documentation Reviews – Establish a control requiring management to review and approve SEFA reconciliation schedules on a monthly or quarterly basis to ensure accuracy and completeness. 4. Implement a Centralized Documentation Retention Policy – Require that all SEFA-related reconciliation records, including general ledger tie-outs and manual adjustments, be retained in a centralized, accessible location. 5. Provide Grants Management Training – Conduct training for grants management and accounting personnel on SEFA preparation requirements, including Uniform Guidance compliance and best practices for documentation and reconciliation. 6. By implementing these measures, the Organization can improve its internal controls over SEFA preparation, ensure compliance with Uniform Guidance, and reduce the risk of reporting inaccuracies. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Views of responsible officials: Management partially agrees with the finding. While we acknowledge that documentation supporting SEFA reconciliation was incomplete, we believe that federal expenditures were properly accounted for. We would like to address some of the auditors' points individually: "The SEFA is prepared based on amounts requested for reimbursement instead of directly based on expenditures incurred." Most grant awards do not fully fund the programs they support, most grant awards do not run concurrently with Prism Health North Texas' fiscal year (i.e., with the Calendar Year), and most grant awards are not spent in equal monthly amounts. It is correct that the 2023 SEFA was based on grant-appropriate expenditures that occurred during Calendar Year 2023 and were submitted to those grant sponsors for reimbursement. This will not necessarily reach the full cost to Prism for each grant-supported program, nor is it likely to exactly match any annual grant award amount. "Expenses recorded in the general ledger represent expenses incurred to operate the program in addition to direct grant expenditures; the Organization only requests reimbursement for direct program expenditures allowable under the program." As we confirmed verbally with the audit partner on April 25, 2025, this statement is intended to provide information and context and is not a criticism or intended to point out any problem. As stated above, most grant awards do not fully fund the programs they support; therefore, the general ledger necessarily includes both expenses the sponsor will reimburse and expenses the sponsor will not reimburse. Nonetheless, we are enhancing our reconciliation procedures and documentation practices to fully meet audit requirements. Finding 2023-004 refers to the auditors' assessment of the SEFA preparation and reconciliation processes that occurred in Calendar Year 2023. As of this writing, Prism Health North Texas has already changed its SEFA preparation and reconciliation processes and meets many of the recommendations above. Action Taken: Documentation Retention – On April 25, 2025, management created a structured and easily accessible system for storing all relevant information for all grants management personnel. A logical naming system for files identifying the SEFA period, the funding agency and identified general ledger expenditures claimed on the SEFA. We are now documenting the difference between all GL transactions and those submitted for sponsor reimbursement (i.e., SEFA components) in a single document per fund code, arranged by fiscal year. Previously this documentation was kept by invoice and arranged by grant year. Management will continue to ensure all expenditure-related support, such as invoices and purchase orders, is saved electronically to all AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) financial transactions. SEFA Reconciliation – Management has decided to move from an annual to quarterly SEFA reconciliation process to enhance the frequency of management oversight in SEFA draft preparation. VP of Finance will prepare the SEFA for independent review by the CFO. This will be put into a written policy/procedure. System Enhancements – Prism's current accounting system does not accommodate this. However, Prism is already in the later stages of selecting a new Enterprise Resource Planning (ERP) solution, with this as one of our key selection criteria. Our new ERP should allow for expenditures within the same cost center to be identified as grant-reimbursable or non-grant-reimbursable at the time of entry. We have identified opportunities in new financial management software solutions that we are scheduled to demo May 12th and the 16th of 2025. Opportunities such as: The ability to tag grant-reimbursable transactions, to segment our award cost center into two important categories. The full cost to manage a specific program. Identified cost claimed on the SEFA. Dedicated grant modules that will allow us to establish business rules and workflows to streamline and digitize critical aspects of grant management. Staff Engagement – Cross department coordination meetings occur monthly between the Finance organization and the Grants Management team to continue to foster alignment and collaboration in our grant cycles. A general overview of SEFA, including how to prepare and organize the monthly reconciliations, has already occurred with some of the grants accountants. _________________________________________________________
Finding number: 2023-005 Significant Deficiency in Internal Control Over Compliance: Allowable Costs and Activities Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914 Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917 Federal Program #3 HIV Prevention Activities: CFDA Number: 93.941 Name of federal agency: U.S. Department of Health and Human Services (HHS) Name of pass-through entity: Multiple Repeat finding: No AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Criteria: Under 2 CFR §200.303, recipients of federal funds must establish and maintain effective internal controls to ensure compliance with federal statutes, regulations, and the terms of grant agreements. 2 CFR §200.403 specifies that costs charged to federal programs must be allowable, necessary, reasonable, and allocable to the respective award. Additionally, 2 CFR §200.302 requires financial management systems to provide effective control and accountability over federal funds, including documented approval of expenditures. A best practice for grant compliance is to implement a documented approval process for expenditures charged to federal programs, ensuring that all costs are reviewed and supported by adequate documentation before reimbursement requests are submitted. Condition: The Organization did not have readily-available documented evidence of review and approval for expenditures charged to federal grants during the fiscal year. Specifically: The financial system did not capture or document approval of expenditures before they were charged to federal programs. No formalized system existed to retain evidence of grant-related expenditure reviews. While the prior Chief Financial Officer (CFO) manually reviewed each invoice, there was no indication of approval on the supporting documentation, making it impossible to verify that an appropriate review occurred before costs were charged to the grants. Cause: The issue arose due to the Organization's reliance on a manual review process conducted by the previous CFO, without requiring a formal approval signature or electronic system control to document review. This lack of a structured approval process resulted in insufficient evidence to support compliance with federal allowable cost requirements. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Possible effect: Without a documented approval process, the Organization cannot demonstrate that expenditures charged to the grants were properly reviewed for allowability, reasonableness, and allocability in accordance with federal regulations. This increases the risk that: Unallowable or misclassified expenditures could be charged to the grants without detection. Noncompliance with federal grant requirements could result in questioned costs or additional oversight from funding agencies. Financial statement and grant reporting inaccuracies may occur if expenditures are not properly reviewed and approved. Although no specific unallowable costs were identified during the audit, the lack of documented review represents a significant deficiency in internal control over compliance. Questioned cost: None identified at this time. Recommendation: We recommend that the Organization strengthen its internal controls over grant expenditures by implementing the following measures: 1. Implement a Formal Expenditure Review and Approval Policy – Establish a policy requiring that all expenditures charged to grants be reviewed and approved by an appropriate individual before being recorded in the system. 2. Require Documentation of Review and Approval – Ensure that invoices, payroll allocations, and other cost support documents include a signature, initials, or system-generated approval to confirm review. 3. Utilize System-Based Controls – If possible, configure the financial system to require electronic approval for all grant-related expenditures before costs are recorded. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Views of responsible officials: Management partially agrees with the finding. While we acknowledge that documentation of expenditure approval was not always retrievable, we believe the expenditures reviewed were all appropriate. Finding 2023-005 refers to the auditors' assessment of expenditure review and approval processes that occurred in Calendar Year 2023. During Calendar Year 2023, Prism relied on email routing of expenditures for review and approval. As of this writing, Prism Health North Texas' expenditure review and approval processes already meet or exceed the recommendations above. Action Taken: Expenditure Review – All expenditures charged to grants are reviewed and approved by two qualified individuals. Documentation of Review and Approval – Such review and approval for non-payroll expenditures occur in and are documented in the SAP Concur software before the costs are recorded in the accounting system (Abila). Such review and approval for payroll-related expenditures occur via and are documented via a combination of methods, also before they are recorded in Abila. Employees report their time, including how much time was devoted to grant activities, in the ExponentHR payroll system, and their supervisors approve both the time and the allocation in that system. Programmatic measures that also support grant billing ("units") are calculated from activity documented in the athenaOne electronic health record (EHR). Payroll allocation is calculated by one person, based on the ExponentHR documentation and the units, then reviewed and imported into Abila by a second person. The unposted transactions are reviewed again before posting. Utilize System-Based Controls – In place as above. _________________________________________________________
Finding number: 2023-004 – Material Weakness in Internal Control Over Preparation, Reconciliation, and Retention of the Schedule of Expenditures of Federal Awards (SEFA) Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number: 93.914 Federal Program #2 HIV Care Formula Grants): CFDA Number: 93.917 Federal Program #3: HIV Prevention Activities: CFDA Number: 93.941 Name of federal agency: U.S. Department of Health and Human Services (HHS) Name of pass-through entity: Multiple Repeat finding: No AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Criteria: Under 2 CFR §200.510(b), recipients of federal funds are required to prepare a Schedule of Expenditures of Federal Awards (SEFA) that fairly presents federal expenditures for each grant program and is derived from and supported by the entity's accounting records. Additionally, 2 CFR §200.302 requires that financial management systems adequately identify and account for federal awards to ensure accuracy and compliance with applicable federal requirements. Best practices dictate that federal expenditures should be reconciled regularly to the general ledger, and supporting documentation should be maintained to substantiate amounts reported on the SEFA. Condition: The Organization lacked adequate controls over the preparation, reconciliation, and retention of records related to the SEFA. Specifically: The SEFA incorrectly reported certain federal awards as non-federal awards. The SEFA is prepared based on amounts requested for reimbursement instead of directly based on expenditures incurred. Reconciliation schedules that tied SEFA expenditures directly back to the expenses recorded in the general ledger could not be located. Expenses recorded in the general ledger represent expenses incurred to operate the program in addition to direct grant expenditures; the Organization only requests reimbursement for direct program expenditures allowable under the program. Documentation of Excel-based reconciliations did not agree to reported monthly expenditures, indicating manual reclassification entries between program codes that were not clearly supported. Cause: The deficiencies noted were primarily due to: Lack of system controls to ensure that state and federal expenditures were separately tracked from non-grant funds spent within the same source codes. Turnover in grants management personnel, which resulted in missing, incomplete, or inaccurate reconciling records. Possible effect: Without a complete and accurate SEFA, the Organization risks noncompliance with Uniform Guidance reporting requirements, which could impact its ability to receive and administer federal funds in the future. Additionally, inaccurate SEFA reporting increases the risk of errors in administering funds, questioned costs, and over or under expenditure of grants. Questioned cost: None identified at this time. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Recommendation: We recommend that the Organization implement the following measures to improve SEFA preparation and record retention: 1. Develop a Standardized SEFA Reconciliation Process – Implement formal policies and procedures requiring that SEFA expenditures be reconciled to the general ledger on a monthly basis, with documentation maintained for audit purposes. 2. Enhance System Controls for Grant Expenditures – Modify the financial system to allow for the proper segregation of state and federal expenditures from non-grant funds, ensuring that expenditures are properly classified at the time of entry. 3. Require Monthly Documentation Reviews – Establish a control requiring management to review and approve SEFA reconciliation schedules on a monthly or quarterly basis to ensure accuracy and completeness. 4. Implement a Centralized Documentation Retention Policy – Require that all SEFA-related reconciliation records, including general ledger tie-outs and manual adjustments, be retained in a centralized, accessible location. 5. Provide Grants Management Training – Conduct training for grants management and accounting personnel on SEFA preparation requirements, including Uniform Guidance compliance and best practices for documentation and reconciliation. 6. By implementing these measures, the Organization can improve its internal controls over SEFA preparation, ensure compliance with Uniform Guidance, and reduce the risk of reporting inaccuracies. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Views of responsible officials: Management partially agrees with the finding. While we acknowledge that documentation supporting SEFA reconciliation was incomplete, we believe that federal expenditures were properly accounted for. We would like to address some of the auditors' points individually: "The SEFA is prepared based on amounts requested for reimbursement instead of directly based on expenditures incurred." Most grant awards do not fully fund the programs they support, most grant awards do not run concurrently with Prism Health North Texas' fiscal year (i.e., with the Calendar Year), and most grant awards are not spent in equal monthly amounts. It is correct that the 2023 SEFA was based on grant-appropriate expenditures that occurred during Calendar Year 2023 and were submitted to those grant sponsors for reimbursement. This will not necessarily reach the full cost to Prism for each grant-supported program, nor is it likely to exactly match any annual grant award amount. "Expenses recorded in the general ledger represent expenses incurred to operate the program in addition to direct grant expenditures; the Organization only requests reimbursement for direct program expenditures allowable under the program." As we confirmed verbally with the audit partner on April 25, 2025, this statement is intended to provide information and context and is not a criticism or intended to point out any problem. As stated above, most grant awards do not fully fund the programs they support; therefore, the general ledger necessarily includes both expenses the sponsor will reimburse and expenses the sponsor will not reimburse. Nonetheless, we are enhancing our reconciliation procedures and documentation practices to fully meet audit requirements. Finding 2023-004 refers to the auditors' assessment of the SEFA preparation and reconciliation processes that occurred in Calendar Year 2023. As of this writing, Prism Health North Texas has already changed its SEFA preparation and reconciliation processes and meets many of the recommendations above. Action Taken: Documentation Retention – On April 25, 2025, management created a structured and easily accessible system for storing all relevant information for all grants management personnel. A logical naming system for files identifying the SEFA period, the funding agency and identified general ledger expenditures claimed on the SEFA. We are now documenting the difference between all GL transactions and those submitted for sponsor reimbursement (i.e., SEFA components) in a single document per fund code, arranged by fiscal year. Previously this documentation was kept by invoice and arranged by grant year. Management will continue to ensure all expenditure-related support, such as invoices and purchase orders, is saved electronically to all AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) financial transactions. SEFA Reconciliation – Management has decided to move from an annual to quarterly SEFA reconciliation process to enhance the frequency of management oversight in SEFA draft preparation. VP of Finance will prepare the SEFA for independent review by the CFO. This will be put into a written policy/procedure. System Enhancements – Prism's current accounting system does not accommodate this. However, Prism is already in the later stages of selecting a new Enterprise Resource Planning (ERP) solution, with this as one of our key selection criteria. Our new ERP should allow for expenditures within the same cost center to be identified as grant-reimbursable or non-grant-reimbursable at the time of entry. We have identified opportunities in new financial management software solutions that we are scheduled to demo May 12th and the 16th of 2025. Opportunities such as: The ability to tag grant-reimbursable transactions, to segment our award cost center into two important categories. The full cost to manage a specific program. Identified cost claimed on the SEFA. Dedicated grant modules that will allow us to establish business rules and workflows to streamline and digitize critical aspects of grant management. Staff Engagement – Cross department coordination meetings occur monthly between the Finance organization and the Grants Management team to continue to foster alignment and collaboration in our grant cycles. A general overview of SEFA, including how to prepare and organize the monthly reconciliations, has already occurred with some of the grants accountants. _________________________________________________________
Finding number: 2023-005 Significant Deficiency in Internal Control Over Compliance: Allowable Costs and Activities Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914 Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917 Federal Program #3 HIV Prevention Activities: CFDA Number: 93.941 Name of federal agency: U.S. Department of Health and Human Services (HHS) Name of pass-through entity: Multiple Repeat finding: No AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Criteria: Under 2 CFR §200.303, recipients of federal funds must establish and maintain effective internal controls to ensure compliance with federal statutes, regulations, and the terms of grant agreements. 2 CFR §200.403 specifies that costs charged to federal programs must be allowable, necessary, reasonable, and allocable to the respective award. Additionally, 2 CFR §200.302 requires financial management systems to provide effective control and accountability over federal funds, including documented approval of expenditures. A best practice for grant compliance is to implement a documented approval process for expenditures charged to federal programs, ensuring that all costs are reviewed and supported by adequate documentation before reimbursement requests are submitted. Condition: The Organization did not have readily-available documented evidence of review and approval for expenditures charged to federal grants during the fiscal year. Specifically: The financial system did not capture or document approval of expenditures before they were charged to federal programs. No formalized system existed to retain evidence of grant-related expenditure reviews. While the prior Chief Financial Officer (CFO) manually reviewed each invoice, there was no indication of approval on the supporting documentation, making it impossible to verify that an appropriate review occurred before costs were charged to the grants. Cause: The issue arose due to the Organization's reliance on a manual review process conducted by the previous CFO, without requiring a formal approval signature or electronic system control to document review. This lack of a structured approval process resulted in insufficient evidence to support compliance with federal allowable cost requirements. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Possible effect: Without a documented approval process, the Organization cannot demonstrate that expenditures charged to the grants were properly reviewed for allowability, reasonableness, and allocability in accordance with federal regulations. This increases the risk that: Unallowable or misclassified expenditures could be charged to the grants without detection. Noncompliance with federal grant requirements could result in questioned costs or additional oversight from funding agencies. Financial statement and grant reporting inaccuracies may occur if expenditures are not properly reviewed and approved. Although no specific unallowable costs were identified during the audit, the lack of documented review represents a significant deficiency in internal control over compliance. Questioned cost: None identified at this time. Recommendation: We recommend that the Organization strengthen its internal controls over grant expenditures by implementing the following measures: 1. Implement a Formal Expenditure Review and Approval Policy – Establish a policy requiring that all expenditures charged to grants be reviewed and approved by an appropriate individual before being recorded in the system. 2. Require Documentation of Review and Approval – Ensure that invoices, payroll allocations, and other cost support documents include a signature, initials, or system-generated approval to confirm review. 3. Utilize System-Based Controls – If possible, configure the financial system to require electronic approval for all grant-related expenditures before costs are recorded. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Views of responsible officials: Management partially agrees with the finding. While we acknowledge that documentation of expenditure approval was not always retrievable, we believe the expenditures reviewed were all appropriate. Finding 2023-005 refers to the auditors' assessment of expenditure review and approval processes that occurred in Calendar Year 2023. During Calendar Year 2023, Prism relied on email routing of expenditures for review and approval. As of this writing, Prism Health North Texas' expenditure review and approval processes already meet or exceed the recommendations above. Action Taken: Expenditure Review – All expenditures charged to grants are reviewed and approved by two qualified individuals. Documentation of Review and Approval – Such review and approval for non-payroll expenditures occur in and are documented in the SAP Concur software before the costs are recorded in the accounting system (Abila). Such review and approval for payroll-related expenditures occur via and are documented via a combination of methods, also before they are recorded in Abila. Employees report their time, including how much time was devoted to grant activities, in the ExponentHR payroll system, and their supervisors approve both the time and the allocation in that system. Programmatic measures that also support grant billing ("units") are calculated from activity documented in the athenaOne electronic health record (EHR). Payroll allocation is calculated by one person, based on the ExponentHR documentation and the units, then reviewed and imported into Abila by a second person. The unposted transactions are reviewed again before posting. Utilize System-Based Controls – In place as above. _________________________________________________________
Finding number: 2023-004 – Material Weakness in Internal Control Over Preparation, Reconciliation, and Retention of the Schedule of Expenditures of Federal Awards (SEFA) Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number: 93.914 Federal Program #2 HIV Care Formula Grants): CFDA Number: 93.917 Federal Program #3: HIV Prevention Activities: CFDA Number: 93.941 Name of federal agency: U.S. Department of Health and Human Services (HHS) Name of pass-through entity: Multiple Repeat finding: No AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Criteria: Under 2 CFR §200.510(b), recipients of federal funds are required to prepare a Schedule of Expenditures of Federal Awards (SEFA) that fairly presents federal expenditures for each grant program and is derived from and supported by the entity's accounting records. Additionally, 2 CFR §200.302 requires that financial management systems adequately identify and account for federal awards to ensure accuracy and compliance with applicable federal requirements. Best practices dictate that federal expenditures should be reconciled regularly to the general ledger, and supporting documentation should be maintained to substantiate amounts reported on the SEFA. Condition: The Organization lacked adequate controls over the preparation, reconciliation, and retention of records related to the SEFA. Specifically: The SEFA incorrectly reported certain federal awards as non-federal awards. The SEFA is prepared based on amounts requested for reimbursement instead of directly based on expenditures incurred. Reconciliation schedules that tied SEFA expenditures directly back to the expenses recorded in the general ledger could not be located. Expenses recorded in the general ledger represent expenses incurred to operate the program in addition to direct grant expenditures; the Organization only requests reimbursement for direct program expenditures allowable under the program. Documentation of Excel-based reconciliations did not agree to reported monthly expenditures, indicating manual reclassification entries between program codes that were not clearly supported. Cause: The deficiencies noted were primarily due to: Lack of system controls to ensure that state and federal expenditures were separately tracked from non-grant funds spent within the same source codes. Turnover in grants management personnel, which resulted in missing, incomplete, or inaccurate reconciling records. Possible effect: Without a complete and accurate SEFA, the Organization risks noncompliance with Uniform Guidance reporting requirements, which could impact its ability to receive and administer federal funds in the future. Additionally, inaccurate SEFA reporting increases the risk of errors in administering funds, questioned costs, and over or under expenditure of grants. Questioned cost: None identified at this time. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Recommendation: We recommend that the Organization implement the following measures to improve SEFA preparation and record retention: 1. Develop a Standardized SEFA Reconciliation Process – Implement formal policies and procedures requiring that SEFA expenditures be reconciled to the general ledger on a monthly basis, with documentation maintained for audit purposes. 2. Enhance System Controls for Grant Expenditures – Modify the financial system to allow for the proper segregation of state and federal expenditures from non-grant funds, ensuring that expenditures are properly classified at the time of entry. 3. Require Monthly Documentation Reviews – Establish a control requiring management to review and approve SEFA reconciliation schedules on a monthly or quarterly basis to ensure accuracy and completeness. 4. Implement a Centralized Documentation Retention Policy – Require that all SEFA-related reconciliation records, including general ledger tie-outs and manual adjustments, be retained in a centralized, accessible location. 5. Provide Grants Management Training – Conduct training for grants management and accounting personnel on SEFA preparation requirements, including Uniform Guidance compliance and best practices for documentation and reconciliation. 6. By implementing these measures, the Organization can improve its internal controls over SEFA preparation, ensure compliance with Uniform Guidance, and reduce the risk of reporting inaccuracies. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Views of responsible officials: Management partially agrees with the finding. While we acknowledge that documentation supporting SEFA reconciliation was incomplete, we believe that federal expenditures were properly accounted for. We would like to address some of the auditors' points individually: "The SEFA is prepared based on amounts requested for reimbursement instead of directly based on expenditures incurred." Most grant awards do not fully fund the programs they support, most grant awards do not run concurrently with Prism Health North Texas' fiscal year (i.e., with the Calendar Year), and most grant awards are not spent in equal monthly amounts. It is correct that the 2023 SEFA was based on grant-appropriate expenditures that occurred during Calendar Year 2023 and were submitted to those grant sponsors for reimbursement. This will not necessarily reach the full cost to Prism for each grant-supported program, nor is it likely to exactly match any annual grant award amount. "Expenses recorded in the general ledger represent expenses incurred to operate the program in addition to direct grant expenditures; the Organization only requests reimbursement for direct program expenditures allowable under the program." As we confirmed verbally with the audit partner on April 25, 2025, this statement is intended to provide information and context and is not a criticism or intended to point out any problem. As stated above, most grant awards do not fully fund the programs they support; therefore, the general ledger necessarily includes both expenses the sponsor will reimburse and expenses the sponsor will not reimburse. Nonetheless, we are enhancing our reconciliation procedures and documentation practices to fully meet audit requirements. Finding 2023-004 refers to the auditors' assessment of the SEFA preparation and reconciliation processes that occurred in Calendar Year 2023. As of this writing, Prism Health North Texas has already changed its SEFA preparation and reconciliation processes and meets many of the recommendations above. Action Taken: Documentation Retention – On April 25, 2025, management created a structured and easily accessible system for storing all relevant information for all grants management personnel. A logical naming system for files identifying the SEFA period, the funding agency and identified general ledger expenditures claimed on the SEFA. We are now documenting the difference between all GL transactions and those submitted for sponsor reimbursement (i.e., SEFA components) in a single document per fund code, arranged by fiscal year. Previously this documentation was kept by invoice and arranged by grant year. Management will continue to ensure all expenditure-related support, such as invoices and purchase orders, is saved electronically to all AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) financial transactions. SEFA Reconciliation – Management has decided to move from an annual to quarterly SEFA reconciliation process to enhance the frequency of management oversight in SEFA draft preparation. VP of Finance will prepare the SEFA for independent review by the CFO. This will be put into a written policy/procedure. System Enhancements – Prism's current accounting system does not accommodate this. However, Prism is already in the later stages of selecting a new Enterprise Resource Planning (ERP) solution, with this as one of our key selection criteria. Our new ERP should allow for expenditures within the same cost center to be identified as grant-reimbursable or non-grant-reimbursable at the time of entry. We have identified opportunities in new financial management software solutions that we are scheduled to demo May 12th and the 16th of 2025. Opportunities such as: The ability to tag grant-reimbursable transactions, to segment our award cost center into two important categories. The full cost to manage a specific program. Identified cost claimed on the SEFA. Dedicated grant modules that will allow us to establish business rules and workflows to streamline and digitize critical aspects of grant management. Staff Engagement – Cross department coordination meetings occur monthly between the Finance organization and the Grants Management team to continue to foster alignment and collaboration in our grant cycles. A general overview of SEFA, including how to prepare and organize the monthly reconciliations, has already occurred with some of the grants accountants. _________________________________________________________
Finding number: 2023-005 Significant Deficiency in Internal Control Over Compliance: Allowable Costs and Activities Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914 Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917 Federal Program #3 HIV Prevention Activities: CFDA Number: 93.941 Name of federal agency: U.S. Department of Health and Human Services (HHS) Name of pass-through entity: Multiple Repeat finding: No AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Criteria: Under 2 CFR §200.303, recipients of federal funds must establish and maintain effective internal controls to ensure compliance with federal statutes, regulations, and the terms of grant agreements. 2 CFR §200.403 specifies that costs charged to federal programs must be allowable, necessary, reasonable, and allocable to the respective award. Additionally, 2 CFR §200.302 requires financial management systems to provide effective control and accountability over federal funds, including documented approval of expenditures. A best practice for grant compliance is to implement a documented approval process for expenditures charged to federal programs, ensuring that all costs are reviewed and supported by adequate documentation before reimbursement requests are submitted. Condition: The Organization did not have readily-available documented evidence of review and approval for expenditures charged to federal grants during the fiscal year. Specifically: The financial system did not capture or document approval of expenditures before they were charged to federal programs. No formalized system existed to retain evidence of grant-related expenditure reviews. While the prior Chief Financial Officer (CFO) manually reviewed each invoice, there was no indication of approval on the supporting documentation, making it impossible to verify that an appropriate review occurred before costs were charged to the grants. Cause: The issue arose due to the Organization's reliance on a manual review process conducted by the previous CFO, without requiring a formal approval signature or electronic system control to document review. This lack of a structured approval process resulted in insufficient evidence to support compliance with federal allowable cost requirements. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Possible effect: Without a documented approval process, the Organization cannot demonstrate that expenditures charged to the grants were properly reviewed for allowability, reasonableness, and allocability in accordance with federal regulations. This increases the risk that: Unallowable or misclassified expenditures could be charged to the grants without detection. Noncompliance with federal grant requirements could result in questioned costs or additional oversight from funding agencies. Financial statement and grant reporting inaccuracies may occur if expenditures are not properly reviewed and approved. Although no specific unallowable costs were identified during the audit, the lack of documented review represents a significant deficiency in internal control over compliance. Questioned cost: None identified at this time. Recommendation: We recommend that the Organization strengthen its internal controls over grant expenditures by implementing the following measures: 1. Implement a Formal Expenditure Review and Approval Policy – Establish a policy requiring that all expenditures charged to grants be reviewed and approved by an appropriate individual before being recorded in the system. 2. Require Documentation of Review and Approval – Ensure that invoices, payroll allocations, and other cost support documents include a signature, initials, or system-generated approval to confirm review. 3. Utilize System-Based Controls – If possible, configure the financial system to require electronic approval for all grant-related expenditures before costs are recorded. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Views of responsible officials: Management partially agrees with the finding. While we acknowledge that documentation of expenditure approval was not always retrievable, we believe the expenditures reviewed were all appropriate. Finding 2023-005 refers to the auditors' assessment of expenditure review and approval processes that occurred in Calendar Year 2023. During Calendar Year 2023, Prism relied on email routing of expenditures for review and approval. As of this writing, Prism Health North Texas' expenditure review and approval processes already meet or exceed the recommendations above. Action Taken: Expenditure Review – All expenditures charged to grants are reviewed and approved by two qualified individuals. Documentation of Review and Approval – Such review and approval for non-payroll expenditures occur in and are documented in the SAP Concur software before the costs are recorded in the accounting system (Abila). Such review and approval for payroll-related expenditures occur via and are documented via a combination of methods, also before they are recorded in Abila. Employees report their time, including how much time was devoted to grant activities, in the ExponentHR payroll system, and their supervisors approve both the time and the allocation in that system. Programmatic measures that also support grant billing ("units") are calculated from activity documented in the athenaOne electronic health record (EHR). Payroll allocation is calculated by one person, based on the ExponentHR documentation and the units, then reviewed and imported into Abila by a second person. The unposted transactions are reviewed again before posting. Utilize System-Based Controls – In place as above. _________________________________________________________
Finding number: 2023-004 – Material Weakness in Internal Control Over Preparation, Reconciliation, and Retention of the Schedule of Expenditures of Federal Awards (SEFA) Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number: 93.914 Federal Program #2 HIV Care Formula Grants): CFDA Number: 93.917 Federal Program #3: HIV Prevention Activities: CFDA Number: 93.941 Name of federal agency: U.S. Department of Health and Human Services (HHS) Name of pass-through entity: Multiple Repeat finding: No AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Criteria: Under 2 CFR §200.510(b), recipients of federal funds are required to prepare a Schedule of Expenditures of Federal Awards (SEFA) that fairly presents federal expenditures for each grant program and is derived from and supported by the entity's accounting records. Additionally, 2 CFR §200.302 requires that financial management systems adequately identify and account for federal awards to ensure accuracy and compliance with applicable federal requirements. Best practices dictate that federal expenditures should be reconciled regularly to the general ledger, and supporting documentation should be maintained to substantiate amounts reported on the SEFA. Condition: The Organization lacked adequate controls over the preparation, reconciliation, and retention of records related to the SEFA. Specifically: The SEFA incorrectly reported certain federal awards as non-federal awards. The SEFA is prepared based on amounts requested for reimbursement instead of directly based on expenditures incurred. Reconciliation schedules that tied SEFA expenditures directly back to the expenses recorded in the general ledger could not be located. Expenses recorded in the general ledger represent expenses incurred to operate the program in addition to direct grant expenditures; the Organization only requests reimbursement for direct program expenditures allowable under the program. Documentation of Excel-based reconciliations did not agree to reported monthly expenditures, indicating manual reclassification entries between program codes that were not clearly supported. Cause: The deficiencies noted were primarily due to: Lack of system controls to ensure that state and federal expenditures were separately tracked from non-grant funds spent within the same source codes. Turnover in grants management personnel, which resulted in missing, incomplete, or inaccurate reconciling records. Possible effect: Without a complete and accurate SEFA, the Organization risks noncompliance with Uniform Guidance reporting requirements, which could impact its ability to receive and administer federal funds in the future. Additionally, inaccurate SEFA reporting increases the risk of errors in administering funds, questioned costs, and over or under expenditure of grants. Questioned cost: None identified at this time. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Recommendation: We recommend that the Organization implement the following measures to improve SEFA preparation and record retention: 1. Develop a Standardized SEFA Reconciliation Process – Implement formal policies and procedures requiring that SEFA expenditures be reconciled to the general ledger on a monthly basis, with documentation maintained for audit purposes. 2. Enhance System Controls for Grant Expenditures – Modify the financial system to allow for the proper segregation of state and federal expenditures from non-grant funds, ensuring that expenditures are properly classified at the time of entry. 3. Require Monthly Documentation Reviews – Establish a control requiring management to review and approve SEFA reconciliation schedules on a monthly or quarterly basis to ensure accuracy and completeness. 4. Implement a Centralized Documentation Retention Policy – Require that all SEFA-related reconciliation records, including general ledger tie-outs and manual adjustments, be retained in a centralized, accessible location. 5. Provide Grants Management Training – Conduct training for grants management and accounting personnel on SEFA preparation requirements, including Uniform Guidance compliance and best practices for documentation and reconciliation. 6. By implementing these measures, the Organization can improve its internal controls over SEFA preparation, ensure compliance with Uniform Guidance, and reduce the risk of reporting inaccuracies. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Views of responsible officials: Management partially agrees with the finding. While we acknowledge that documentation supporting SEFA reconciliation was incomplete, we believe that federal expenditures were properly accounted for. We would like to address some of the auditors' points individually: "The SEFA is prepared based on amounts requested for reimbursement instead of directly based on expenditures incurred." Most grant awards do not fully fund the programs they support, most grant awards do not run concurrently with Prism Health North Texas' fiscal year (i.e., with the Calendar Year), and most grant awards are not spent in equal monthly amounts. It is correct that the 2023 SEFA was based on grant-appropriate expenditures that occurred during Calendar Year 2023 and were submitted to those grant sponsors for reimbursement. This will not necessarily reach the full cost to Prism for each grant-supported program, nor is it likely to exactly match any annual grant award amount. "Expenses recorded in the general ledger represent expenses incurred to operate the program in addition to direct grant expenditures; the Organization only requests reimbursement for direct program expenditures allowable under the program." As we confirmed verbally with the audit partner on April 25, 2025, this statement is intended to provide information and context and is not a criticism or intended to point out any problem. As stated above, most grant awards do not fully fund the programs they support; therefore, the general ledger necessarily includes both expenses the sponsor will reimburse and expenses the sponsor will not reimburse. Nonetheless, we are enhancing our reconciliation procedures and documentation practices to fully meet audit requirements. Finding 2023-004 refers to the auditors' assessment of the SEFA preparation and reconciliation processes that occurred in Calendar Year 2023. As of this writing, Prism Health North Texas has already changed its SEFA preparation and reconciliation processes and meets many of the recommendations above. Action Taken: Documentation Retention – On April 25, 2025, management created a structured and easily accessible system for storing all relevant information for all grants management personnel. A logical naming system for files identifying the SEFA period, the funding agency and identified general ledger expenditures claimed on the SEFA. We are now documenting the difference between all GL transactions and those submitted for sponsor reimbursement (i.e., SEFA components) in a single document per fund code, arranged by fiscal year. Previously this documentation was kept by invoice and arranged by grant year. Management will continue to ensure all expenditure-related support, such as invoices and purchase orders, is saved electronically to all AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) financial transactions. SEFA Reconciliation – Management has decided to move from an annual to quarterly SEFA reconciliation process to enhance the frequency of management oversight in SEFA draft preparation. VP of Finance will prepare the SEFA for independent review by the CFO. This will be put into a written policy/procedure. System Enhancements – Prism's current accounting system does not accommodate this. However, Prism is already in the later stages of selecting a new Enterprise Resource Planning (ERP) solution, with this as one of our key selection criteria. Our new ERP should allow for expenditures within the same cost center to be identified as grant-reimbursable or non-grant-reimbursable at the time of entry. We have identified opportunities in new financial management software solutions that we are scheduled to demo May 12th and the 16th of 2025. Opportunities such as: The ability to tag grant-reimbursable transactions, to segment our award cost center into two important categories. The full cost to manage a specific program. Identified cost claimed on the SEFA. Dedicated grant modules that will allow us to establish business rules and workflows to streamline and digitize critical aspects of grant management. Staff Engagement – Cross department coordination meetings occur monthly between the Finance organization and the Grants Management team to continue to foster alignment and collaboration in our grant cycles. A general overview of SEFA, including how to prepare and organize the monthly reconciliations, has already occurred with some of the grants accountants. _________________________________________________________
Finding number: 2023-005 Significant Deficiency in Internal Control Over Compliance: Allowable Costs and Activities Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914 Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917 Federal Program #3 HIV Prevention Activities: CFDA Number: 93.941 Name of federal agency: U.S. Department of Health and Human Services (HHS) Name of pass-through entity: Multiple Repeat finding: No AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Criteria: Under 2 CFR §200.303, recipients of federal funds must establish and maintain effective internal controls to ensure compliance with federal statutes, regulations, and the terms of grant agreements. 2 CFR §200.403 specifies that costs charged to federal programs must be allowable, necessary, reasonable, and allocable to the respective award. Additionally, 2 CFR §200.302 requires financial management systems to provide effective control and accountability over federal funds, including documented approval of expenditures. A best practice for grant compliance is to implement a documented approval process for expenditures charged to federal programs, ensuring that all costs are reviewed and supported by adequate documentation before reimbursement requests are submitted. Condition: The Organization did not have readily-available documented evidence of review and approval for expenditures charged to federal grants during the fiscal year. Specifically: The financial system did not capture or document approval of expenditures before they were charged to federal programs. No formalized system existed to retain evidence of grant-related expenditure reviews. While the prior Chief Financial Officer (CFO) manually reviewed each invoice, there was no indication of approval on the supporting documentation, making it impossible to verify that an appropriate review occurred before costs were charged to the grants. Cause: The issue arose due to the Organization's reliance on a manual review process conducted by the previous CFO, without requiring a formal approval signature or electronic system control to document review. This lack of a structured approval process resulted in insufficient evidence to support compliance with federal allowable cost requirements. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Possible effect: Without a documented approval process, the Organization cannot demonstrate that expenditures charged to the grants were properly reviewed for allowability, reasonableness, and allocability in accordance with federal regulations. This increases the risk that: Unallowable or misclassified expenditures could be charged to the grants without detection. Noncompliance with federal grant requirements could result in questioned costs or additional oversight from funding agencies. Financial statement and grant reporting inaccuracies may occur if expenditures are not properly reviewed and approved. Although no specific unallowable costs were identified during the audit, the lack of documented review represents a significant deficiency in internal control over compliance. Questioned cost: None identified at this time. Recommendation: We recommend that the Organization strengthen its internal controls over grant expenditures by implementing the following measures: 1. Implement a Formal Expenditure Review and Approval Policy – Establish a policy requiring that all expenditures charged to grants be reviewed and approved by an appropriate individual before being recorded in the system. 2. Require Documentation of Review and Approval – Ensure that invoices, payroll allocations, and other cost support documents include a signature, initials, or system-generated approval to confirm review. 3. Utilize System-Based Controls – If possible, configure the financial system to require electronic approval for all grant-related expenditures before costs are recorded. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Views of responsible officials: Management partially agrees with the finding. While we acknowledge that documentation of expenditure approval was not always retrievable, we believe the expenditures reviewed were all appropriate. Finding 2023-005 refers to the auditors' assessment of expenditure review and approval processes that occurred in Calendar Year 2023. During Calendar Year 2023, Prism relied on email routing of expenditures for review and approval. As of this writing, Prism Health North Texas' expenditure review and approval processes already meet or exceed the recommendations above. Action Taken: Expenditure Review – All expenditures charged to grants are reviewed and approved by two qualified individuals. Documentation of Review and Approval – Such review and approval for non-payroll expenditures occur in and are documented in the SAP Concur software before the costs are recorded in the accounting system (Abila). Such review and approval for payroll-related expenditures occur via and are documented via a combination of methods, also before they are recorded in Abila. Employees report their time, including how much time was devoted to grant activities, in the ExponentHR payroll system, and their supervisors approve both the time and the allocation in that system. Programmatic measures that also support grant billing ("units") are calculated from activity documented in the athenaOne electronic health record (EHR). Payroll allocation is calculated by one person, based on the ExponentHR documentation and the units, then reviewed and imported into Abila by a second person. The unposted transactions are reviewed again before posting. Utilize System-Based Controls – In place as above. _________________________________________________________
Finding number: 2023-004 – Material Weakness in Internal Control Over Preparation, Reconciliation, and Retention of the Schedule of Expenditures of Federal Awards (SEFA) Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number: 93.914 Federal Program #2 HIV Care Formula Grants): CFDA Number: 93.917 Federal Program #3: HIV Prevention Activities: CFDA Number: 93.941 Name of federal agency: U.S. Department of Health and Human Services (HHS) Name of pass-through entity: Multiple Repeat finding: No AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Criteria: Under 2 CFR §200.510(b), recipients of federal funds are required to prepare a Schedule of Expenditures of Federal Awards (SEFA) that fairly presents federal expenditures for each grant program and is derived from and supported by the entity's accounting records. Additionally, 2 CFR §200.302 requires that financial management systems adequately identify and account for federal awards to ensure accuracy and compliance with applicable federal requirements. Best practices dictate that federal expenditures should be reconciled regularly to the general ledger, and supporting documentation should be maintained to substantiate amounts reported on the SEFA. Condition: The Organization lacked adequate controls over the preparation, reconciliation, and retention of records related to the SEFA. Specifically: The SEFA incorrectly reported certain federal awards as non-federal awards. The SEFA is prepared based on amounts requested for reimbursement instead of directly based on expenditures incurred. Reconciliation schedules that tied SEFA expenditures directly back to the expenses recorded in the general ledger could not be located. Expenses recorded in the general ledger represent expenses incurred to operate the program in addition to direct grant expenditures; the Organization only requests reimbursement for direct program expenditures allowable under the program. Documentation of Excel-based reconciliations did not agree to reported monthly expenditures, indicating manual reclassification entries between program codes that were not clearly supported. Cause: The deficiencies noted were primarily due to: Lack of system controls to ensure that state and federal expenditures were separately tracked from non-grant funds spent within the same source codes. Turnover in grants management personnel, which resulted in missing, incomplete, or inaccurate reconciling records. Possible effect: Without a complete and accurate SEFA, the Organization risks noncompliance with Uniform Guidance reporting requirements, which could impact its ability to receive and administer federal funds in the future. Additionally, inaccurate SEFA reporting increases the risk of errors in administering funds, questioned costs, and over or under expenditure of grants. Questioned cost: None identified at this time. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Recommendation: We recommend that the Organization implement the following measures to improve SEFA preparation and record retention: 1. Develop a Standardized SEFA Reconciliation Process – Implement formal policies and procedures requiring that SEFA expenditures be reconciled to the general ledger on a monthly basis, with documentation maintained for audit purposes. 2. Enhance System Controls for Grant Expenditures – Modify the financial system to allow for the proper segregation of state and federal expenditures from non-grant funds, ensuring that expenditures are properly classified at the time of entry. 3. Require Monthly Documentation Reviews – Establish a control requiring management to review and approve SEFA reconciliation schedules on a monthly or quarterly basis to ensure accuracy and completeness. 4. Implement a Centralized Documentation Retention Policy – Require that all SEFA-related reconciliation records, including general ledger tie-outs and manual adjustments, be retained in a centralized, accessible location. 5. Provide Grants Management Training – Conduct training for grants management and accounting personnel on SEFA preparation requirements, including Uniform Guidance compliance and best practices for documentation and reconciliation. 6. By implementing these measures, the Organization can improve its internal controls over SEFA preparation, ensure compliance with Uniform Guidance, and reduce the risk of reporting inaccuracies. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Views of responsible officials: Management partially agrees with the finding. While we acknowledge that documentation supporting SEFA reconciliation was incomplete, we believe that federal expenditures were properly accounted for. We would like to address some of the auditors' points individually: "The SEFA is prepared based on amounts requested for reimbursement instead of directly based on expenditures incurred." Most grant awards do not fully fund the programs they support, most grant awards do not run concurrently with Prism Health North Texas' fiscal year (i.e., with the Calendar Year), and most grant awards are not spent in equal monthly amounts. It is correct that the 2023 SEFA was based on grant-appropriate expenditures that occurred during Calendar Year 2023 and were submitted to those grant sponsors for reimbursement. This will not necessarily reach the full cost to Prism for each grant-supported program, nor is it likely to exactly match any annual grant award amount. "Expenses recorded in the general ledger represent expenses incurred to operate the program in addition to direct grant expenditures; the Organization only requests reimbursement for direct program expenditures allowable under the program." As we confirmed verbally with the audit partner on April 25, 2025, this statement is intended to provide information and context and is not a criticism or intended to point out any problem. As stated above, most grant awards do not fully fund the programs they support; therefore, the general ledger necessarily includes both expenses the sponsor will reimburse and expenses the sponsor will not reimburse. Nonetheless, we are enhancing our reconciliation procedures and documentation practices to fully meet audit requirements. Finding 2023-004 refers to the auditors' assessment of the SEFA preparation and reconciliation processes that occurred in Calendar Year 2023. As of this writing, Prism Health North Texas has already changed its SEFA preparation and reconciliation processes and meets many of the recommendations above. Action Taken: Documentation Retention – On April 25, 2025, management created a structured and easily accessible system for storing all relevant information for all grants management personnel. A logical naming system for files identifying the SEFA period, the funding agency and identified general ledger expenditures claimed on the SEFA. We are now documenting the difference between all GL transactions and those submitted for sponsor reimbursement (i.e., SEFA components) in a single document per fund code, arranged by fiscal year. Previously this documentation was kept by invoice and arranged by grant year. Management will continue to ensure all expenditure-related support, such as invoices and purchase orders, is saved electronically to all AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) financial transactions. SEFA Reconciliation – Management has decided to move from an annual to quarterly SEFA reconciliation process to enhance the frequency of management oversight in SEFA draft preparation. VP of Finance will prepare the SEFA for independent review by the CFO. This will be put into a written policy/procedure. System Enhancements – Prism's current accounting system does not accommodate this. However, Prism is already in the later stages of selecting a new Enterprise Resource Planning (ERP) solution, with this as one of our key selection criteria. Our new ERP should allow for expenditures within the same cost center to be identified as grant-reimbursable or non-grant-reimbursable at the time of entry. We have identified opportunities in new financial management software solutions that we are scheduled to demo May 12th and the 16th of 2025. Opportunities such as: The ability to tag grant-reimbursable transactions, to segment our award cost center into two important categories. The full cost to manage a specific program. Identified cost claimed on the SEFA. Dedicated grant modules that will allow us to establish business rules and workflows to streamline and digitize critical aspects of grant management. Staff Engagement – Cross department coordination meetings occur monthly between the Finance organization and the Grants Management team to continue to foster alignment and collaboration in our grant cycles. A general overview of SEFA, including how to prepare and organize the monthly reconciliations, has already occurred with some of the grants accountants. _________________________________________________________
Finding number: 2023-005 Significant Deficiency in Internal Control Over Compliance: Allowable Costs and Activities Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914 Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917 Federal Program #3 HIV Prevention Activities: CFDA Number: 93.941 Name of federal agency: U.S. Department of Health and Human Services (HHS) Name of pass-through entity: Multiple Repeat finding: No AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Criteria: Under 2 CFR §200.303, recipients of federal funds must establish and maintain effective internal controls to ensure compliance with federal statutes, regulations, and the terms of grant agreements. 2 CFR §200.403 specifies that costs charged to federal programs must be allowable, necessary, reasonable, and allocable to the respective award. Additionally, 2 CFR §200.302 requires financial management systems to provide effective control and accountability over federal funds, including documented approval of expenditures. A best practice for grant compliance is to implement a documented approval process for expenditures charged to federal programs, ensuring that all costs are reviewed and supported by adequate documentation before reimbursement requests are submitted. Condition: The Organization did not have readily-available documented evidence of review and approval for expenditures charged to federal grants during the fiscal year. Specifically: The financial system did not capture or document approval of expenditures before they were charged to federal programs. No formalized system existed to retain evidence of grant-related expenditure reviews. While the prior Chief Financial Officer (CFO) manually reviewed each invoice, there was no indication of approval on the supporting documentation, making it impossible to verify that an appropriate review occurred before costs were charged to the grants. Cause: The issue arose due to the Organization's reliance on a manual review process conducted by the previous CFO, without requiring a formal approval signature or electronic system control to document review. This lack of a structured approval process resulted in insufficient evidence to support compliance with federal allowable cost requirements. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Possible effect: Without a documented approval process, the Organization cannot demonstrate that expenditures charged to the grants were properly reviewed for allowability, reasonableness, and allocability in accordance with federal regulations. This increases the risk that: Unallowable or misclassified expenditures could be charged to the grants without detection. Noncompliance with federal grant requirements could result in questioned costs or additional oversight from funding agencies. Financial statement and grant reporting inaccuracies may occur if expenditures are not properly reviewed and approved. Although no specific unallowable costs were identified during the audit, the lack of documented review represents a significant deficiency in internal control over compliance. Questioned cost: None identified at this time. Recommendation: We recommend that the Organization strengthen its internal controls over grant expenditures by implementing the following measures: 1. Implement a Formal Expenditure Review and Approval Policy – Establish a policy requiring that all expenditures charged to grants be reviewed and approved by an appropriate individual before being recorded in the system. 2. Require Documentation of Review and Approval – Ensure that invoices, payroll allocations, and other cost support documents include a signature, initials, or system-generated approval to confirm review. 3. Utilize System-Based Controls – If possible, configure the financial system to require electronic approval for all grant-related expenditures before costs are recorded. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Views of responsible officials: Management partially agrees with the finding. While we acknowledge that documentation of expenditure approval was not always retrievable, we believe the expenditures reviewed were all appropriate. Finding 2023-005 refers to the auditors' assessment of expenditure review and approval processes that occurred in Calendar Year 2023. During Calendar Year 2023, Prism relied on email routing of expenditures for review and approval. As of this writing, Prism Health North Texas' expenditure review and approval processes already meet or exceed the recommendations above. Action Taken: Expenditure Review – All expenditures charged to grants are reviewed and approved by two qualified individuals. Documentation of Review and Approval – Such review and approval for non-payroll expenditures occur in and are documented in the SAP Concur software before the costs are recorded in the accounting system (Abila). Such review and approval for payroll-related expenditures occur via and are documented via a combination of methods, also before they are recorded in Abila. Employees report their time, including how much time was devoted to grant activities, in the ExponentHR payroll system, and their supervisors approve both the time and the allocation in that system. Programmatic measures that also support grant billing ("units") are calculated from activity documented in the athenaOne electronic health record (EHR). Payroll allocation is calculated by one person, based on the ExponentHR documentation and the units, then reviewed and imported into Abila by a second person. The unposted transactions are reviewed again before posting. Utilize System-Based Controls – In place as above. _________________________________________________________
Finding number: 2023-004 – Material Weakness in Internal Control Over Preparation, Reconciliation, and Retention of the Schedule of Expenditures of Federal Awards (SEFA) Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number: 93.914 Federal Program #2 HIV Care Formula Grants): CFDA Number: 93.917 Federal Program #3: HIV Prevention Activities: CFDA Number: 93.941 Name of federal agency: U.S. Department of Health and Human Services (HHS) Name of pass-through entity: Multiple Repeat finding: No AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Criteria: Under 2 CFR §200.510(b), recipients of federal funds are required to prepare a Schedule of Expenditures of Federal Awards (SEFA) that fairly presents federal expenditures for each grant program and is derived from and supported by the entity's accounting records. Additionally, 2 CFR §200.302 requires that financial management systems adequately identify and account for federal awards to ensure accuracy and compliance with applicable federal requirements. Best practices dictate that federal expenditures should be reconciled regularly to the general ledger, and supporting documentation should be maintained to substantiate amounts reported on the SEFA. Condition: The Organization lacked adequate controls over the preparation, reconciliation, and retention of records related to the SEFA. Specifically: The SEFA incorrectly reported certain federal awards as non-federal awards. The SEFA is prepared based on amounts requested for reimbursement instead of directly based on expenditures incurred. Reconciliation schedules that tied SEFA expenditures directly back to the expenses recorded in the general ledger could not be located. Expenses recorded in the general ledger represent expenses incurred to operate the program in addition to direct grant expenditures; the Organization only requests reimbursement for direct program expenditures allowable under the program. Documentation of Excel-based reconciliations did not agree to reported monthly expenditures, indicating manual reclassification entries between program codes that were not clearly supported. Cause: The deficiencies noted were primarily due to: Lack of system controls to ensure that state and federal expenditures were separately tracked from non-grant funds spent within the same source codes. Turnover in grants management personnel, which resulted in missing, incomplete, or inaccurate reconciling records. Possible effect: Without a complete and accurate SEFA, the Organization risks noncompliance with Uniform Guidance reporting requirements, which could impact its ability to receive and administer federal funds in the future. Additionally, inaccurate SEFA reporting increases the risk of errors in administering funds, questioned costs, and over or under expenditure of grants. Questioned cost: None identified at this time. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Recommendation: We recommend that the Organization implement the following measures to improve SEFA preparation and record retention: 1. Develop a Standardized SEFA Reconciliation Process – Implement formal policies and procedures requiring that SEFA expenditures be reconciled to the general ledger on a monthly basis, with documentation maintained for audit purposes. 2. Enhance System Controls for Grant Expenditures – Modify the financial system to allow for the proper segregation of state and federal expenditures from non-grant funds, ensuring that expenditures are properly classified at the time of entry. 3. Require Monthly Documentation Reviews – Establish a control requiring management to review and approve SEFA reconciliation schedules on a monthly or quarterly basis to ensure accuracy and completeness. 4. Implement a Centralized Documentation Retention Policy – Require that all SEFA-related reconciliation records, including general ledger tie-outs and manual adjustments, be retained in a centralized, accessible location. 5. Provide Grants Management Training – Conduct training for grants management and accounting personnel on SEFA preparation requirements, including Uniform Guidance compliance and best practices for documentation and reconciliation. 6. By implementing these measures, the Organization can improve its internal controls over SEFA preparation, ensure compliance with Uniform Guidance, and reduce the risk of reporting inaccuracies. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Views of responsible officials: Management partially agrees with the finding. While we acknowledge that documentation supporting SEFA reconciliation was incomplete, we believe that federal expenditures were properly accounted for. We would like to address some of the auditors' points individually: "The SEFA is prepared based on amounts requested for reimbursement instead of directly based on expenditures incurred." Most grant awards do not fully fund the programs they support, most grant awards do not run concurrently with Prism Health North Texas' fiscal year (i.e., with the Calendar Year), and most grant awards are not spent in equal monthly amounts. It is correct that the 2023 SEFA was based on grant-appropriate expenditures that occurred during Calendar Year 2023 and were submitted to those grant sponsors for reimbursement. This will not necessarily reach the full cost to Prism for each grant-supported program, nor is it likely to exactly match any annual grant award amount. "Expenses recorded in the general ledger represent expenses incurred to operate the program in addition to direct grant expenditures; the Organization only requests reimbursement for direct program expenditures allowable under the program." As we confirmed verbally with the audit partner on April 25, 2025, this statement is intended to provide information and context and is not a criticism or intended to point out any problem. As stated above, most grant awards do not fully fund the programs they support; therefore, the general ledger necessarily includes both expenses the sponsor will reimburse and expenses the sponsor will not reimburse. Nonetheless, we are enhancing our reconciliation procedures and documentation practices to fully meet audit requirements. Finding 2023-004 refers to the auditors' assessment of the SEFA preparation and reconciliation processes that occurred in Calendar Year 2023. As of this writing, Prism Health North Texas has already changed its SEFA preparation and reconciliation processes and meets many of the recommendations above. Action Taken: Documentation Retention – On April 25, 2025, management created a structured and easily accessible system for storing all relevant information for all grants management personnel. A logical naming system for files identifying the SEFA period, the funding agency and identified general ledger expenditures claimed on the SEFA. We are now documenting the difference between all GL transactions and those submitted for sponsor reimbursement (i.e., SEFA components) in a single document per fund code, arranged by fiscal year. Previously this documentation was kept by invoice and arranged by grant year. Management will continue to ensure all expenditure-related support, such as invoices and purchase orders, is saved electronically to all AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) financial transactions. SEFA Reconciliation – Management has decided to move from an annual to quarterly SEFA reconciliation process to enhance the frequency of management oversight in SEFA draft preparation. VP of Finance will prepare the SEFA for independent review by the CFO. This will be put into a written policy/procedure. System Enhancements – Prism's current accounting system does not accommodate this. However, Prism is already in the later stages of selecting a new Enterprise Resource Planning (ERP) solution, with this as one of our key selection criteria. Our new ERP should allow for expenditures within the same cost center to be identified as grant-reimbursable or non-grant-reimbursable at the time of entry. We have identified opportunities in new financial management software solutions that we are scheduled to demo May 12th and the 16th of 2025. Opportunities such as: The ability to tag grant-reimbursable transactions, to segment our award cost center into two important categories. The full cost to manage a specific program. Identified cost claimed on the SEFA. Dedicated grant modules that will allow us to establish business rules and workflows to streamline and digitize critical aspects of grant management. Staff Engagement – Cross department coordination meetings occur monthly between the Finance organization and the Grants Management team to continue to foster alignment and collaboration in our grant cycles. A general overview of SEFA, including how to prepare and organize the monthly reconciliations, has already occurred with some of the grants accountants. _________________________________________________________
Finding number: 2023-005 Significant Deficiency in Internal Control Over Compliance: Allowable Costs and Activities Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914 Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917 Federal Program #3 HIV Prevention Activities: CFDA Number: 93.941 Name of federal agency: U.S. Department of Health and Human Services (HHS) Name of pass-through entity: Multiple Repeat finding: No AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Criteria: Under 2 CFR §200.303, recipients of federal funds must establish and maintain effective internal controls to ensure compliance with federal statutes, regulations, and the terms of grant agreements. 2 CFR §200.403 specifies that costs charged to federal programs must be allowable, necessary, reasonable, and allocable to the respective award. Additionally, 2 CFR §200.302 requires financial management systems to provide effective control and accountability over federal funds, including documented approval of expenditures. A best practice for grant compliance is to implement a documented approval process for expenditures charged to federal programs, ensuring that all costs are reviewed and supported by adequate documentation before reimbursement requests are submitted. Condition: The Organization did not have readily-available documented evidence of review and approval for expenditures charged to federal grants during the fiscal year. Specifically: The financial system did not capture or document approval of expenditures before they were charged to federal programs. No formalized system existed to retain evidence of grant-related expenditure reviews. While the prior Chief Financial Officer (CFO) manually reviewed each invoice, there was no indication of approval on the supporting documentation, making it impossible to verify that an appropriate review occurred before costs were charged to the grants. Cause: The issue arose due to the Organization's reliance on a manual review process conducted by the previous CFO, without requiring a formal approval signature or electronic system control to document review. This lack of a structured approval process resulted in insufficient evidence to support compliance with federal allowable cost requirements. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Possible effect: Without a documented approval process, the Organization cannot demonstrate that expenditures charged to the grants were properly reviewed for allowability, reasonableness, and allocability in accordance with federal regulations. This increases the risk that: Unallowable or misclassified expenditures could be charged to the grants without detection. Noncompliance with federal grant requirements could result in questioned costs or additional oversight from funding agencies. Financial statement and grant reporting inaccuracies may occur if expenditures are not properly reviewed and approved. Although no specific unallowable costs were identified during the audit, the lack of documented review represents a significant deficiency in internal control over compliance. Questioned cost: None identified at this time. Recommendation: We recommend that the Organization strengthen its internal controls over grant expenditures by implementing the following measures: 1. Implement a Formal Expenditure Review and Approval Policy – Establish a policy requiring that all expenditures charged to grants be reviewed and approved by an appropriate individual before being recorded in the system. 2. Require Documentation of Review and Approval – Ensure that invoices, payroll allocations, and other cost support documents include a signature, initials, or system-generated approval to confirm review. 3. Utilize System-Based Controls – If possible, configure the financial system to require electronic approval for all grant-related expenditures before costs are recorded. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Views of responsible officials: Management partially agrees with the finding. While we acknowledge that documentation of expenditure approval was not always retrievable, we believe the expenditures reviewed were all appropriate. Finding 2023-005 refers to the auditors' assessment of expenditure review and approval processes that occurred in Calendar Year 2023. During Calendar Year 2023, Prism relied on email routing of expenditures for review and approval. As of this writing, Prism Health North Texas' expenditure review and approval processes already meet or exceed the recommendations above. Action Taken: Expenditure Review – All expenditures charged to grants are reviewed and approved by two qualified individuals. Documentation of Review and Approval – Such review and approval for non-payroll expenditures occur in and are documented in the SAP Concur software before the costs are recorded in the accounting system (Abila). Such review and approval for payroll-related expenditures occur via and are documented via a combination of methods, also before they are recorded in Abila. Employees report their time, including how much time was devoted to grant activities, in the ExponentHR payroll system, and their supervisors approve both the time and the allocation in that system. Programmatic measures that also support grant billing ("units") are calculated from activity documented in the athenaOne electronic health record (EHR). Payroll allocation is calculated by one person, based on the ExponentHR documentation and the units, then reviewed and imported into Abila by a second person. The unposted transactions are reviewed again before posting. Utilize System-Based Controls – In place as above. _________________________________________________________
Finding number: 2023-004 – Material Weakness in Internal Control Over Preparation, Reconciliation, and Retention of the Schedule of Expenditures of Federal Awards (SEFA) Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number: 93.914 Federal Program #2 HIV Care Formula Grants): CFDA Number: 93.917 Federal Program #3: HIV Prevention Activities: CFDA Number: 93.941 Name of federal agency: U.S. Department of Health and Human Services (HHS) Name of pass-through entity: Multiple Repeat finding: No AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Criteria: Under 2 CFR §200.510(b), recipients of federal funds are required to prepare a Schedule of Expenditures of Federal Awards (SEFA) that fairly presents federal expenditures for each grant program and is derived from and supported by the entity's accounting records. Additionally, 2 CFR §200.302 requires that financial management systems adequately identify and account for federal awards to ensure accuracy and compliance with applicable federal requirements. Best practices dictate that federal expenditures should be reconciled regularly to the general ledger, and supporting documentation should be maintained to substantiate amounts reported on the SEFA. Condition: The Organization lacked adequate controls over the preparation, reconciliation, and retention of records related to the SEFA. Specifically: The SEFA incorrectly reported certain federal awards as non-federal awards. The SEFA is prepared based on amounts requested for reimbursement instead of directly based on expenditures incurred. Reconciliation schedules that tied SEFA expenditures directly back to the expenses recorded in the general ledger could not be located. Expenses recorded in the general ledger represent expenses incurred to operate the program in addition to direct grant expenditures; the Organization only requests reimbursement for direct program expenditures allowable under the program. Documentation of Excel-based reconciliations did not agree to reported monthly expenditures, indicating manual reclassification entries between program codes that were not clearly supported. Cause: The deficiencies noted were primarily due to: Lack of system controls to ensure that state and federal expenditures were separately tracked from non-grant funds spent within the same source codes. Turnover in grants management personnel, which resulted in missing, incomplete, or inaccurate reconciling records. Possible effect: Without a complete and accurate SEFA, the Organization risks noncompliance with Uniform Guidance reporting requirements, which could impact its ability to receive and administer federal funds in the future. Additionally, inaccurate SEFA reporting increases the risk of errors in administering funds, questioned costs, and over or under expenditure of grants. Questioned cost: None identified at this time. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Recommendation: We recommend that the Organization implement the following measures to improve SEFA preparation and record retention: 1. Develop a Standardized SEFA Reconciliation Process – Implement formal policies and procedures requiring that SEFA expenditures be reconciled to the general ledger on a monthly basis, with documentation maintained for audit purposes. 2. Enhance System Controls for Grant Expenditures – Modify the financial system to allow for the proper segregation of state and federal expenditures from non-grant funds, ensuring that expenditures are properly classified at the time of entry. 3. Require Monthly Documentation Reviews – Establish a control requiring management to review and approve SEFA reconciliation schedules on a monthly or quarterly basis to ensure accuracy and completeness. 4. Implement a Centralized Documentation Retention Policy – Require that all SEFA-related reconciliation records, including general ledger tie-outs and manual adjustments, be retained in a centralized, accessible location. 5. Provide Grants Management Training – Conduct training for grants management and accounting personnel on SEFA preparation requirements, including Uniform Guidance compliance and best practices for documentation and reconciliation. 6. By implementing these measures, the Organization can improve its internal controls over SEFA preparation, ensure compliance with Uniform Guidance, and reduce the risk of reporting inaccuracies. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Views of responsible officials: Management partially agrees with the finding. While we acknowledge that documentation supporting SEFA reconciliation was incomplete, we believe that federal expenditures were properly accounted for. We would like to address some of the auditors' points individually: "The SEFA is prepared based on amounts requested for reimbursement instead of directly based on expenditures incurred." Most grant awards do not fully fund the programs they support, most grant awards do not run concurrently with Prism Health North Texas' fiscal year (i.e., with the Calendar Year), and most grant awards are not spent in equal monthly amounts. It is correct that the 2023 SEFA was based on grant-appropriate expenditures that occurred during Calendar Year 2023 and were submitted to those grant sponsors for reimbursement. This will not necessarily reach the full cost to Prism for each grant-supported program, nor is it likely to exactly match any annual grant award amount. "Expenses recorded in the general ledger represent expenses incurred to operate the program in addition to direct grant expenditures; the Organization only requests reimbursement for direct program expenditures allowable under the program." As we confirmed verbally with the audit partner on April 25, 2025, this statement is intended to provide information and context and is not a criticism or intended to point out any problem. As stated above, most grant awards do not fully fund the programs they support; therefore, the general ledger necessarily includes both expenses the sponsor will reimburse and expenses the sponsor will not reimburse. Nonetheless, we are enhancing our reconciliation procedures and documentation practices to fully meet audit requirements. Finding 2023-004 refers to the auditors' assessment of the SEFA preparation and reconciliation processes that occurred in Calendar Year 2023. As of this writing, Prism Health North Texas has already changed its SEFA preparation and reconciliation processes and meets many of the recommendations above. Action Taken: Documentation Retention – On April 25, 2025, management created a structured and easily accessible system for storing all relevant information for all grants management personnel. A logical naming system for files identifying the SEFA period, the funding agency and identified general ledger expenditures claimed on the SEFA. We are now documenting the difference between all GL transactions and those submitted for sponsor reimbursement (i.e., SEFA components) in a single document per fund code, arranged by fiscal year. Previously this documentation was kept by invoice and arranged by grant year. Management will continue to ensure all expenditure-related support, such as invoices and purchase orders, is saved electronically to all AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) financial transactions. SEFA Reconciliation – Management has decided to move from an annual to quarterly SEFA reconciliation process to enhance the frequency of management oversight in SEFA draft preparation. VP of Finance will prepare the SEFA for independent review by the CFO. This will be put into a written policy/procedure. System Enhancements – Prism's current accounting system does not accommodate this. However, Prism is already in the later stages of selecting a new Enterprise Resource Planning (ERP) solution, with this as one of our key selection criteria. Our new ERP should allow for expenditures within the same cost center to be identified as grant-reimbursable or non-grant-reimbursable at the time of entry. We have identified opportunities in new financial management software solutions that we are scheduled to demo May 12th and the 16th of 2025. Opportunities such as: The ability to tag grant-reimbursable transactions, to segment our award cost center into two important categories. The full cost to manage a specific program. Identified cost claimed on the SEFA. Dedicated grant modules that will allow us to establish business rules and workflows to streamline and digitize critical aspects of grant management. Staff Engagement – Cross department coordination meetings occur monthly between the Finance organization and the Grants Management team to continue to foster alignment and collaboration in our grant cycles. A general overview of SEFA, including how to prepare and organize the monthly reconciliations, has already occurred with some of the grants accountants. _________________________________________________________
Finding number: 2023-005 Significant Deficiency in Internal Control Over Compliance: Allowable Costs and Activities Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914 Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917 Federal Program #3 HIV Prevention Activities: CFDA Number: 93.941 Name of federal agency: U.S. Department of Health and Human Services (HHS) Name of pass-through entity: Multiple Repeat finding: No AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Criteria: Under 2 CFR §200.303, recipients of federal funds must establish and maintain effective internal controls to ensure compliance with federal statutes, regulations, and the terms of grant agreements. 2 CFR §200.403 specifies that costs charged to federal programs must be allowable, necessary, reasonable, and allocable to the respective award. Additionally, 2 CFR §200.302 requires financial management systems to provide effective control and accountability over federal funds, including documented approval of expenditures. A best practice for grant compliance is to implement a documented approval process for expenditures charged to federal programs, ensuring that all costs are reviewed and supported by adequate documentation before reimbursement requests are submitted. Condition: The Organization did not have readily-available documented evidence of review and approval for expenditures charged to federal grants during the fiscal year. Specifically: The financial system did not capture or document approval of expenditures before they were charged to federal programs. No formalized system existed to retain evidence of grant-related expenditure reviews. While the prior Chief Financial Officer (CFO) manually reviewed each invoice, there was no indication of approval on the supporting documentation, making it impossible to verify that an appropriate review occurred before costs were charged to the grants. Cause: The issue arose due to the Organization's reliance on a manual review process conducted by the previous CFO, without requiring a formal approval signature or electronic system control to document review. This lack of a structured approval process resulted in insufficient evidence to support compliance with federal allowable cost requirements. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Possible effect: Without a documented approval process, the Organization cannot demonstrate that expenditures charged to the grants were properly reviewed for allowability, reasonableness, and allocability in accordance with federal regulations. This increases the risk that: Unallowable or misclassified expenditures could be charged to the grants without detection. Noncompliance with federal grant requirements could result in questioned costs or additional oversight from funding agencies. Financial statement and grant reporting inaccuracies may occur if expenditures are not properly reviewed and approved. Although no specific unallowable costs were identified during the audit, the lack of documented review represents a significant deficiency in internal control over compliance. Questioned cost: None identified at this time. Recommendation: We recommend that the Organization strengthen its internal controls over grant expenditures by implementing the following measures: 1. Implement a Formal Expenditure Review and Approval Policy – Establish a policy requiring that all expenditures charged to grants be reviewed and approved by an appropriate individual before being recorded in the system. 2. Require Documentation of Review and Approval – Ensure that invoices, payroll allocations, and other cost support documents include a signature, initials, or system-generated approval to confirm review. 3. Utilize System-Based Controls – If possible, configure the financial system to require electronic approval for all grant-related expenditures before costs are recorded. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Views of responsible officials: Management partially agrees with the finding. While we acknowledge that documentation of expenditure approval was not always retrievable, we believe the expenditures reviewed were all appropriate. Finding 2023-005 refers to the auditors' assessment of expenditure review and approval processes that occurred in Calendar Year 2023. During Calendar Year 2023, Prism relied on email routing of expenditures for review and approval. As of this writing, Prism Health North Texas' expenditure review and approval processes already meet or exceed the recommendations above. Action Taken: Expenditure Review – All expenditures charged to grants are reviewed and approved by two qualified individuals. Documentation of Review and Approval – Such review and approval for non-payroll expenditures occur in and are documented in the SAP Concur software before the costs are recorded in the accounting system (Abila). Such review and approval for payroll-related expenditures occur via and are documented via a combination of methods, also before they are recorded in Abila. Employees report their time, including how much time was devoted to grant activities, in the ExponentHR payroll system, and their supervisors approve both the time and the allocation in that system. Programmatic measures that also support grant billing ("units") are calculated from activity documented in the athenaOne electronic health record (EHR). Payroll allocation is calculated by one person, based on the ExponentHR documentation and the units, then reviewed and imported into Abila by a second person. The unposted transactions are reviewed again before posting. Utilize System-Based Controls – In place as above. _________________________________________________________
Uniform Guidance requires written policies for the requirements outlined in 2 CFR 200.302(b)(7), 2 CFR 200.318(c)(1), 2 CFR 200.318(c)(2), 2 CFR 200.320(b)(2), and 2 CFR 200.319(d). The Village does not have written policies in place for the requirements outlined in the Code of Federal Regulations sections referenced above.
2023-003 Internal Controls and Compliance over Allowable Costs (Significant Deficiency) U.S. Department of Health and Human Services 93.939 HIV Prevention Activities - Non-Governmental Organization Based 2022-2023 and 2023-2024 Funding Criteria: Under 2 CFR Section 200.303(a), non‐federal entities must establish and maintain effective internal controls to provide reasonable assurance that the entity is managing the federal awards in compliance with statues, regulations, and the terms and conditions of the award. Additionally, grantees are required to have a detailed breakout of these costs along with any supporting documents for those expenses for auditing and oversight. Title 2 CFR 200.302 requires the financial management system of each non-Federal entity provide records that identify adequately the source and application of funds for federally-funded activities. Condition: We noted instances of the allocation rates being used to calculate amount of payroll costs to charge to grants did not agree to the hours incurred per approved timesheets. SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (Continued) Cause: The personnel costs charged to the grant were not reconciled to timesheets correctly by the accounting personnel. Effect: AIH requested in error reimbursement for unallowable payroll costs. Questioned Costs: $42 Perspective: Allocation errors were noted for 2 employees in 3 payroll periods tested. Repeat Finding: No Auditor’s Recommendation: Review process should be reevaluated and employees retrained to ensure that only actual hours worked from timesheets are charged to grant. Views of Responsible Officials: We concur with the recommendation, please see Corrective Action Plan.
2023-003 Internal Controls and Compliance over Allowable Costs (Significant Deficiency) U.S. Department of Health and Human Services 93.939 HIV Prevention Activities - Non-Governmental Organization Based 2022-2023 and 2023-2024 Funding Criteria: Under 2 CFR Section 200.303(a), non‐federal entities must establish and maintain effective internal controls to provide reasonable assurance that the entity is managing the federal awards in compliance with statues, regulations, and the terms and conditions of the award. Additionally, grantees are required to have a detailed breakout of these costs along with any supporting documents for those expenses for auditing and oversight. Title 2 CFR 200.302 requires the financial management system of each non-Federal entity provide records that identify adequately the source and application of funds for federally-funded activities. Condition: We noted instances of the allocation rates being used to calculate amount of payroll costs to charge to grants did not agree to the hours incurred per approved timesheets. SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (Continued) Cause: The personnel costs charged to the grant were not reconciled to timesheets correctly by the accounting personnel. Effect: AIH requested in error reimbursement for unallowable payroll costs. Questioned Costs: $42 Perspective: Allocation errors were noted for 2 employees in 3 payroll periods tested. Repeat Finding: No Auditor’s Recommendation: Review process should be reevaluated and employees retrained to ensure that only actual hours worked from timesheets are charged to grant. Views of Responsible Officials: We concur with the recommendation, please see Corrective Action Plan.
2023-001 Implement System-Based Tracking of Federal Expenditures Assistance Listing Number: 93.566 Assistance Listing Program Title: Refugee and Entrant Assistance – State - Administered Programs Federal Agency: Department of Health and Human Services (HHS) Passed Through Entities: 1. California Department of Social Services 2. University of California, San Diego 3. California Rural Legal Assistance Foundation 4. San Diego Refugee Communities Coalition/United Women of East Africa Support Team Federal Award Numbers: ALSP22-0002-A1, PUR00533092, ALSP22-0001, and ACS22-05-CAIR-A1 Federal Award Year: 8/1/2022 to 3/31/2025 Compliance Requirement: Activities Allowed or Unallowed Criteria: Management is responsible for designing, implementing, and maintaining an internal control system that ensures accurate financial reporting. Effective internal control over financial reporting provides reasonable assurance regarding the completeness and accuracy of accounting records, and compliance with grantor requirements. 2 CFR 200.510 Financial Statements require auditees to prepare a Schedule of Expenditures of Federal Awards (SEFA) for the period covered by the auditee's financial statements. This schedule must include the total Federal awards expended, as determined in accordance with 2 CFR 200.502. The information presented should be consistent with the accounting records (i.e., general ledger). In addition, Section 2 CFR 200.302(b)(1) provides that non-Federal entities must maintain effective control over and accountability for all funds, and must identify, in their accounts, all Federal awards received and expended. Condition: During our review of the SEFA, we noted that CAIR-CA currently utilizes workbooks outside of its accounting software to track federal expenditures. The external workbooks do not reconcile directly with the general ledger (GL) requiring management to prepare a separate reconciliation to support the SEFA amounts. Cause: This year marks CAIR-CA’s first Single Audit. As such, processes and internal controls over federal award tracking are still under development. The current system is not yet fully integrated to allow for automated or system-based tracking of federal expenditures by grant. Effect: Relying on manual workbooks to track federal expenditures can be inefficient and may result in inaccurate or incomplete reporting of federal expenditures. Questioned Cost: None Recommendation: We recommend that CAIR-CA enhance its accounting processes to enable the tracking of federal expenditures directly within its accounting software. This can be accomplished by implementing GL tracking codes or tags specifically designated for federal expenditures. Transitioning to a system based tracking approach will support consistency between the general ledger and the SEFA, simplify the process of generating financial reports, and improve the tracking of federal expenditures. Views of Responsible Officials and Corrective Action Plan: Management concurs with the finding and is currently in the process of updating the accounting system to incorporate grant-specific specific tracking codes to further align with federal reporting standards. As part of a layered approach to internal controls, Excel worksheets will continue to be used as a supplementary monitoring tool, providing an additional cross-check to the system-generated reports. Responsible person: Jackie Ramirez, Operations & Finance Associate Director Expected Implementation date: November 20, 2025
2023-001 Implement System-Based Tracking of Federal Expenditures Assistance Listing Number: 93.566 Assistance Listing Program Title: Refugee and Entrant Assistance – State - Administered Programs Federal Agency: Department of Health and Human Services (HHS) Passed Through Entities: 1. California Department of Social Services 2. University of California, San Diego 3. California Rural Legal Assistance Foundation 4. San Diego Refugee Communities Coalition/United Women of East Africa Support Team Federal Award Numbers: ALSP22-0002-A1, PUR00533092, ALSP22-0001, and ACS22-05-CAIR-A1 Federal Award Year: 8/1/2022 to 3/31/2025 Compliance Requirement: Activities Allowed or Unallowed Criteria: Management is responsible for designing, implementing, and maintaining an internal control system that ensures accurate financial reporting. Effective internal control over financial reporting provides reasonable assurance regarding the completeness and accuracy of accounting records, and compliance with grantor requirements. 2 CFR 200.510 Financial Statements require auditees to prepare a Schedule of Expenditures of Federal Awards (SEFA) for the period covered by the auditee's financial statements. This schedule must include the total Federal awards expended, as determined in accordance with 2 CFR 200.502. The information presented should be consistent with the accounting records (i.e., general ledger). In addition, Section 2 CFR 200.302(b)(1) provides that non-Federal entities must maintain effective control over and accountability for all funds, and must identify, in their accounts, all Federal awards received and expended. Condition: During our review of the SEFA, we noted that CAIR-CA currently utilizes workbooks outside of its accounting software to track federal expenditures. The external workbooks do not reconcile directly with the general ledger (GL) requiring management to prepare a separate reconciliation to support the SEFA amounts. Cause: This year marks CAIR-CA’s first Single Audit. As such, processes and internal controls over federal award tracking are still under development. The current system is not yet fully integrated to allow for automated or system-based tracking of federal expenditures by grant. Effect: Relying on manual workbooks to track federal expenditures can be inefficient and may result in inaccurate or incomplete reporting of federal expenditures. Questioned Cost: None Recommendation: We recommend that CAIR-CA enhance its accounting processes to enable the tracking of federal expenditures directly within its accounting software. This can be accomplished by implementing GL tracking codes or tags specifically designated for federal expenditures. Transitioning to a system based tracking approach will support consistency between the general ledger and the SEFA, simplify the process of generating financial reports, and improve the tracking of federal expenditures. Views of Responsible Officials and Corrective Action Plan: Management concurs with the finding and is currently in the process of updating the accounting system to incorporate grant-specific specific tracking codes to further align with federal reporting standards. As part of a layered approach to internal controls, Excel worksheets will continue to be used as a supplementary monitoring tool, providing an additional cross-check to the system-generated reports. Responsible person: Jackie Ramirez, Operations & Finance Associate Director Expected Implementation date: November 20, 2025
2023-001 Implement System-Based Tracking of Federal Expenditures Assistance Listing Number: 93.566 Assistance Listing Program Title: Refugee and Entrant Assistance – State - Administered Programs Federal Agency: Department of Health and Human Services (HHS) Passed Through Entities: 1. California Department of Social Services 2. University of California, San Diego 3. California Rural Legal Assistance Foundation 4. San Diego Refugee Communities Coalition/United Women of East Africa Support Team Federal Award Numbers: ALSP22-0002-A1, PUR00533092, ALSP22-0001, and ACS22-05-CAIR-A1 Federal Award Year: 8/1/2022 to 3/31/2025 Compliance Requirement: Activities Allowed or Unallowed Criteria: Management is responsible for designing, implementing, and maintaining an internal control system that ensures accurate financial reporting. Effective internal control over financial reporting provides reasonable assurance regarding the completeness and accuracy of accounting records, and compliance with grantor requirements. 2 CFR 200.510 Financial Statements require auditees to prepare a Schedule of Expenditures of Federal Awards (SEFA) for the period covered by the auditee's financial statements. This schedule must include the total Federal awards expended, as determined in accordance with 2 CFR 200.502. The information presented should be consistent with the accounting records (i.e., general ledger). In addition, Section 2 CFR 200.302(b)(1) provides that non-Federal entities must maintain effective control over and accountability for all funds, and must identify, in their accounts, all Federal awards received and expended. Condition: During our review of the SEFA, we noted that CAIR-CA currently utilizes workbooks outside of its accounting software to track federal expenditures. The external workbooks do not reconcile directly with the general ledger (GL) requiring management to prepare a separate reconciliation to support the SEFA amounts. Cause: This year marks CAIR-CA’s first Single Audit. As such, processes and internal controls over federal award tracking are still under development. The current system is not yet fully integrated to allow for automated or system-based tracking of federal expenditures by grant. Effect: Relying on manual workbooks to track federal expenditures can be inefficient and may result in inaccurate or incomplete reporting of federal expenditures. Questioned Cost: None Recommendation: We recommend that CAIR-CA enhance its accounting processes to enable the tracking of federal expenditures directly within its accounting software. This can be accomplished by implementing GL tracking codes or tags specifically designated for federal expenditures. Transitioning to a system based tracking approach will support consistency between the general ledger and the SEFA, simplify the process of generating financial reports, and improve the tracking of federal expenditures. Views of Responsible Officials and Corrective Action Plan: Management concurs with the finding and is currently in the process of updating the accounting system to incorporate grant-specific specific tracking codes to further align with federal reporting standards. As part of a layered approach to internal controls, Excel worksheets will continue to be used as a supplementary monitoring tool, providing an additional cross-check to the system-generated reports. Responsible person: Jackie Ramirez, Operations & Finance Associate Director Expected Implementation date: November 20, 2025
2023-001 Implement System-Based Tracking of Federal Expenditures Assistance Listing Number: 93.566 Assistance Listing Program Title: Refugee and Entrant Assistance – State - Administered Programs Federal Agency: Department of Health and Human Services (HHS) Passed Through Entities: 1. California Department of Social Services 2. University of California, San Diego 3. California Rural Legal Assistance Foundation 4. San Diego Refugee Communities Coalition/United Women of East Africa Support Team Federal Award Numbers: ALSP22-0002-A1, PUR00533092, ALSP22-0001, and ACS22-05-CAIR-A1 Federal Award Year: 8/1/2022 to 3/31/2025 Compliance Requirement: Activities Allowed or Unallowed Criteria: Management is responsible for designing, implementing, and maintaining an internal control system that ensures accurate financial reporting. Effective internal control over financial reporting provides reasonable assurance regarding the completeness and accuracy of accounting records, and compliance with grantor requirements. 2 CFR 200.510 Financial Statements require auditees to prepare a Schedule of Expenditures of Federal Awards (SEFA) for the period covered by the auditee's financial statements. This schedule must include the total Federal awards expended, as determined in accordance with 2 CFR 200.502. The information presented should be consistent with the accounting records (i.e., general ledger). In addition, Section 2 CFR 200.302(b)(1) provides that non-Federal entities must maintain effective control over and accountability for all funds, and must identify, in their accounts, all Federal awards received and expended. Condition: During our review of the SEFA, we noted that CAIR-CA currently utilizes workbooks outside of its accounting software to track federal expenditures. The external workbooks do not reconcile directly with the general ledger (GL) requiring management to prepare a separate reconciliation to support the SEFA amounts. Cause: This year marks CAIR-CA’s first Single Audit. As such, processes and internal controls over federal award tracking are still under development. The current system is not yet fully integrated to allow for automated or system-based tracking of federal expenditures by grant. Effect: Relying on manual workbooks to track federal expenditures can be inefficient and may result in inaccurate or incomplete reporting of federal expenditures. Questioned Cost: None Recommendation: We recommend that CAIR-CA enhance its accounting processes to enable the tracking of federal expenditures directly within its accounting software. This can be accomplished by implementing GL tracking codes or tags specifically designated for federal expenditures. Transitioning to a system based tracking approach will support consistency between the general ledger and the SEFA, simplify the process of generating financial reports, and improve the tracking of federal expenditures. Views of Responsible Officials and Corrective Action Plan: Management concurs with the finding and is currently in the process of updating the accounting system to incorporate grant-specific specific tracking codes to further align with federal reporting standards. As part of a layered approach to internal controls, Excel worksheets will continue to be used as a supplementary monitoring tool, providing an additional cross-check to the system-generated reports. Responsible person: Jackie Ramirez, Operations & Finance Associate Director Expected Implementation date: November 20, 2025
2023-001 Implement System-Based Tracking of Federal Expenditures Assistance Listing Number: 93.566 Assistance Listing Program Title: Refugee and Entrant Assistance – State - Administered Programs Federal Agency: Department of Health and Human Services (HHS) Passed Through Entities: 1. California Department of Social Services 2. University of California, San Diego 3. California Rural Legal Assistance Foundation 4. San Diego Refugee Communities Coalition/United Women of East Africa Support Team Federal Award Numbers: ALSP22-0002-A1, PUR00533092, ALSP22-0001, and ACS22-05-CAIR-A1 Federal Award Year: 8/1/2022 to 3/31/2025 Compliance Requirement: Activities Allowed or Unallowed Criteria: Management is responsible for designing, implementing, and maintaining an internal control system that ensures accurate financial reporting. Effective internal control over financial reporting provides reasonable assurance regarding the completeness and accuracy of accounting records, and compliance with grantor requirements. 2 CFR 200.510 Financial Statements require auditees to prepare a Schedule of Expenditures of Federal Awards (SEFA) for the period covered by the auditee's financial statements. This schedule must include the total Federal awards expended, as determined in accordance with 2 CFR 200.502. The information presented should be consistent with the accounting records (i.e., general ledger). In addition, Section 2 CFR 200.302(b)(1) provides that non-Federal entities must maintain effective control over and accountability for all funds, and must identify, in their accounts, all Federal awards received and expended. Condition: During our review of the SEFA, we noted that CAIR-CA currently utilizes workbooks outside of its accounting software to track federal expenditures. The external workbooks do not reconcile directly with the general ledger (GL) requiring management to prepare a separate reconciliation to support the SEFA amounts. Cause: This year marks CAIR-CA’s first Single Audit. As such, processes and internal controls over federal award tracking are still under development. The current system is not yet fully integrated to allow for automated or system-based tracking of federal expenditures by grant. Effect: Relying on manual workbooks to track federal expenditures can be inefficient and may result in inaccurate or incomplete reporting of federal expenditures. Questioned Cost: None Recommendation: We recommend that CAIR-CA enhance its accounting processes to enable the tracking of federal expenditures directly within its accounting software. This can be accomplished by implementing GL tracking codes or tags specifically designated for federal expenditures. Transitioning to a system based tracking approach will support consistency between the general ledger and the SEFA, simplify the process of generating financial reports, and improve the tracking of federal expenditures. Views of Responsible Officials and Corrective Action Plan: Management concurs with the finding and is currently in the process of updating the accounting system to incorporate grant-specific specific tracking codes to further align with federal reporting standards. As part of a layered approach to internal controls, Excel worksheets will continue to be used as a supplementary monitoring tool, providing an additional cross-check to the system-generated reports. Responsible person: Jackie Ramirez, Operations & Finance Associate Director Expected Implementation date: November 20, 2025
2023-001 Implement System-Based Tracking of Federal Expenditures Assistance Listing Number: 93.566 Assistance Listing Program Title: Refugee and Entrant Assistance – State - Administered Programs Federal Agency: Department of Health and Human Services (HHS) Passed Through Entities: 1. California Department of Social Services 2. University of California, San Diego 3. California Rural Legal Assistance Foundation 4. San Diego Refugee Communities Coalition/United Women of East Africa Support Team Federal Award Numbers: ALSP22-0002-A1, PUR00533092, ALSP22-0001, and ACS22-05-CAIR-A1 Federal Award Year: 8/1/2022 to 3/31/2025 Compliance Requirement: Activities Allowed or Unallowed Criteria: Management is responsible for designing, implementing, and maintaining an internal control system that ensures accurate financial reporting. Effective internal control over financial reporting provides reasonable assurance regarding the completeness and accuracy of accounting records, and compliance with grantor requirements. 2 CFR 200.510 Financial Statements require auditees to prepare a Schedule of Expenditures of Federal Awards (SEFA) for the period covered by the auditee's financial statements. This schedule must include the total Federal awards expended, as determined in accordance with 2 CFR 200.502. The information presented should be consistent with the accounting records (i.e., general ledger). In addition, Section 2 CFR 200.302(b)(1) provides that non-Federal entities must maintain effective control over and accountability for all funds, and must identify, in their accounts, all Federal awards received and expended. Condition: During our review of the SEFA, we noted that CAIR-CA currently utilizes workbooks outside of its accounting software to track federal expenditures. The external workbooks do not reconcile directly with the general ledger (GL) requiring management to prepare a separate reconciliation to support the SEFA amounts. Cause: This year marks CAIR-CA’s first Single Audit. As such, processes and internal controls over federal award tracking are still under development. The current system is not yet fully integrated to allow for automated or system-based tracking of federal expenditures by grant. Effect: Relying on manual workbooks to track federal expenditures can be inefficient and may result in inaccurate or incomplete reporting of federal expenditures. Questioned Cost: None Recommendation: We recommend that CAIR-CA enhance its accounting processes to enable the tracking of federal expenditures directly within its accounting software. This can be accomplished by implementing GL tracking codes or tags specifically designated for federal expenditures. Transitioning to a system based tracking approach will support consistency between the general ledger and the SEFA, simplify the process of generating financial reports, and improve the tracking of federal expenditures. Views of Responsible Officials and Corrective Action Plan: Management concurs with the finding and is currently in the process of updating the accounting system to incorporate grant-specific specific tracking codes to further align with federal reporting standards. As part of a layered approach to internal controls, Excel worksheets will continue to be used as a supplementary monitoring tool, providing an additional cross-check to the system-generated reports. Responsible person: Jackie Ramirez, Operations & Finance Associate Director Expected Implementation date: November 20, 2025
2023-003 U.S. Department of Transportation – AL #20.106 Airport Improvement Program – Reporting Grant Award: 3-38-0022-064-2022 Criteria The Authority is required to submit payment requests using the DOT Electronic Grants payment system, Delphi e-Invoicing. These requests must meet the standards described in 2 CFR ss 200.302 and 200.305. Condition During review of submitted Request for Reimbursements and Outlay reports, it was noted that one request submitted was not accurately prepared as there were two instances in which the amount requested was greater than invoice documentation, additionally the request included a request for reimbursement of AIP ineligible costs. As of December 31, 2023 no funds have been returned to U.S. DOT. Questioned Costs N/A Context We reviewed the project financial summary for two of the 19 requests submitted during 2023 Cause Employee oversight. Effect The Authority could have had federal funding delayed or reduced. Recommendation We recommend that the Authority implement internal controls to ensure all reporting is accurately filed. Repeat Finding This is not a repeat finding. Views of Responsible Officials Management recognizes the deficiency and plans to implement the auditor’s recommendation.
2023-003 U.S. Department of Transportation – AL #20.106 Airport Improvement Program – Reporting Grant Award: 3-38-0022-064-2022 Criteria The Authority is required to submit payment requests using the DOT Electronic Grants payment system, Delphi e-Invoicing. These requests must meet the standards described in 2 CFR ss 200.302 and 200.305. Condition During review of submitted Request for Reimbursements and Outlay reports, it was noted that one request submitted was not accurately prepared as there were two instances in which the amount requested was greater than invoice documentation, additionally the request included a request for reimbursement of AIP ineligible costs. As of December 31, 2023 no funds have been returned to U.S. DOT. Questioned Costs N/A Context We reviewed the project financial summary for two of the 19 requests submitted during 2023 Cause Employee oversight. Effect The Authority could have had federal funding delayed or reduced. Recommendation We recommend that the Authority implement internal controls to ensure all reporting is accurately filed. Repeat Finding This is not a repeat finding. Views of Responsible Officials Management recognizes the deficiency and plans to implement the auditor’s recommendation.
Criteria or specific requirement: According to §200.302 Financial management of 2 CFR Part 200, MTW Agencies must ensure that housing assisted under the demonstration program meets housing quality standards established or approved by the secretary. The HCV program regulations at 24 CFR sections 982.401 through 982.405 set forth basic housing quality standards (HQS) which all units must meet, and the PHA must verify by inspection, before initial assistance can be paid on behalf of a family and at least annually throughout the term of the assisted tenancy. Current HQS regulations consist of 13 key aspects of housing quality, performance requirements, and acceptability criteria to meet each performance requirement. HQS include requirements for all housing types, including single and multi-family dwelling units, as well as specific requirements for special housing types, such as manufactured homes, congregate housing, single room occupancy, shared housing, and group residences (Section 204(c)(3)(E) of Pub. L. No. 104-134 (42 USC 1437f (note))). Per the HCVP Administrative Plan, the Authority is required to inspect tenant units no less than every 26 months. Condition: During the testing of 40 HCV files selected, we noted 1 of the 40 tenant files did not have an inspection completed on the unit within the established timeline of the Authority’s policy. Questioned costs: $30,000 Context: Out of 40 files, 1 contained errors as noted above. Per the HCVP Administrative Plan, the Authority is required to inspect tenant units no less than every 26 months. Cause: There was an issue with Yardi and the notice letters that outlined deficiencies were printing out incorrect mailing information. This resulted in the housing provider not being properly notified of the deficiencies, so as a result the Authority could not abate until the housing provider received proper notice. Effect: The auditor noted an instance of noncompliance. Noncompliance results in possible over charges to the grant. Repeat Finding: No. Recommendation: We recommend the Authority review their process and internal controls over HQS inspections to ensure compliance with HUD requirements and their administrative plan. Furthermore, management should ensure no HAP payments are issued for units that have not passed HQS housing inspections. Views of responsible officials: There is no disagreement with the audit finding.
Criteria or specific requirement: According to §200.302 Financial management of 2 CFR Part 200, MTW Agencies must ensure that housing assisted under the demonstration program meets housing quality standards established or approved by the secretary. The HCV program regulations at 24 CFR sections 982.401 through 982.405 set forth basic housing quality standards (HQS) which all units must meet, and the PHA must verify by inspection, before initial assistance can be paid on behalf of a family and at least annually throughout the term of the assisted tenancy. Current HQS regulations consist of 13 key aspects of housing quality, performance requirements, and acceptability criteria to meet each performance requirement. HQS include requirements for all housing types, including single and multi-family dwelling units, as well as specific requirements for special housing types, such as manufactured homes, congregate housing, single room occupancy, shared housing, and group residences (Section 204(c)(3)(E) of Pub. L. No. 104-134 (42 USC 1437f (note))). Per the HCVP Administrative Plan, the Authority is required to inspect tenant units no less than every 26 months. Condition: During the testing of 40 HCV files selected, we noted 1 of the 40 tenant files did not have an inspection completed on the unit within the established timeline of the Authority’s policy. Questioned costs: $30,000 Context: Out of 40 files, 1 contained errors as noted above. Per the HCVP Administrative Plan, the Authority is required to inspect tenant units no less than every 26 months. Cause: There was an issue with Yardi and the notice letters that outlined deficiencies were printing out incorrect mailing information. This resulted in the housing provider not being properly notified of the deficiencies, so as a result the Authority could not abate until the housing provider received proper notice. Effect: The auditor noted an instance of noncompliance. Noncompliance results in possible over charges to the grant. Repeat Finding: No. Recommendation: We recommend the Authority review their process and internal controls over HQS inspections to ensure compliance with HUD requirements and their administrative plan. Furthermore, management should ensure no HAP payments are issued for units that have not passed HQS housing inspections. Views of responsible officials: There is no disagreement with the audit finding.
Criteria or specific requirement: According to §200.302 Financial management of 2 CFR Part 200, MTW Agencies must ensure that housing assisted under the demonstration program meets housing quality standards established or approved by the secretary. The HCV program regulations at 24 CFR sections 982.401 through 982.405 set forth basic housing quality standards (HQS) which all units must meet, and the PHA must verify by inspection, before initial assistance can be paid on behalf of a family and at least annually throughout the term of the assisted tenancy. Current HQS regulations consist of 13 key aspects of housing quality, performance requirements, and acceptability criteria to meet each performance requirement. HQS include requirements for all housing types, including single and multi-family dwelling units, as well as specific requirements for special housing types, such as manufactured homes, congregate housing, single room occupancy, shared housing, and group residences (Section 204(c)(3)(E) of Pub. L. No. 104-134 (42 USC 1437f (note))). Per the HCVP Administrative Plan, the Authority is required to inspect tenant units no less than every 26 months. Condition: During the testing of 40 HCV files selected, we noted 1 of the 40 tenant files did not have an inspection completed on the unit within the established timeline of the Authority’s policy. Questioned costs: $30,000 Context: Out of 40 files, 1 contained errors as noted above. Per the HCVP Administrative Plan, the Authority is required to inspect tenant units no less than every 26 months. Cause: There was an issue with Yardi and the notice letters that outlined deficiencies were printing out incorrect mailing information. This resulted in the housing provider not being properly notified of the deficiencies, so as a result the Authority could not abate until the housing provider received proper notice. Effect: The auditor noted an instance of noncompliance. Noncompliance results in possible over charges to the grant. Repeat Finding: No. Recommendation: We recommend the Authority review their process and internal controls over HQS inspections to ensure compliance with HUD requirements and their administrative plan. Furthermore, management should ensure no HAP payments are issued for units that have not passed HQS housing inspections. Views of responsible officials: There is no disagreement with the audit finding.
Criteria or specific requirement: According to §200.302 Financial management of 2 CFR Part 200, MTW Agencies must ensure that housing assisted under the demonstration program meets housing quality standards established or approved by the secretary. The HCV program regulations at 24 CFR sections 982.401 through 982.405 set forth basic housing quality standards (HQS) which all units must meet, and the PHA must verify by inspection, before initial assistance can be paid on behalf of a family and at least annually throughout the term of the assisted tenancy. Current HQS regulations consist of 13 key aspects of housing quality, performance requirements, and acceptability criteria to meet each performance requirement. HQS include requirements for all housing types, including single and multi-family dwelling units, as well as specific requirements for special housing types, such as manufactured homes, congregate housing, single room occupancy, shared housing, and group residences (Section 204(c)(3)(E) of Pub. L. No. 104-134 (42 USC 1437f (note))). Per the HCVP Administrative Plan, the Authority is required to inspect tenant units no less than every 26 months. Condition: During the testing of 40 HCV files selected, we noted 1 of the 40 tenant files did not have an inspection completed on the unit within the established timeline of the Authority’s policy. Questioned costs: $30,000 Context: Out of 40 files, 1 contained errors as noted above. Per the HCVP Administrative Plan, the Authority is required to inspect tenant units no less than every 26 months. Cause: There was an issue with Yardi and the notice letters that outlined deficiencies were printing out incorrect mailing information. This resulted in the housing provider not being properly notified of the deficiencies, so as a result the Authority could not abate until the housing provider received proper notice. Effect: The auditor noted an instance of noncompliance. Noncompliance results in possible over charges to the grant. Repeat Finding: No. Recommendation: We recommend the Authority review their process and internal controls over HQS inspections to ensure compliance with HUD requirements and their administrative plan. Furthermore, management should ensure no HAP payments are issued for units that have not passed HQS housing inspections. Views of responsible officials: There is no disagreement with the audit finding.
Criteria or specific requirement: According to §200.302 Financial management of 2 CFR Part 200, MTW Agencies must ensure that housing assisted under the demonstration program meets housing quality standards established or approved by the secretary. The HCV program regulations at 24 CFR sections 982.401 through 982.405 set forth basic housing quality standards (HQS) which all units must meet, and the PHA must verify by inspection, before initial assistance can be paid on behalf of a family and at least annually throughout the term of the assisted tenancy. Current HQS regulations consist of 13 key aspects of housing quality, performance requirements, and acceptability criteria to meet each performance requirement. HQS include requirements for all housing types, including single and multi-family dwelling units, as well as specific requirements for special housing types, such as manufactured homes, congregate housing, single room occupancy, shared housing, and group residences (Section 204(c)(3)(E) of Pub. L. No. 104-134 (42 USC 1437f (note))). Per the HCVP Administrative Plan, the Authority is required to inspect tenant units no less than every 26 months. Condition: During the testing of 40 HCV files selected, we noted 1 of the 40 tenant files did not have an inspection completed on the unit within the established timeline of the Authority’s policy. Questioned costs: $30,000 Context: Out of 40 files, 1 contained errors as noted above. Per the HCVP Administrative Plan, the Authority is required to inspect tenant units no less than every 26 months. Cause: There was an issue with Yardi and the notice letters that outlined deficiencies were printing out incorrect mailing information. This resulted in the housing provider not being properly notified of the deficiencies, so as a result the Authority could not abate until the housing provider received proper notice. Effect: The auditor noted an instance of noncompliance. Noncompliance results in possible over charges to the grant. Repeat Finding: No. Recommendation: We recommend the Authority review their process and internal controls over HQS inspections to ensure compliance with HUD requirements and their administrative plan. Furthermore, management should ensure no HAP payments are issued for units that have not passed HQS housing inspections. Views of responsible officials: There is no disagreement with the audit finding.
Criteria or specific requirement: According to §200.302 Financial management of 2 CFR Part 200, MTW Agencies must ensure that housing assisted under the demonstration program meets housing quality standards established or approved by the secretary. The HCV program regulations at 24 CFR sections 982.401 through 982.405 set forth basic housing quality standards (HQS) which all units must meet, and the PHA must verify by inspection, before initial assistance can be paid on behalf of a family and at least annually throughout the term of the assisted tenancy. Current HQS regulations consist of 13 key aspects of housing quality, performance requirements, and acceptability criteria to meet each performance requirement. HQS include requirements for all housing types, including single and multi-family dwelling units, as well as specific requirements for special housing types, such as manufactured homes, congregate housing, single room occupancy, shared housing, and group residences (Section 204(c)(3)(E) of Pub. L. No. 104-134 (42 USC 1437f (note))). Per the HCVP Administrative Plan, the Authority is required to inspect tenant units no less than every 26 months. Condition: During the testing of 40 HCV files selected, we noted 1 of the 40 tenant files did not have an inspection completed on the unit within the established timeline of the Authority’s policy. Questioned costs: $30,000 Context: Out of 40 files, 1 contained errors as noted above. Per the HCVP Administrative Plan, the Authority is required to inspect tenant units no less than every 26 months. Cause: There was an issue with Yardi and the notice letters that outlined deficiencies were printing out incorrect mailing information. This resulted in the housing provider not being properly notified of the deficiencies, so as a result the Authority could not abate until the housing provider received proper notice. Effect: The auditor noted an instance of noncompliance. Noncompliance results in possible over charges to the grant. Repeat Finding: No. Recommendation: We recommend the Authority review their process and internal controls over HQS inspections to ensure compliance with HUD requirements and their administrative plan. Furthermore, management should ensure no HAP payments are issued for units that have not passed HQS housing inspections. Views of responsible officials: There is no disagreement with the audit finding.
Criteria or specific requirement: According to §200.302 Financial management of 2 CFR Part 200, MTW Agencies must ensure that housing assisted under the demonstration program meets housing quality standards established or approved by the secretary. The HCV program regulations at 24 CFR sections 982.401 through 982.405 set forth basic housing quality standards (HQS) which all units must meet, and the PHA must verify by inspection, before initial assistance can be paid on behalf of a family and at least annually throughout the term of the assisted tenancy. Current HQS regulations consist of 13 key aspects of housing quality, performance requirements, and acceptability criteria to meet each performance requirement. HQS include requirements for all housing types, including single and multi-family dwelling units, as well as specific requirements for special housing types, such as manufactured homes, congregate housing, single room occupancy, shared housing, and group residences (Section 204(c)(3)(E) of Pub. L. No. 104-134 (42 USC 1437f (note))). Per the HCVP Administrative Plan, the Authority is required to inspect tenant units no less than every 26 months. Condition: During the testing of 40 HCV files selected, we noted 1 of the 40 tenant files did not have an inspection completed on the unit within the established timeline of the Authority’s policy. Questioned costs: $30,000 Context: Out of 40 files, 1 contained errors as noted above. Per the HCVP Administrative Plan, the Authority is required to inspect tenant units no less than every 26 months. Cause: There was an issue with Yardi and the notice letters that outlined deficiencies were printing out incorrect mailing information. This resulted in the housing provider not being properly notified of the deficiencies, so as a result the Authority could not abate until the housing provider received proper notice. Effect: The auditor noted an instance of noncompliance. Noncompliance results in possible over charges to the grant. Repeat Finding: No. Recommendation: We recommend the Authority review their process and internal controls over HQS inspections to ensure compliance with HUD requirements and their administrative plan. Furthermore, management should ensure no HAP payments are issued for units that have not passed HQS housing inspections. Views of responsible officials: There is no disagreement with the audit finding.
Criteria or specific requirement: According to §200.302 Financial management of 2 CFR Part 200, MTW Agencies must ensure that housing assisted under the demonstration program meets housing quality standards established or approved by the secretary. The HCV program regulations at 24 CFR sections 982.401 through 982.405 set forth basic housing quality standards (HQS) which all units must meet, and the PHA must verify by inspection, before initial assistance can be paid on behalf of a family and at least annually throughout the term of the assisted tenancy. Current HQS regulations consist of 13 key aspects of housing quality, performance requirements, and acceptability criteria to meet each performance requirement. HQS include requirements for all housing types, including single and multi-family dwelling units, as well as specific requirements for special housing types, such as manufactured homes, congregate housing, single room occupancy, shared housing, and group residences (Section 204(c)(3)(E) of Pub. L. No. 104-134 (42 USC 1437f (note))). Per the HCVP Administrative Plan, the Authority is required to inspect tenant units no less than every 26 months. Condition: During the testing of 40 HCV files selected, we noted 1 of the 40 tenant files did not have an inspection completed on the unit within the established timeline of the Authority’s policy. Questioned costs: $30,000 Context: Out of 40 files, 1 contained errors as noted above. Per the HCVP Administrative Plan, the Authority is required to inspect tenant units no less than every 26 months. Cause: There was an issue with Yardi and the notice letters that outlined deficiencies were printing out incorrect mailing information. This resulted in the housing provider not being properly notified of the deficiencies, so as a result the Authority could not abate until the housing provider received proper notice. Effect: The auditor noted an instance of noncompliance. Noncompliance results in possible over charges to the grant. Repeat Finding: No. Recommendation: We recommend the Authority review their process and internal controls over HQS inspections to ensure compliance with HUD requirements and their administrative plan. Furthermore, management should ensure no HAP payments are issued for units that have not passed HQS housing inspections. Views of responsible officials: There is no disagreement with the audit finding.
Criteria or specific requirement: According to §200.302 Financial management of 2 CFR Part 200, MTW Agencies must ensure that housing assisted under the demonstration program meets housing quality standards established or approved by the secretary. The HCV program regulations at 24 CFR sections 982.401 through 982.405 set forth basic housing quality standards (HQS) which all units must meet, and the PHA must verify by inspection, before initial assistance can be paid on behalf of a family and at least annually throughout the term of the assisted tenancy. Current HQS regulations consist of 13 key aspects of housing quality, performance requirements, and acceptability criteria to meet each performance requirement. HQS include requirements for all housing types, including single and multi-family dwelling units, as well as specific requirements for special housing types, such as manufactured homes, congregate housing, single room occupancy, shared housing, and group residences (Section 204(c)(3)(E) of Pub. L. No. 104-134 (42 USC 1437f (note))). Per the HCVP Administrative Plan, the Authority is required to inspect tenant units no less than every 26 months. Condition: During the testing of 40 HCV files selected, we noted 1 of the 40 tenant files did not have an inspection completed on the unit within the established timeline of the Authority’s policy. Questioned costs: $30,000 Context: Out of 40 files, 1 contained errors as noted above. Per the HCVP Administrative Plan, the Authority is required to inspect tenant units no less than every 26 months. Cause: There was an issue with Yardi and the notice letters that outlined deficiencies were printing out incorrect mailing information. This resulted in the housing provider not being properly notified of the deficiencies, so as a result the Authority could not abate until the housing provider received proper notice. Effect: The auditor noted an instance of noncompliance. Noncompliance results in possible over charges to the grant. Repeat Finding: No. Recommendation: We recommend the Authority review their process and internal controls over HQS inspections to ensure compliance with HUD requirements and their administrative plan. Furthermore, management should ensure no HAP payments are issued for units that have not passed HQS housing inspections. Views of responsible officials: There is no disagreement with the audit finding.