Finding 2024-003 - Material Weakness in Internal Control over Compliance and Material Noncompliance (Qualified Opinion) - Inadequate Tracking of Expenditures and Retention of Documentation: Activities Allowed or Unallowed: Allowable Costs/Cost Principles and Reporting (A/B/L) for Assistance Listing Number 19.510 and 93.567 Criteria: The Code of Federal Regulations (CFR) Section 200.510(b) states in part, “The auditee must also prepare a schedule of federal expenditures for the period covered by the auditee’s consolidated financial statements which must include the total Federal awards expended as determined in accordance with 200.502.” Also, in accordance with CFR Section 200.302(b) - Financial Management, the auditees financial management system must provide 1) identification of all federal awards received and expended; 2) accurate, current, and complete disclosure of the financial results of each federal award or program; 3) records that identify adequately the source and application of funds for federally‐funded activities; 4) effective control over, and accountability for, all funds, property, and other assets; 5) comparison of expenditures with budget amounts for each Federal award; 6) written procedures to implement the requirements of section 200.305 and; 7) written procedures for determining the allowability of costs in accordance with Subpart E and the terms and conditions of the Federal award. Recipients of federal awards must submit accurate, complete and timely financial and performance reports. The Organization should have internal controls designed to ensure compliance with those provisions. The Organization should retain sufficient documentation such as invoice and allocation support for expenditures to retain documentation for audit purposes. Condition: During detail testing of expenditures, it was noted that the Organization did not maintain adequate documentation to support how certain costs were allocated to the federal program. Several transactions lacked sufficient detail, such as invoice or expense reimbursement form. Several expenditures selected for testing did not obtain sufficient approval by an individual at the Organization. There was one instance of employee compensation being processed at an approved pay rate and the Center could not provide any supporting documentation such as an offer letter, to substantiate the rate paid. It was noted that quarterly reports provided to the federal program were not reviewed by an individual at the Organization prior to submission to ensure accurate report of expenditures. 2 of the 8 monthly reports sampled were not submitted timely to the grantor. Cause: The Organization does not have an adequate system in place to ensure quarterly reports have sufficient supporting documentation, proper approval/review, and accurate reporting prior to submission. Responsibilities for expenditure tracking were not clearly assigned, and there was no formal review process in place. The Organization is not following their Document Retention Policy. Effect: The effect of this condition increases the possibility that quarterly financial reports are misstated or inaccurate and increase the risk of noncompliance with federal requirements. The effect of this condition also increases the risk that expenditures are unallowable per the grant, federal regulations, or cost principles due to the insufficient support of proper approval retained. Questioned costs: None Repeat Finding: Yes - 2023-003 Recommendation: Policies and procedures should be in place to ensure quarterly financial reports are properly supported, accurately reported, and adequately approved and reviewed. A formal review process should be established to ensure compliance. The Organization should follow the Document Retention Policy that was put in place and required by law and submit the required reporting documentation timely to the grantor to ensure compliance. Views of Responsible Officials: Management agrees with this finding and their response is included in the Corrective Action Plan.
2024-001 – Cash Management Federal Agency: U.S. Department of Education Federal Program: Arts in Education Federal Assistance Listing Number: 84.351A Pass-through Entity: Not applicable. Award Identification Number: S351A210115 Year: 2023 and 2024 Criteria: 2 CFR 200.305 requires recipients and subrecipients to minimize the time elapsing between receipt of federal funds and disbursement, ensuring advance payments are limited to the minimum needed and timed to actual, immediate cash requirements for program or project costs. Additionally, 2 CFR 200.303 requires non-Federal entities to maintain effective internal controls over Federal awards to ensure compliance with Federal laws, regulations, and award terms. Condition: During our audit, we noted instances whereby the basis for the funds drawn down from the G6 system were unsupported. Context: This issue appears to be recurring, as several drawdowns over multiple months exceeded actual expenses and were not identified through the Organization’s internal controls. During the audit period, 100% of drawdowns were tested, with cumulative drawdowns exceeding actual expenses by $260,490 out of $1,118,922 total drawdowns at year-end. Cause: Internal controls were not in place to ensure an accurate basis for drawdowns. Effect: The failure to maintain supporting documentation for draw requests could result in drawing funds in excess of actual expenses incurred. Questioned Costs: Known questioned costs are $260,490, calculated as the excess of cumulative federal drawdowns over allowable program expenses as of June 30, 2024. Repeat Finding: Yes Recommendation: We recommend that the Organization implement procedures to ensure that federal drawdowns are based on allowable program expenditures and are supported by general ledger reports of expenses incurred on the Federal program. Staff responsible for drawdowns should receive training on federal cash management requirements. Views of Responsible Officials: See Corrective Action Plan.
Federal Agency: Major Program- U.S. Department of Health and Human Services. Other Program- U.S. Department of Justice Context: We noted through our testing of drawdowns and related expenses that as of June 30, 2024 Mazzoni Center had drawn down $53,675 more funds than it had expended on the contract for Assistance Listing No. 93.939 HIV Prevention Activities. It was also identified that $66,629 of funds were drawn down in excess of funds expended for Assistance Listing No. 16.889 Grants for Outreach and Services to Underserved Populations which was not deemed to be a major program. The individual drawing down funds from the federal agencies did not draw down funds based on the expenses incurred each month. Cause: The entity lacked effective internal controls to reconcile actual drawdowns with expenditures incurred. Effect: This deficiency resulted in noncompliance with federal cash management requirements and exposed the entity to potential interest liabilities and reputational risk. It also indicates a reasonable possibility that material noncompliance with federal requirements may not be prevented or detected and corrected on a timely basis. Repeat finding: No Recommendation: We recommend that management ensure drawdowns are strictly aligned with incurred and allowable expenses. This should include: • Pre-drawdown verification of expense documentation. • Monthly reconciliations of drawdown activity to actual expenditures. • Training for staff involved in federal fund management on Uniform Guidance requirements. Views of responsible officials: There is no disagreement with the audit finding. See Corrective Action Plan. Federal Program Name: Major Program- HIV Prevention Activities: Non-Governmental Organization Based. Other Program- Grants for Outreach and Services to Underserved Populations Assistance Listing Number: Major Program- 93.939. Other Program- 16.889 Federal Award Identification Number: Major Program- NU65PS923746. Other Program- 15JOVW-22-GG-00404-UNDE Award Period: Major Program- July 1, 2023 through June 30, 2024. Other Program October 1, 2023 through September 30, 2024. Type of Finding: Material Weakness in Internal Control over Compliance and Compliance - Cash Management Criteria or specific requirement: Per the Uniform Guidance (2 CFR §200.305), non-federal entities must minimize the time between the transfer of funds from the U.S. Treasury and the disbursement for program purposes. Drawdowns must be based on immediate cash needs and supported by incurred expenses. Condition: During the audit of federal program compliance, it was identified that the entity drew down federal funds in excess of the amounts incurred for allowable expenses. Specifically, cash management procedures did not ensure that funds drawn down were limited to actual expenditures incurred, resulting in excess cash balances held temporarily beyond the allowable timeframe. Questioned costs: Major Program- $53,675. Other Program- $66,629 Context: We noted through our testing of drawdowns and related expenses that as of June 30, 2024 Mazzoni Center had drawn down $53,675 more funds than it had expended on the contract for Assistance Listing No. 93.939 HIV Prevention Activities. It was also identified that $66,629 of funds were drawn down in excess of funds expended for Assistance Listing No. 16.889 Grants for Outreach and Services to Underserved Populations which was not deemed to be a major program. The individual drawing down funds from the federal agencies did not draw down funds based on the expenses incurred each month. Cause: The entity lacked effective internal controls to reconcile actual drawdowns with expenditures incurred. Effect: This deficiency resulted in noncompliance with federal cash management requirements and exposed the entity to potential interest liabilities and reputational risk. It also indicates a reasonable possibility that material noncompliance with federal requirements may not be prevented or detected and corrected on a timely basis. Repeat finding: No Recommendation: We recommend that management ensure drawdowns are strictly aligned with incurred and allowable expenses. This should include: • Pre-drawdown verification of expense documentation. • Monthly reconciliations of drawdown activity to actual expenditures. • Training for staff involved in federal fund management on Uniform Guidance requirements. Views of responsible officials: There is no disagreement with the audit finding. See Corrective Action Plan.
Assistance Listing Number(s): 17.258, 17.259, 17.278 Name of Federal Program or Cluster: WIOA Cluster Name of Federal Agency: Department of Labor Name of Pass-through Entity: Wisconsin Department of Workforce Development Award Period: July 1, 2023 through June 30, 2024 Criteria: Under 2 CFR Part 200.305, non-federal entities must minimize the time elapsing between the transfer of funds from the U.S. Treasury and the disbursement of those funds for program purposes. Funds should be drawn down only as needed to meet immediate cash requirements. Condition: The Organization drew down federal funds in advance of immediate cash needs, resulting in excess cash balances being held for extended periods. Cause: The Organization has controls over draws of federal awards but the controls were not followed. Effect or Potential Effect: Holding excess federal funds for extended periods can result in non-compliance with federal regulations and could potentially increase the risk of mismanagement or misuse of funds. Recommendation: We recommend the Organization revise federal award draw procedures to ensure compliance with cash management requirements. Such draws should be made for immediate cash needs. Views of Responsible Officials: The Organization agrees with the finding and is implementing procedures.
Finding 2024-002: Reportable finding considered a material weakness - Cash Management Program Name: Environmental and Scientific Partnerships and Programs Assistance Listing: 19.017 Federal Awarding Agency: US Department of State Federal Award Number: SAQMIP22CA0082 Pass-through Entity: N/A - Direct Award Pass-through Entity Award Number: N/A Criteria: Federal regulations under 2 CFR §200.305 require recipients of Federal awards to maintain written procedures that minimize the time between the receipt and disbursement of Federal funds, to deposit advance payments in interest-bearing accounts when applicable, and to remit interest earned in excess of $500 annually to the Federal government. Entities are also required to have adequate internal controls to ensure that drawdown and reimbursement requests are properly reviewed, approved, and supported by allowable expenditures. Condition: Two instances were identified in which advance funds were not disbursed within a reasonable period after receipt. In both cases, the funds were not maintained in an interest-bearing account. Additionally, reimbursement requests lacked secondary approval and were not supported by detailed underlying expenditures at the time of submission. Cause: The Foundation had not established formal written procedures for managing Federal cash advances. The absence of defined processes and review controls contributed to delays in disbursement, lack of supporting documentation, and noncompliance with the interest-bearing account requirements. Effect: The absence of formal written procedures and consistent oversight increases the risk that Federal cash-management requirements may not be fully met. Without clear guidance and monitoring, the organization may be unable to demonstrate that advances are disbursed timely, maintained appropriately, and supported by sufficient documentation. This condition reflects a deficiency in internal control over compliance rather than a material impact on the financial statements or program expenditures. Repeat Finding: This is not a repeat finding. Questioned Costs: $592.97, representing the estimated interest that should have been remitted to the Federal agency. Perspective: While the transactions noted represent a limited portion of total Federal expenditures tested, the frequency and nature of the exceptions indicate that the issue is systemic rather than isolated. Although the related dollar amounts are not significant in the context of overall Federal program expenditures, the underlying control weaknesses increase the risk of future noncompliance if not addressed. Recommendation: - It is recommended that the Foundation: 1. Develop and implement written cash-management procedures that comply with Federal regulations. 2. Ensure that advance funds are disbursed timely and only as needed to meet immediate program cash requirements. 3. Maintain advance funds in interest-bearing accounts unless an exemption applies. 4. Establish a formal review and approval process for drawdown and reimbursement requests, supported by detailed documentation. 5. Remit any interest earned in excess of $500 annually to the appropriate Federal payment system. Management's response and corrective action plan (unaudited): See corrective action plan.
2024 – 018 – HEERF Cash Management Federal Agency: Department of Education Federal Program Name: Education Stabilization Fund Assistance Listing Number: 84.425 Federal Award Identification Number and Year: P425J200025 - 2024 Award Period: July 1, 2023 – June 30, 2024 Type of Finding: • Significant Deficiency in Internal Control over Compliance • Other Matters Criteria or specific requirement: 2 CFR §200.305 – Federal Payment: Requires that payment methods minimize the time elapsing between the transfer of funds from the Federal agency and the disbursement of funds by the recipient. Advance payments must be limited to the minimum amounts needed and timed to meet actual, immediate cash requirements for program costs. HEERF Program Guidance: Institutions must not draw down funds in excess of immediate needs and should avoid accumulating excess cash on hand. Interest earned on excess cash over $250 per year must be remitted to the federal government. Condition: The University drew down Higher Education Emergency Relief Fund (HEERF) funds before incurring the related program expenditures. Federal regulations require that these drawdowns align with actual, immediate cash requirements to prevent excess federal cash on hand. Holding funds for extended periods before spending them can result in noncompliance. Questioned costs: None Context: During our testing of cash receipts, it was noted that the University was drawing down funds prior to incurring the related program expenditures. Cause: The University’s cash management process did not adequately align drawdown timing with actual disbursement needs. The drawdown was initiated based on anticipated expenses rather than immediate cash requirements. Effect: Drawing down funds prior to incurring expenditure creates risk of noncompliance with federal cash management regulations and may result in interest liability for excess cash held. Repeat Finding: No Recommendation: The University should revise its cash management procedures to ensure that HEERF drawdowns are based on actual, immediate cash needs rather than anticipated expenditures. Draw requests should be timed as closely as administratively feasible to the disbursement of funds for allowable program costs. Additionally, management should implement monitoring controls to prevent excess cash accumulation and ensure compliance with 2 CFR §200.305 and HEERF guidance. Views of responsible officials: There is no disagreement with the audit finding.
FINDING 2024-007 Subject: Special Education Cluster (IDEA) - Cash Management Federal Agency: Department of Education Federal Programs: Special Education Grants to States, COVID-19 - Special Education Grants to States, Special Education Preschool Grants, COVID-19 - Special Education Preschool Grants Assistance Listings Numbers: 84.027, 84.027X, 84.173, 84.173X Federal Award Numbers and Years (or Other Identifying Numbers): 21611-045-PN01, 22611-045-PN01, 22611-045-ARP, 21619-045-PN01, 22619-045-PN01, 22619-045-ARP Pass-Through Entity: Indiana Department of Education Compliance Requirement: Cash Management Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-007. INDIANA STATE BOARD OF ACCOUNTS 29 NORTH LAWRENCE COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context The system of internal controls over the applicable reports, as established by the School Corporation, was not properly implemented, nor was it operating effectively to ensure that sufficient audit evidence was maintained to support the requests for reimbursement. The School Corporation submitted six reimbursement requests to the Indiana Department of Education during the audit period. The School Corporation was unable to provide documentation to support the underlying data accumulated and summarized in each of the reimbursement requests. The reported data could not be traced to the records that accumulate or summarize the data; therefore, we were unable to verify the accuracy and completeness of the reimbursement requests. As a result, we were unable to verify that program funds were expended prior to requesting reimbursement. 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: (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 200.334 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for the Federal awards that are renewed quarterly or annual, from the date of submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 2 CFR 200.305(b)(3) states in part: "Reimbursement is the preferred method when the requirements in paragraph (b) cannot be met, when the Federal awarding agency sets a specific condition per § 200.208, or when the non-Federal entity requests payment by reimbursement. . . ." Cause Due to turnover of staffing in both the Special Education personnel and the School Corporation's administrative office, the School Corporation's management had not developed nor implemented a system of internal controls that would have ensured compliance, or that supporting documentation would have been maintained and made available for audit, as it related to the grant agreement and the Cash Management compliance requirement. INDIANA STATE BOARD OF ACCOUNTS 30 NORTH LAWRENCE COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect Without a proper system of internal controls in place that operated effectively, the School Corporation did not retain and provide appropriate supporting documentation to support the reimbursement requests. This prevented the determination of the School Corporation's compliance with the compliance requirements listed above. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish an effective system of internal controls to ensure documentation for the reimbursement requests will be maintained and made available for audit as related to the grant agreement and the Cash Management compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
Finding 2024-006: Cash Management – Significant Deficiency Information on the federal program: Federal program is American Rescue Plan Act - Violence Prevention and Reduction Grant Portfolio from the U.S. Department of Treasury passed through the Justice Advisory Council. Criteria: Under 2 CFR 200.305, non-federal entities must minimize the time between drawing federal funds and disbursing those funds for grant-related expenditures. For cost-reimbursement grants, entities should only request reimbursement for costs that have already been incurred. Condition: The Organization drew down federal funds under the American Rescue Plan Act (ALN 21.027) before incurring the related expenditures. Draw request amounts were based on estimated costs instead of actual, supported expenditures. Management indicated this occurred due to an oversight that resulted in estimated draw requests being submitted. Cause: The Organization did not have adequate procedures in place to ensure draw requests were based solely on actual expenditures incurred under the grant Effect: Drawing funds prior to incurring allowable costs is noncompliant with federal cash management requirements and may result in the federal government or the pass-through entity requiring repayment of improperly drawn funds. Additionally, early draws increase the risk that federal funds may be used for non-allowable or unsupported purposes. Questioned Costs: None. Context: During our testing of drawdown activity for the Justice Advisory Council (JAC) pass-through award, we identified instances in which the Organization submitted draw requests based on estimated expenditures rather than actual incurred costs. The sampled drawdown was requested before the underlying expenditures occurred, indicating that the Organization’s draw procedures allowed submissions that were not tied to actual costs at the time of the request. Identification as a Repeat Finding: 2023-007 Recommendation: We recommend that management implement procedures to ensure that all draw requests are based strictly on incurred, supported expenditures. Draw requests should reflect the actual expenditures for the reporting period, and an individual should be assigned responsibility for monitoring the timing and accuracy of draw submissions. Views of responsible officials and planned corrective actions: Subsequent to this grant commencing, the Organization hired a new grant and partnership specialist. This specialist reviews all draws to ensure that the draw is for reimbursement for actual expenditure and not estimated expenditure. Reports and draws are also reviewed by the vice president of finance.
2024-011 (2023-005) INADEQUATE POLICIES AND PROCEDURES Federal Agency: U.S. Department of Education Federal Program Title and Assistance Listing Number: Higher Educational Institutional Aid, 84.031 Type of Finding: Significant Deficiency Compliance Area: Other - Inadequate Policies and Procedures Federal Award Year: 2024 Questioned Costs: None Condition The College does not maintain written procedures as required by 2 CFR 200, Subparts D and E of the Uniform Guidance. Criteria Per 2 CFR 200.302(b)(6), Financial Management, the financial management system of each non-federal entity must provide the following: Written procedures to implement the requirements of 200.305 Federal Payment. Per 2 CFR 200.302(b)(7), Financial Management, the financial management system of each nonfederal entity must provide the following: 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. Cause The College does not have written procedures for the federal program financial management requirements. Effect Not having written procedures for the aforementioned puts the College in direct violation of Federal requirements over Federal programs under the Uniform Guidance, which could result in a loss of programs, funds and/or repayment of federal monies already awarded back to the Federal government.
Condition: CRMHS’ internal controls were not functioning as designed to ensure that federal draw requests were reviewed and reconciled to underlying allowable expenditures for the above program, resulting in CRMHS drawing down federal funds in advance of immediate cash needs. Criteria: Under 2 CFC Part 200.305, non-federal entities must minimize the time elapsing between the transfer of funds from the U.S. Treasury and the disbursement of those funds for program purposes. Funds should only be drawn down as need for immediate cash requirements.Cause: CRMHS made a draw prior to the year ended June 30, 2024 in excess of what was needed for immediate cash needs.Effect: Holding excess federal funds for extended periods can result in non-compliance with federal regulations and could potentially increase the risk of mismanagement or misuse of funds.Questioned Costs: $155,949. Recommendation: We recommend management review the current controls over cash management procedures and ensure a proper reconciliation of all federal draw requests to supporting expenditure records prior to submission of the draw request.View of responsible officials: CRMHS management concurs with the finding. During the fiscal year ended June 30, 2024, CRMHS did not consistently operate internal controls over federal cash management as designed. Specifically, a federal draw was processed in excess of immediate cash needs and was not fully reconciled to supporting allowable expenditures prior to submission. This resulted in federal funds being drawn in advance of program disbursement requirements.Management acknowledges that this practice does not comply with 2 CFR §200.305, which requires non-federal entities to minimize the time between drawdown of federal funds and their disbursement for program purposes.While the funds were ultimately expended on allowable program costs, the timing of the draw created a compliance exception and reflects a material weakness in internal control over compliance. Management takes this matter seriously and has implemented corrective measures to strengthen cash management oversight and reconciliation procedures. The Chief Financial Officer is responsible for the implementation and oversight of these corrective measures.
The Department of Emergency and Military Affairs’ Emergency Management Division (Division) did not retain adequate documentation supporting reimbursement requests, matching requirements, and financial reports, risking the Division receiving monies it was not entitled to Assistance Listings number(s) and name(s): 97.042 Emergency Management Performance Grants Award number(s) and year(s): EMF-2021-EP-0016-S01 October 1, 2020 through September 30, 2023 EMF-2021-EP-0018-S01 October 1, 2020 through June 30, 2025 EMF-2022-EP-0009-S01 October 1, 2021 through September 30, 2025 EMF-2023-EP-0008-S01 October 1, 2022 through September 30, 2025 Federal agency: U.S. Department of Homeland Security Compliance requirement(s): Cash management, matching, and reporting Questioned costs: Unknown Condition Contrary to federal regulations, the Division did not retain adequate documentation supporting reimbursement requests, matching requirements, and financial reports as follows: X Cash management For 4 of 5 requests for reimbursement we tested, the Division did not retain adequate documentation to support the amounts requested for reimbursement from the federal agency. The Division used documentation provided by its subrecipients to calculate the amount to both reimburse the subrecipient and request from the federal government. However, while the Division provided documentation of the invoices paid under their requests for reimbursement, they were unable to indicate which invoice applied to the respective request for reimbursement. X Matching The Division was unable to demonstrate through its reimbursement requests or other supporting documentation how it used nonfederal funds for at least 50% of the total project cost. X Reporting The Division did not retain documentation supporting 3 of 3 Federal Financial Reports (FFR) we tested, as follows: y For the 2023 quarter 4 FFR, the Division could only provide an unapproved draft copy and could not demonstrate that it submitted the FFR to the federal agency. y For the 2024 quarter 1 FFR and the annual FFR, the Division did not retain underlying general ledger data or other records to support costs reported, including indirect costs calculated from an approved indirect cost rate agreement. Effect The Division’s failure to retain adequate documentation supporting reimbursement requests, matching requirements, and financial reports resulted in our being unable to determine whether the reimbursements were appropriate, matching requirements were met, and the reports were complete and accurate. There is also an increased risk that Division could receive federal monies to which it is not entitled. Also, if matching requirements are not met, the Division may be required to return program monies to the federal agency in accordance with federal requirements.1 Further, the federal agency is unable to rely on the financial reports to monitor the Division’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and evaluate the program’s success. Finally, the Division is at risk that this finding applies to other federal programs it administers. Cause The Division reported that turnover of staff who previously prepared documentation to support reimbursement requests, matching requirements, and financial reports and submitted the reimbursement requests and financial reports resulted in the Division’s inability to locate the supporting documentation for the reports, including the applicable indirect cost agreement, or explain how to reconcile a large number of invoices that were provided to the reimbursement requests tested. The Division also did not have formal policies and procedures requiring an independent review to ensure the accuracy and completeness of the information included in the reports, and the retention of all documentation supporting data included in its reports. Consequently, only 2 of the 3 reports we tested were reviewed and approved prior to submitting the reports to the federal agency. 1 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient takes appropriate and timely corrective action (2 CFR §200.513(c)). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521). Criteria Federal regulation requires the Division to retain all public records, including financial records and supporting documentation, related to a federal program for a period of 3 years from the date the program’s final report was submitted to the federal awarding agency or pass-through grantor (2 CFR §200.334). In addition, federal regulation requires the Division to submit its quarterly reports no later than 30 days after the reporting period (2 CFR §200.328). Federal regulation also requires the Division to use the reimbursement method to administer the program, whereby the Division is reimbursed with federal program monies only after it spends its own monies for authorized program purposes and requests reimbursement from the federal grantor (2 CFR §200.305[B][3]). Also, the program’s grant agreement requires the Division to match 50% of the approved project costs from nonfederal sources. Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations to the Division 1. Retain documentation for all reimbursement requests, matching requirements, and financial reports, such as the underlying general ledger data, approved indirect cost rate agreements, or information provided by its subrecipients for a period of 3 years from the date the program’s final report is submitted to the federal agency. 2. Review the reports identified above to ensure they were accurate. If any inaccuracies are identified, work with the federal grantor to correct these reports. 3. Develop and implement written policies and procedures over the preparation of reimbursement requests and financial reports, and the monitoring of the Division’s matching requirements as well as the retention of these records. The Division should train responsible staff on these policies and to perform an independent review of these documents to ensure accuracy and completeness prior to submission to the federal agency. 4. Allocate sufficient resources, such as staffing, to comply with the award terms and program requirements over reimbursement requests, matching requirements, and financial reports. Views of responsible officials State management concurs with this finding. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials regarding these recommendations. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Information on the Federal Program(s): 14.228 Community Development Block Grants/State’s Program Compliance Requirements: Cash Management. Type of Finding: Material Noncompliance. Criteria: 2 CFR § 200.302(b)(6) requires that each non-Federal entity must provide for written procedures to implement the requirements of 2 CFR § 200.305 Payment. Condition: We noted that the City did not have written procedures to implement the requirements of 2 CFR § 200.305 Payment. Cause: The City was not aware of the requirement to have written procedures to implement the requirements of 2 CFR § 200.305 Payment. Effect: Failure to have written procedures to ensure the compliance with the 2 CFR § 200.305 Payment could result in federal award drawdown requests by the City to be overstated as to immediate cash flow needs, noncompliance with Uniform Guidance requirements, and terms and conditions of the Federal award. Questioned Costs: There are no questioned costs. Recommendation: We recommend that the City identify grants that are subject to the Uniform Guidance on a timely basis to ensure all compliance requirements are met and develop written procedures where required. Views of Responsible Officials and Planned Corrective Action: The City has identified federal grants subject to the Uniform Guidance and will develop written procedures to implement the requirements of 2 CFR § 200.305 Payment.
Finding 2024-2 Assistance listing number: 21.027 Program name: Coronavirus State and Local Fiscal Recovery Funds Pass-through entity: State of Michigan EGLE Project numbers: A5817-01 Finding type: Material weakness and material noncompliance with laws and regulations Repeat finding: No Criteria: Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) requires non-federal entities to maintain specific written policies to ensure accountability for federal awards. Minimum mandatory policies include procurement procedures, allowability of costs, conflict of interest, cash management, and internal controls. Conditions: The City did not have written policies, as are required by Uniform Guidance, that adhered fully to the requirements of Uniform Guidance. Questioned Costs: None Why Questioned Costs Not Determinable: N/A How Questioned Computed: N/A Context: The City has some written policies or resolutions that address procurement and conflict of interest. The procurement policy, however, did not fully address the requirements of UG Section 200.318. In addition, the City had developed some procedures for cash management, allowability costs and internal control but did not adopt the written policies for cash management, allowability of costs and internal control that would fully address the requirements of UG Sections 200.305, 200.302, 200.400 and 200.303. Cause: The City was not in compliance with the UG requirements to have the correct written policies related to procurement, cash management, allowability costs and internal control. Effect: The absence of those properly prepared written policies increases the potential for further noncompliance because the City’s procedures may not adequately address the relevant compliance requirements. Recommendation: We recommend that the City create and put in place the written policies that address the requirements of 2 CFR 200.318-Procurement, 200.305-Cash Management, 200.302 & 200.400-Allowability of Costs, 200.303-Internal Control. View and Response of Responsible Officials: The City is reviewing existing documents and the requirements of UG for written policies to determine the best course of action to create and put in place the written policies required by UG.
Material Weakness Finding No. 2024-006: Cash Management U.S. Department of Health and Human Services Substance Abuse and Mental Health Services Federal Assistance Listing Number 93.243. U.S. Department of Health and Human Services Health Care for Native Hawaiians Federal Assistance Listing Number 93.932. Criteria Pursuant to 2 CFR §200.305, the payment methods for Federal payments to recipients must minimize the time elapsing between the transfer of funds from the Federal agency to the recipient and the disbursement of funds by the recipient. Condition We noted that the Organization’s director of administrative operations has implemented a methodology designed to minimize the time that advance payment requests are expended; however there are no internal controls in place over this process. Cause The Organization’s policies and procedures do not require an internal review of the payment requests and the subsequent disbursements of the Federal funds to ensure compliance with 2 CFR §200.305. Effect The lack of internal controls could result in noncompliance with 2 CFR §200.305. Identification of a Repeat Finding This finding was reported as a federal award finding in the immediately previous audit as Finding No. 2023-006. Recommendation We recommend that the Organization incorporate internal controls over cash management to ensure compliance with 2 CFR §200.305.
FINDING REFERENCE NUMBER 2024-023 (See Finding Reference Number 2024-004) FEDERAL PROGRAMS (ALN – 10.566) NUTRITION ASSISTANCE FOR PUERTO RICO U.S. DEPARTMENT OF AGRICULTURE (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) (ALN – 93.560) PAYMENT TO TERRITORIES – ADULT (ALN – 93.568) LOW-INCOME HOME ENERGY ASSISTANCE U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 231PR426S7003/4; 241PR426S7003/4 (Federal Award Years: 10/1/2022 through 9/30/2024) 2022G996117; 2023996117 (Federal Award Years: 10/1/2021 through 9/30/2023) 2401PRTANF1 (Federal Award Years: 10/1/2023 through 9/30/2026) 2301PRTABD; 2401PRTABD (Federal Award Years: 10/1/2022 through 9/30/2026) 2201PRLIEA; 2301PRLIEA; 2401PRLIEA (Federal Award Years: 10/1/2021 through 9/30/2025) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ALLOWABLE COSTS/COSTS PRINCIPLES TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA Uniform Guidance at 2 CFR 200 §200.302, Financial Management, establishes that: “(a) Each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. (See § 200.450). (b) The recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (1) Identification of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number, year the Federal award was issued, and name of the Federal agency or pass-through entity. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. When a Federal agency or pass-through entity requires reporting on an accrual basis from a recipient or subrecipient that maintains its records other than on an accrual basis, the recipient or subrecipient must not be required to establish an accrual accounting system. This recipient or subrecipient may develop accrual data for its reports based on an analysis of the documentation on hand. (3) Maintaining 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. (4) Effective control over and accountability for all funds, property, and assets. The recipient or subrecipient must safeguard all assets and ensure they are used solely for authorized purposes. See § 200.303. (5) Comparison of expenditures with budget amounts for each Federal award. (6) Written procedures to implement the requirements of § 200.305. (7) Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award.” STATEMENT OF CONDITION As part of our audit procedures, we conducted an analysis of the process used to distribute administrative costs among the various programs administered by ADSEF. Administrative expenses are distributed based on a methodology called "Random Moment Sampling" (RMS). We identified the following deficiencies in the implementation and execution of this process: i. There is no written procedure that outlines the process for applying this formula for distributing administrative expenses. ii. There is no standardized monitoring or communication to ensure that employees who are required to complete this form are fully assigned to the roles subject to this process. In other words, the Human Resources Department or the Appointments Office do not communicate periodically or whenever a staff change occurs, in order to adjust the population subject to this questionnaire. iii. Among the options provided for responding to the RMS survey, three options are not assigned to a Federal program. These options include licenses; other types of work not directly tied to a Federal program function for which administrative expenses can be allocated. According to the State Plan, 3,300 questionnaires will be administered for functions performed by employees who are not at the central level, and 300 for employees who are at the central level. Two quarters of the Fiscal Year 2023-2024 fiscal year were observed, in which these three options represented between 25% and 18% for local offices and 38% at the central level. Because these options are not tied to a Federal program function, they reduce the percentage to zero and redistribute the percentage among Federal programs. QUESTIONED COSTS None. PERSPECTIVE INFORMATION We consider this deficiency a systemic problem. This allocation of administrative expenses is made quarterly; however, the adjustment in the accounting system (PRIFAS) is not necessarily made in the same period. The administrative expenses of each program contain the redistribution of expenses not assigned to a Federal program. STATEMENT OF CAUSE ADSEF does not have a written procedure establishing the process for implementing and monitoring the execution of this methodology. Additionally, among the responses regarding functions performed, time may be allocated to functions not related to Federal programs. POSSIBLE ASSERTED EFFECT They lack a standardized process that ensures that the methodology used allocates reasonable administrative costs among Federal programs, ensures that the distribution base is complete, and is periodically monitored. Furthermore, by redistributing the percentage of responses not directly related to a Federal program function, administrative costs could be claimed from Federal programs that should likely be allocated to state funds. IDENTIFICATION OF REPEAT FINDING This is a repeat of a finding reported in the prior audit as Finding Numbers 2023-004/2023-032. RECOMMENDATIONS We recommend that management establish a written internal control procedure that provides certainty, monitoring frequency, data validation, and responsibilities for those responsible for executing this process. Additionally, it should be considered that there are functions performed by the personnel in charge of answering the RMS that are not directly linked to a Federal program and should be assigned to state funds.
FINDING REFERENCE NUMBER 2024-024 (See Finding Reference Number 2024-005) FEDERAL PROGRAMS (ALN – 10.566) NUTRITION ASSISTANCE FOR PUERTO RICO U.S. DEPARTMENT OF AGRICULTURE (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 231PR426S7003/4 (Federal Award Years: 10/01/2022 through 09/30/2023); 241PR426S7003/4 (Federal Award Years: 10/01/2023 through 09/30/2024) 2023996117 (Federal Award Years: 10/01/2022 through 09/30/2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ALLOWABLE COSTS/COSTS PRINCIPLES TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA Uniform Guidance at 2 CFR 200 §200.302, Financial Management, establishes that: “(a) Each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. (See § 200.450). (b) The recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (1) Identification of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number, year the Federal award was issued, and name of the Federal agency or pass-through entity. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. When a Federal agency or pass-through entity requires reporting on an accrual basis from a recipient or subrecipient that maintains its records other than on an accrual basis, the recipient or subrecipient must not be required to establish an accrual accounting system. This recipient or subrecipient may develop accrual data for its reports based on an analysis of the documentation on hand. (3) Maintaining 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. … (6) Written procedures to implement the requirements of § 200.305. (7) Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award.” STATEMENT OF CONDITION As part of our audit procedures, we requested evidence of the indirect costs transactions. ADSEF is allowed to claim 16.80% of indirect costs. As part of our audit procedures over the Nutrition Assistance for Puerto Rico and TANF program, we selected some transactions to evaluate the compliance with the indirect cost’s claims. The TANF program reported three (3) transactions related to indirect costs in the amount of $569,998.55, and for the Nutrition Assistance for Puerto Rico three (3) transactions were reported in the amount of $4,815,418.41. We requested evidence of one (1) transaction for the TANF program and one (1) for the Nutrition Assistance for Puerto Rico, no evidence of class object was provided in order to ascertain that only allowable expenditure transactions were considered in the calculation and claim of indirect costs. QUESTIONED COSTS None. PERSPECTIVE INFORMATION We consider this deficiency a systemic problem. ADSEF does not have an internal control process that allows for proper authorization and monitoring of the claims made for indirect costs. STATEMENT OF CAUSE ADSEF does not have a written procedure establishing the process for claiming and documenting indirect costs claims. The process of recording indirect costs is based on an excel spreadsheet, no detail of costs indicating the class object and transactions considered are maintained. POSSIBLE ASSERTED EFFECT Indirect costs calculation may include unallowable costs and not be detected timely. ADSEF cannot provide proper audit evidence of the amounts claimed as indirect costs. IDENTIFICATION OF REPEAT FINDING This is a repeat of a finding reported in the prior audit as Finding Numbers 2023-005/2023-033. RECOMMENDATIONS We recommend that management establish internal control processes to reconcile PRIFAS and the various sources of information used for reporting. Additionally, maintain clear records of indirect costs claimed and awarded.
FINDING REFERENCE NUMBER 2024-025 FEDERAL PROGRAMS (ALN – 93.556) MARYLEE ALLEN PROMOTING SAFE AND STABLE FAMILIES (ALN – 93.667) SOCIAL SERVICES BLOCK GRANT U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2203PRFPSS; 2303PRFPSC; 2202PRFPCV; 2302PRFPCV; 2302PRPKIN (Federal Award Years: 10/1/2021 through 9/30/2023) 2211PRSOSR; 2311PRSOSR (Federal Award Years: 10/1/2022 through 9/30/2024) ADMINISTRATION ADMINISTRATION FOR FAMILIES AND CHILDREN (ADFAN, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ALLOWABLE COSTS/COSTS PRINCIPLES // CASH MANAGEMENT TYPE OF FINDING INTERNAL CONTROL – SIGNIFICANT DEFICIENCY CRITERIA Uniform Guidance at 2 CFR 200 §200.302, Financial Management, establishes that: “(a) Each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. (See § 200.450). (b) The recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): … (6) Written procedures to implement the requirements of § 200.305. (7) Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award.” STATEMENT OF CONDITION As part of our audit procedures, we verified the requirements for the written procedures policies, and we didn’t obtain by ADFAN the required documentation. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This deficiency is a systemic problem that is related to written policies and procedures. STATEMENT OF CAUSE ADFAN has not established a work plan to maintain the written procedures policies required by the Uniform Guidance. POSSIBLE ASSERTED EFFECT The absence of written procedures may lead to inconsistent program implementation, unclear assignment of responsibilities, and inadequate oversight. This increases the risk of noncompliance with applicable regulations, inefficiencies in operations, and reduced effectiveness in achieving program objectives. IDENTIFICATION OF REPEAT FINDING This is a repeat of a finding reported in the prior audit as Finding Numbers 2023-006/2023-034. RECOMMENDATIONS We recommend that ADFAN develop, formalize, and implement comprehensive written procedures for the programs to comply with the Uniform Guidance. These procedures should clearly define roles and responsibilities, establish operational workflows, and include mechanisms for monitoring and compliance. Doing so will help ensure consistency in program execution, accountability, and alignment with regulatory and performance requirements.
FINDING REFERENCE NUMBER 2024-026 (See Finding Reference Number 2024-006) FEDERAL PROGRAM (ALN – 93.568) LOW-INCOME HOME ENERGY ASSISTANCE U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2201PRLIEA (Federal Award Year: 10/1/2021 – 9/30/2023) 2301PRLIEA (Federal Award Year: 10/1/2022 – 9/30/2024) 2401PRLIEA (Federal Award Year: 10/1/2023 – 9/30/2025) 2301PRLIEE (Federal Award Year: 10/1/2022 – 9/30/2024) 2301PRLIEI (Federal Award Year: 10/1/2022 – 9/30/2024) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT CASH MANAGEMENT TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA Uniform Guidance at 2 CFR 200.302, requires recipient's and subrecipient's financial management system must provide for the following: (3) maintaining 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; (4) effective control over and accountability for all funds, property, and assets. The recipient or subrecipient must safeguard all assets and ensure they are used solely for authorized purposes. See § 200.303; and (6) written procedures to implement the requirements of § 200.305. 2 CFR 200.305, Federal Payments, establishes that: (a) payments for States are governed by Treasury-State Cash Management Improvement Act (CMIA) agreements and default procedures codified at 31 CFR part 205 and Treasury Financial Manual (TFM) 4A-2000, “Overall Disbursing Rules for All Federal Agencies”; (b) for recipients and subrecipients other than States, payment methods must minimize the time elapsing between the transfer of funds from the Federal agency or the pass-through entity and the disbursement of funds by the recipient or subrecipient regardless of whether the payment is made by electronic funds transfer or by other means. See § 200.302(b)(6). Except as noted in this part, the Federal agency must require recipients to use only OMB-approved, government-wide information collections to request payment. STATEMENT OF CONDITION As part of our understanding of internal controls and compliance regarding cash management, we obtained a procedures manual. We found the following deficiencies: 1. The effective date is April 2024. 2. In the section describing the LIHEAP process, the US Department of Agriculture is mentioned instead of the US Department of Health and Human Services. 3. It does not identify the personnel responsible for the processes to establish segregation of duties. 4. In our interviews it was noted that only one person is in charge of all drawdowns, and no proper supervision or review of the documentation is performed. In addition, a detail of the requests related to the program was obtained; however, this request information does not reconcile with the revenue recognized in PRIFAS. The following deficiencies were identified: 1. The document includes amounts identified as LIHEAP, which belongs to another Federal program, the Low-Income Household Water Assistance Program (ALN 93.499), in the amount of $295,354.51. 2. Three (3) deposits were included in the detail that were not recorded in PRIFA in the amount of $491,243.33. 3. Three (3) deposits were included in PRIFA that were not included in the detail in the amount of $502,901.10. From a population of fifty (50) revenue transactions, six (6) transactions were selected to ensure that the correct amounts were requested from the Federal program and that the documents indicated in the manual were included with each petition. The following deficiencies were observed: 1. The documents included do not contain signatures from the personnel who perform each process. 2. The documentation included in the manual does not match the documentation included in the documents submitted with each petition. 3. In two (2) requests, the form DF-155, “Request for Federal Funds” was not included as part of the documentation. 4. A form used, IF-8, does not have a sequence number. The document does not provide for signatures, in addition, it makes reference to the Governmental Development Bank, which closed in 2017. 5. In two (2) requests, no detail of the liquidation of benefits was included, only an Excel document. 6. We were unable to determine whether the drawdown was a reimbursement or an advance. 7. We noted that in one drawdown in the amount of $8,014,770, had a note in the documentation indicating that this request is made and pending of the final certification or closeout of the grant from the federal reporting area. 8. In another drawdown in the amount of $832,397.50, the document identified as DF-155 was completed requesting the amount of $1,515,694.80. Although, in handwriting is a comment indicating that this drawdown is partial in order to comply with Puerto Rico Treasury Department, therefore, only the amount of $1,036,663.43 is requested. This amount is also adjusted by $204,265.93, ending with a balance of $832,397.50. No evidence of the adjustment was included. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This is a systemic deficiency. The lack of proper training and updated information to all personnel with the responsibility of determining, supervising, and monitoring the eligibility determinations and follow-up affects this requirement. The sampling was a statistical valid sample. STATEMENT OF CAUSE ADSEF does not have a procedures manual that clearly establishes a segregation of duties, demonstrating compliance with the required internal control components. No standardized process is in place requiring documentation to be included, reviews and approvals of all requests for federal funds. POSSIBLE ASSERTED EFFECT The program may be requesting funds in excess of cash needs, or a reimbursement for funds not previously expended. The lack of internal controls may result in the program to be on a reimbursement basis. IDENTIFICATION OF REPEAT FINDING This is a repeat of a finding reported in the prior audit as Finding Numbers 2023-007/2023-035. RECOMMENDATIONS We recommend that management establish a written internal controls process that demonstrates compliance with cash management requirements and appropriate segregation of duties, and training to all areas regarding this compliance.
FINDING REFERENCE NUMBER 2024-037 (See Finding Reference Number 2024-015) FEDERAL PROGRAM (ALN – 10.566) NUTRITION ASSISTANCE FOR PUERTO RICO U.S. DEPARTMENT OF AGRICULTURE AWARD NUMBERS 231PR426S7003/4 (Federal Award Year: 10/1/2022 through – 9/30/2023); 241PR426S7003/4 (Federal Award Year: 10/1/2023 through – 9/30/2024) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT REPORTING TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA Uniform Guidance at 2 CFR § 200.302, Financial Management, establishes that (a) each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. See § 200.450. In section (b), the recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): … (6) written procedures to implement the requirements of § 200.305 and (7) written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. The 2 CFR §200.303 (a) establishes that the recipient and subrecipient must: establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the 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). STATEMENT OF CONDITION As part of our audit procedures over internal controls and compliance for reporting requirements, we selected two reports that closed during our fiscal year audit. With respect with the Grant Award 231PR426S7003/4 and 241PR426S7003/4 we noted the following deficiencies: 1) The PRDF was unable to provide supporting documentation for the administrative expenditures that reconcile the figures reported with the PRIFAS accounting system. 2) In addition, for all the Federal awards mentioned above, based on internal control interviews, we found that there is no designated individual responsible for independently reviewing the reports prior to submission to ensure accuracy and consistency with source data. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This deficiency is a systemic problem. Procedures and internal controls manuals should provide for and ensure the segregation of duties, and the reconciliation of financial information reported to Federal agencies against the accounting records used to prepare financial statement and SEFA. ADSEF failure to support reported amounts with verifiable documentation and the absence of independent review increases the risk of inaccurate or misstated financial data being reported to the Federal awarding agency. STATEMENT OF CAUSE During our interviews and understanding of the internal controls over financial reporting, we noted that only one person prepares, submits and certifies the required reports. No proper segregation of duties exists, that allows for validation of all accounting data before submitting the reports. In addition, the procedures manual for preparing reports does not establish a clear process for obtaining information, validating it, recording it, preparing it, and reporting it, as well as the responsibilities and segregation of duties to ensure that the reported information is consistent with ADSEF's accounting records. Furthermore, they lack a written procedures manual detailing the processes to follow in obtaining accounting data and reporting it to the Federal government, ensuring that the responsibility does not fall on a single individual. POSSIBLE ASSERTED EFFECT ADSEF does not ensure that the reports are accurate and traceable to the accounting database used to prepare their financial reports to the Federal Agencies and their financial statement. IDENTIFICATION OF REPEAT FINDING This is a repeat of a finding reported in the prior audit as Finding Numbers is 2023-020/2023-049. RECOMMENDATIONS We recommend ADSEF establish written internal controls and specific procedures to ensure that all reported amounts are fully supported and reconciled with the PRIFAS accounting system and to assign responsibility to a designated official to review and approve all reports prior to submission to the Federal agency. Implement internal controls to maintain adequate documentation supporting all financial data reported.
FINDING REFERENCE NUMBER 2024-041 FEDERAL PROGRAM (ALN – 93.568) LOW-INCOME HOME ENERGY ASSISTANCE U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2301PRLIEA (Federal Award Year: 10/1/2022 – 9/30/2024) 2401PRLIEA (Federal Award Year: 10/1/2023 – 9/30/2025) 2301PRLIEE (Federal Award Year: 10/1/2022 – 9/30/2024) 2301PRLIEI (Federal Award Year: 10/1/2022 – 9/30/2024) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT REPORTING – PERFORMANCE TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA Uniform Guidance at 2 CFR § 200.302, Financial Management, establishes that: (a) Each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. (See § 200.450.) (b) The recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (1) Identification of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number, year the Federal award was issued, and name of the Federal agency or pass-through entity. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. When a Federal agency or pass-through entity requires reporting on an accrual basis from a recipient or subrecipient that maintains its records other than on an accrual basis, the recipient or subrecipient must not be required to establish an accrual accounting system. This recipient or subrecipient may develop accrual data for its reports based on an analysis of the documentation on hand. (3) Maintaining 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. (4) Effective control over and accountability for all funds, property, and assets. The recipient or subrecipient must safeguard all assets and ensure they are used solely for authorized purposes. See § 200.303. … (6) Written procedures to implement the requirements of § 200.305 and (7) Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. LlHEAP Performance Data Form (OMB No 0970-0449) – State grant recipients must submit this report by January 3lst regarding the prior Federal fiscal year. The first section of the report is the Grant recipient Survey that collects and reports data on sources and uses of LIHEAP funds. The Grant recipient Survey includes Section III: Estimated Sources of Funds and Section IV: Estimated Use of LIHEAP Funds. Note: that these are referencing obligated not expended funding. The rest of the report is regarding performance metrics, mostly related to home energy burden targeting and reduction, as well as the continuity of home energy service. The Grantee Survey obligation amounts should be compared with the Carryover and Reallotment and FFR-425 reports. This reconciliation is needed to make sure the obligated balances for the program year being tested are accurate. Annual Report on Households Assisted by LIHEAP (OMB No. 0970-0060) https://omb.report/icr/202211-0970-005 – As part of the application for block grant funds each year, a report is required for the preceding fiscal year of (1) the number and income levels of the households assisted for each component and any type of LHEAP assistance (heating, cooling, crisis, and weatherization); and (2) the number of households served that contained young children, elderly, or persons with disabilities, or any vulnerable household for each component. Quarterly Performance and Management Report (OMB No. 0970-0589) https://omb.report/icr/202205-0970-017/doc/121847100 – Grant recipients must submit data and information about LIHEAP during the current FY, including success, challenges, needs and innovations. The quarterly reports focus on assisted households, performance management, obligation of funding, changes made due to anticipated increase in energy bills, collaboration with other utility programs, training and technical assistance needs. STATEMENT OF CONDITION As part of our audit procedures over the financial reporting requirements for LIHEAP program, we selected three reports submitted during our fiscal year. We noted that the administrative expenditures do not reconcile with the accounting information from PRIFAS. In addition, there are no written procedures describing internal controls over this requirement. We requested the LIHEAP Performance Data (OMB No 0970-0449), but no evidence of the report was provided. We obtained a copy of the Annual Report on Households Assisted by LlHEAP (OMB No. 0970-0060), but no supporting documentation regarding the information reported was provided. We requested two quarterly reports for the Quarterly Performance and Management Report (OMB No. 0970-0589) for the 2301LIEA grant, but no documentation was provided. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This is a systematic deficiency. Procedures and internal controls manuals should provide for and ensure the segregation of duties, and the reconciliation of financial information reported to federal agencies against the accounting records used to prepare financial statements and SEFA. ADSEF failure to support reported amounts with verifiable documentation and the absence of independent review increases the risk of inaccurate or misstated financial data being reported to the Federal awarding agency. In relation to Special and Performance Reports, there are no proper controls over the data reported and the supporting information. STATEMENT OF CAUSE During our interviews and understanding of the internal controls over financial reporting, we noted that only one person prepares, submits and certifies the SF– 425 reports. No proper segregation of duties exists, that allows for validation of all accounting data before submitting the reports. In addition, the procedures manual for preparing reports does not establish a clear process for obtaining information, validating it, recording it, preparing it, and reporting it, as well as the responsibilities and segregation of duties to ensure that the reported information is consistent with ADSEF's accounting records. ADSEF lacks internal controls that allow for the timely validation and reconciliation of financial information. Furthermore, they lack a written procedures manual detailing the processes to follow in obtaining accounting data and reporting it to the Federal government, ensuring that the responsibility does not fall on a single individual. In relation to the Special and Performance Reports, the lack of written procedures and proper safeguarding of documentation does not allow for demonstrating compliance with the requirements of these reports. POSSIBLE ASSERTED EFFECT ADSEF does not ensure that the reports are accurate and traceable to the accounting database used to prepare their financial reports to the Federal Agencies and their financial statement. We were unable to evaluate internal controls and compliance over the Special and Performance Reports. ADSEF might not comply with the requirements of the program and not report it on time to the regulatory agencies. IDENTIFICATION OF REPEAT FINDING This is a repeat of a finding reported in the prior audit as Finding Numbers 2023-021/2023-051. RECOMMENDATIONS We recommend ADSEF to establish written procedures and internal controls manuals to provide and document the segregation of duties related to the reporting compliance requirement. In addition, in relation to the Special and Performance Reports create internal controls that provide for obtaining information, preparing reports, and filing evidence of reports.
FINDING REFERENCE NUMBER 2024-042 FEDERAL PROGRAM (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2022G996117 (Federal Award Year: 10/1/2021 – 9/30/2022) 2023G996117 (Federal Award Year: 10/1/2022 – 9/30/2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT REPORTING – PERFORMANCE TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA In accordance with 45 CFR, Subtitle B, Chapter II, Part 265.7, states that: (a) Each State's quarterly reports [the TANF Data Report, the TANF Financial Report (or Territorial Financial Report), the SSP-MOE Data Report, and the Work Outcomes of TANF Exciters Report] must be complete and accurate and filed by the due date. (b) For a disaggregated data report, “a complete and accurate report” means that: (1) The reported data accurately reflects information available to the State in case records, financial records, and automated data systems, and includes correction of the quarterly data by the end of the fiscal year reporting period; (2) The data are free from computational errors and are internally consistent (e.g., items that should add to totals do so); (3) The State reports data for all required elements (i.e., no data is missing); (4) (i) The State provides data on all families; or (ii) If the State opts to use sampling, the State reports data on all families selected in a sample that meets the specification and procedures in the TANF Sampling Manual (except for families listed in error); and (5) Where estimates are necessary (e.g., some types of assistance may require cost estimates), the State uses reasonable methods to develop these estimates. (c) For an aggregated data report, “a complete and accurate report” means that: (1) The reported data accurately reflects information available to the State in case records, financial records, and automated data systems; (2) The data are free from computational errors and are internally consistent (e.g., items that should add to totals do so); (3) The State reports data on all applicable elements; and (4) Monthly totals are unduplicated counts for all families (e.g., the number of families and the number of out-of-wedlock births are unduplicated counts). In addition, 2 CFR § 200.302 (a) establishes that each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. See § 200.450. In section (b) the recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (6) written procedures to implement the requirements of § 200.305 and (7) written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. STATEMENT OF CONDITION As part of our procedures for understanding internal controls for the preparation of ACF-199 reports, we request a procedures manual on how these reports are processed and the personnel responsible for each process. ADSEF did not provide us with a manual describing the data collection process, how the information provided by the regions is validated, and the individuals responsible for submitting the reports. Also, they should have completed the ACF-209 report for the quarters of December 2023 and June 2024 and no evidence was provided. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This is a systemic deficiency. Following the sample selection, ADSEF failed to demonstrate a control structure, as it was unable to provide a formal procedures manual for the reporting process. The sampling was a statistically valid sample. STATEMENT OF CAUSE ADSEF did not establish and implement written policies and procedures governing the preparation, review, validation, and submission of TANF reports. In addition, management did not implement adequate monitoring controls to ensure that required reports were prepared, reviewed, and submitted timely in accordance with Federal requirements. POSSIBLE ASSERTED EFFECT As a result, ADSEF was unable to demonstrate that adequate controls existed to ensure the completeness, accuracy, and timeliness of TANF reporting. This condition resulted in the failure to submit the required ACF-209 reports for the quarters ended December 31, 2023, and June 30, 2024, and increases the risk that Federal reports may contain incomplete or inaccurate information, thereby affecting Federal oversight and decision-making. IDENTIFICATION OF REPEAT FINDING This is a repeat of a finding reported in the prior audit as Finding Number is 2023-052. RECOMMENDATIONS We recommend that management establish internal control procedures manuals that clearly outline the processes to be followed for data collection, recording, and reporting. Additionally, standardize the way documents related to participant files are filed.
FINDING REFERENCE NUMBER 2024-044 (See Finding Reference Number 2024-016) FEDERAL PROGRAMS (ALN – 93.556) MARYLEE ALLEN PROMOTING SAFE AND STABLE FAMILIES (ALN – 93.667) SOCIAL SERVICES BLOCK GRANT U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBER 2203PRFPSS (Federal Award Years: 10/1/2021 through 9/30/2023); 2202PRFPCV (Federal Award Years: 10/1/2021 through 9/30/2023) 2211PRSOSR (Federal Award Years: 10/1/2021 through 9/30/2023) ADMINISTRATION ADMINISTRATION FOR FAMILIES AND CHILDREN (ADFAN, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT REPORTING TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA Uniform Guidance at 2 CFR § 200.302 (a) establishes that each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. See § 200.450. In addition, the SF-425 Federal Financial Report requires the reporting of financial activities related to Federal awards. The accounting basis used for reporting expenditures (whether cash or accrual) must align with the accounting system employed by the recipient organization. The 2 CFR § 200.302 (b), establish that the recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): … (6) written procedures to implement the requirements of § 200.305 and (7) written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. The 2 CFR section 200.328(c) establishes that the recipient or subrecipient must submit financial reports as required by the Federal award. Reports submitted annually by the recipient or subrecipient must be due no later than 90 calendar days after the reporting period. Reports submitted quarterly or semiannually must be due no later than 30 calendar days after the reporting period. The 2 CFR §200.303 (a) establishes that the recipient and subrecipient must: establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the 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). STATEMENT OF CONDITION As part of our audit procedures over internal controls and compliance for reporting requirements, we selected the Grant Awards 2203PRFPSS and 2202PRFPCV, which closes in the audit period from July 2023 to June 2024, to validate the recorded amounts. Upon evaluating the report for the Grant Award 2203PRFPSS, we found the following deficiencies: 1) The accounting basis should be Cash Basis instead of Accrual Basis, according to the accounting system used. Additionally, they provided a Procedures Manual for the Finance and Budget Divisions, approved in 2009 and delivered in Word format, which states that the accounting basis is “accrual”, even though their current system operates on a cash basis and no conversion to accrual basis was made. 2) The total Federal expenditure reported on line (e) does not match the database provided by the PRDF. 3) The matching expenditure on line (j) does not match the database provided by the PRDF. 4) The report was not submitted within the established deadline, December 31, 2023 and they submitted the report on July 8, 2024. 5) During the internal control’s interviews, we found that there is no designated person responsible for reviewing the information entered by the preparer. As part of our audit procedures over internal controls and compliance for reporting requirements, we selected the Grant Award 2211PRSOSR, which closes in the audit period from July 1, 2023 to June 30, 2024, to validate the recorded amounts. Upon evaluating the report, we found the following deficiencies: 1) The accounting basis should be Cash Basis instead of Accrual Basis, according to the accounting system used. Additionally, they provided a Procedures Manual for the Finance and Budget Divisions, approved in 2009 and delivered in Word format, which states that the accounting basis is “accrual”, even though their current system operates on a cash basis and no conversion to accrual basis was made. 2) The total Federal expenditure reported on line (e) does not match the database provided by the PRDF. 3) The report was not submitted within the established deadline, December 31, 2023 and they submitted the report on June 10, 2024. 4) During the internal control’s interviews, we found that there is no designated person responsible for reviewing the information entered by the preparer. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This deficiency is a systemic problem. Procedures and internal controls manuals should provide for and ensure the segregation of duties, training, and the reconciliation of financial information reported to Federal agencies against the accounting records used to prepare financial statement and SEFA. STATEMENT OF CAUSE ADFAN does not have internal controls to effectively review the process and comply with the reporting requirements. The absence of effective internal controls at ADFAN to review processes and ensure compliance with reporting requirements can be attributed to inadequate organizational structure and insufficiently defined roles and responsibilities. There is no designated individual or team responsible for overseeing the accuracy and completeness of financial data entered reports. As mentioned above in the condition, this responsibility falls under one person and does not have segregation of duties. This gap in accountability stems from a lack of internal review and insufficient oversight mechanisms, which restrains the organization's ability to ensure that reports are fully aligned with the required compliance standards. Additionally, there is a lack of training or resources dedicated to maintaining and monitoring compliance which contributes to the failure in reporting requirements. POSSIBLE ASSERTED EFFECT ADFAN does not ensure that the reports are accurate and traceable to the accounting database used to prepare their financial reports for the Federal Agencies and their financial statement. IDENTIFICATION OF REPEAT FINDING This is a repeat of a finding reported in the prior audit as Finding Numbers is 2023-023/2023-054. RECOMMENDATIONS We recommend that ADFAN ensures the SF-425 is completed using the appropriate accounting basis consistent with the organization’s financial system. Additionally, ADFAN should establish and implement internal control procedures that include formal review process to verify the accuracy and completeness of the reported information and designate responsible personnel for the review and approval of reports prior to submission to ensure compliance with Federal reporting requirements.
FINDING REFERENCE NUMBER 2024-046 (See Finding Reference Number 2024-018) FEDERAL PROGRAMS (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) (ALN – 93.560) PAYMENT TO TERRITORIES – ADULT U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2022G996117 (Federal Award Year: 10/1/2021 – 9/30/2022) 2023G996117 (Federal Award Year: 10/1/2022 – 9/30/2023) 2022G9922PT (Federal Award Years: 10/1/2022 through 9/30/2025) 2301PRTABD (Federal Award Years: 10/1/2023 through 9/30/2026) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT REPORTING – FINANCIAL REPORTING TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA The 2 CFR 200 §200.302, Financial Management, establishes that: “(a) Each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. See § 200.450. (b) The recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (1) Identification of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number, year the Federal award was issued, and name of the Federal agency or pass-through entity. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. When a Federal agency or pass-through entity requires reporting on an accrual basis from a recipient or subrecipient that maintains its records other than on an accrual basis, the recipient or subrecipient must not be required to establish an accrual accounting system. This recipient or subrecipient may develop accrual data for its reports based on an analysis of the documentation on hand. (3) Maintaining 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. (4) Effective control over and accountability for all funds, property, and assets. The recipient or subrecipient must safeguard all assets and ensure they are used solely for authorized purposes. See § 200.303. … (6) Written procedures to implement the requirements of § 200.305 and (7) Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. STATEMENT OF CONDITION As part of our audit procedures over the reporting requirements for the Temporary Assistance for Needy Families (TANF) and Payment to Territories – Adult (PTTA) programs, we reviewed two ACF-196TR reports submitted during the fiscal year under audit. Our review disclosed deficiencies related to the accuracy, support, reconciliation, and timeliness of reported expenditures. Specifically, we noted the following: • Administrative expenditures for both TANF and PTTA are recorded under the same accounting account number and Assistance Listing Number associated with TANF. As a result, the PRIFA accounting system does not segregate administrative expenditures by federal award or Assistance Listing Number, limiting the ability to identify and track expenditures attributable to each program. • Amounts reported in the ACF-196TR reports could not be reconciled to the PRIFA accounting records, particularly for administrative expenditures. Upon request, management was unable to provide supporting schedules, reconciliations, or documentation demonstrating how the reported amounts were derived. Supporting information was prepared only after it was requested during the audit. • For grant award 2023G996117, reported expenditures in the quarterly report of September 30, 2023, that did not agree with the underlying accounting records. We identified differences of $7,266.40 in Line 6A (Work-Related Activities and Expenses), $1,745,668.00 in Line 5A (Basic Assistance), $1,645,366.55 in Line 6J (Administration), $2,007,611.62 in Line 3 (Transfer to SSBG), and $103,052.41 in Line 10 (Total Expenditures). In addition, the report was submitted after the applicable due date. • For grant award 2401PRTANF, reported expenditures in the June 30, 2024 quarterly report that also differed from the accounting records. We identified differences of $12,312.07 in Line 6A (Work-Related Activities and Expenses), $1,898,639.95 in Line 6J (Administration), $3,786,696.14 in Line 3 (Transfer to SSBG), and $1,902,297.08 in Line 10 (Total Expenditures). Furthermore, the report maintained by ADSEF did not contain evidence of the submission date; therefore, we were unable to determine whether the report was submitted within the required timeframe. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This is a systematic deficiency. Procedures and internal controls manuals should provide for and ensure the segregation of duties, and the reconciliation of financial information reported to Federal agencies against the accounting records used to prepare financial statements and SEFA. In addition, the financial management system should provide to account separately the administrative expenditures incurred among all Federal programs administered. ADSEF failure to support reported amounts with verifiable documentation and the absence of independent review increases the risk of inaccurate or misstated financial data being reported to the Federal awarding agency. STATEMENT OF CAUSE During our interviews and understanding of the internal controls over financial reporting, we noted that only one person prepares, submits and certifies the ACF-196TR reports. No proper segregation of duties exists, that allows for validation of all accounting data before submitting the reports. In addition, the procedures manual for preparing reports does not establish a clear process for obtaining information, validating it, recording it, preparing it, and reporting it, as well as the responsibilities and segregation of duties to ensure that the reported information is consistent with ADSEF's accounting records. PRIFAS accounting data base as configured, does not provide for the administrative expenditures incurred from the TANF and Payment to Territories – Adult programs to be segregated. ADSEF lacks internal controls that allow for the timely validation and reconciliation of financial information. Furthermore, they lack a written procedures manual detailing the processes to follow in obtaining accounting data and reporting it to the Federal government, ensuring that the responsibility does not fall on a single individual. POSSIBLE ASSERTED EFFECT ADSEF does not ensure that the reports are accurate and traceable to the accounting database used to prepare their financial reports to the Federal Agencies and their financial statement. IDENTIFICATION OF REPEAT FINDING This is a repeat of a finding reported in the prior audit as Finding Numbers is 2023-025/2023-056. RECOMMENDATIONS We recommend ADSEF to establish written procedures and internal controls manuals to provide and document the segregation of duties related to the reporting compliance requirement. Additionally, work with the Puerto Rico Department of the Treasury to provide accounting records to segregate the administrative expenditures of both programs.
CASH MANAGEMENT – CASH DRAWS Repeat of finding 2022-003, 2023-006 Finding Type: Material Weakness in Internal Controls over Compliance, Material Noncompliance ALN Program Title: 93.676 – Unaccompanied Alien Children Program Federal Agency: U.S. Department of Health and Human Services Pass-Through Entity: Liberty Wilderness Crossroads Camp Contract Number: 90ZU0501 Criteria: Under 2 CFR 200.305(b) of the Uniform Guidance, non-federal entities “must minimize the time elapsing between the transfer of funds from the United States Treasury or the pass-through entity and the disbursement by the non-federal entity whether the payment is made by electronic funds transfer, or issuance or redemption of checks, warrants, or payment by other means.” Under 2 CFR 200.305(b)(5) of the Uniform Guidance, “To the extent available, the non-federal entity must disburse funds available from program income (including repayments to a revolving fund), rebates, refunds, contract settlements, audit recoveries, and interest earned on such funds before requesting additional cash payments.” Under 2 CFR 200.302(b)(6) of the Uniform Guidance, the Organization’s financial management system must provide for “written procedures to implement the requirements of 2 CFR 200.305.” Additionally, 2 CFR 200.303(a) of the Uniform Guidance requires non-federal entities to establish and maintain effective internal control over federal awards 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. Condition: While the Organization did not draw cash in excess of program disbursements for the grant that was in effect during the current year, the Organization had previously drawn cash in excess of program disbursements under a grant that ended in the prior year so the Organization started and ended the year with a material balance of unspent grant funds for the program. Additionally, the Organization did not have written cash management policies and there was no process established for reviewing the pay requests prepared prior to submission. Cause: Policies and procedures were not in place to ensure that the time elapsing between the transfer of federal funds to the Organization and the disbursement of such funds for program purposes was minimized. In addition, policies and procedures were not in place to ensure that additional cash draws were not requested prior to disbursing all available funds for program related purposes. Effect: Overall program funds were drawn in excess of disbursements. The Organization could be required to return the excess funds to the grantor along with any associated earned interest. Questioned Costs: None Recommendation: We recommend that written policies and procedures be established to implement the requirements of 2 CFR 200.305, and recommend procedures be established for review of the cash draw requests prior to submission and that the review be documented. Views of Responsible Officials and Planned Corrective Actions: See management’s response and Corrective Action Plan on page 55.
CASH MANAGEMENT – INTEREST ON EXCESS FUNDS Repeat of finding 2023-011 Finding Type: Significant Deficiency in Internal Controls over Compliance ALN and Program Title: 93.676 – Unaccompanied Alien Children Program Federal Agency: U.S. Department of Health and Human Services Pass-Through Entity: Liberty Wilderness Crossroads Camp Contract Number: 90ZU0501 Criteria: Under 2 CFR 200.305(b)(11) of the Uniform Guidance, the Organization “must maintain advance payments of federal funds in interest-bearing accounts” unless certain criteria apply. Under 2 CFR 200.305(b)(12) of the Uniform Guidance, interest earned on federal funds in excess of $500 per year must be returned annually. Condition: The Organization started and ended the year with a material balance of unspent grant funds for the program and did not maintain the funds in an interest-bearing account. Cause: Management was unaware of the requirement to maintain funds in an interest-bearing account so the funds were maintained in the Organization’s checking account with other funds. Effect: Interest was not being earned on the excess program funds or remitted to the grantor. Questioned Costs: None Recommendation: We recommend the Organization establish policies to maintain federal grant funds in an interest-bearing account so that interest can be earned and remitted if required. Views of Responsible Officials and Planned Corrective Actions: See management’s response and Corrective Action Plan on page 55.
#2024-001: Grant Program: Department of Health and Human Services – National Institutes for Health Research and Development Cluster – Cancer Control – Assistance Listing #93.399 – Lack of Required Written Policies Condition: The Consortium does not have written policies and procedures in place as required by 2 CFR § 200.302 and § 200.313. Specifically, the Consortium lacks documented policies for: • The timing of federal cash draws; • The allowability of costs charged to federal awards; and • Documentation of time-and-effort for personal services. Criteria: 2 CFR § 200.302(b)(6)–(7) requires nonfederal entities to have written procedures for (a) cash drawdowns and (b) determining cost allowability. § 200.305 requires written cash-management procedures that minimize the time between draw and disbursement. § 200.430 requires a written policy that is consistently applied to both federal and nonfederal activities for documentation of compensation for personal services. Context: At the time of completion of the audit for the year ended May 31, 2024, the written policies were not in place. Cause: The Consortium has not yet developed or adopted the required written policies due to limited administrative capacity and reliance on informal practices. Effect: The absence of written policies increases the risk of noncompliance with federal requirements, mismanagement of federal funds, and audit findings in future periods. It may also impair the Consortium’s ability to consistently apply federal cost principles and properly safeguard assets. Recommendation: We recommend that the Consortium develop and implement written policies and procedures that comply with the requirements of Uniform Guidance. Management Response: See Corrective Action Plan.
Finding No. 2024-001 – Repayment agreement requested in voucher. Federal Program ALN 14.157 - U.S. Department of Housing and Urban Development Section 202 Capital Advance Program – Supportive Housing for the Elderly Name of Federal Agency U. S. Department of Housing and Urban Development (HUD) Category Other Matter Compliance requirement Cash Management Criteria Under CFR 200.305 Federal payment states the following: (1) The non-Federal entity must be paid in advance, provided it maintains or demonstrates the willingness to maintain both written procedures that minimize the time elapsing between the transfer of funds and disbursement by the non-Federal entity, and financial management systems that meet the standards for fund control and accountability as established in this part. Advance payments to a non-Federal entity must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the non-Federal entity in carrying out the purpose of the approved program or project. The timing and amount of advance payments must be as close as is administratively feasible to the actual disbursements by the non_x0002_Federal entity for direct program or project costs and the proportionate share of any allowable indirect costs. The non-Federal entity must make timely payment to contractors in accordance with the contract provisions. Condition During the audit testing of cash management, we identified one voucher for the month of August 2023, that incorrectly included $1,348 of funds pertaining to a tenant repayment agreement. The management of the Project acknowledged that they did not detect that the repayment agreement amount had been included in the voucher. Additionally, the tenant disappeared after signing the repayment agreement without fulfilling her obligation. Cause The inclusion of the incorrect amount corresponding to a repayment agreement was due to administrative errors and to lack of effective internal controls for the review and approval of vouchers to be submitted to HUD. Effect Funds amounting to $1,348 had to be returned due to inaccuracies in the original voucher requests submitted to HUD. Questioned Cost Total known question cost to be reimbursed to HUD amounting to $1,348. Context The population consists of twelve vouchers. We selected a sample of two vouchers from this population. Upon audit procedures, we identified an error in one of the vouchers, which amounted to a total of $1,348 that needs to be refunded. Prior year finding No Recommendation We recommended that the Project administrator implement a more thorough review process for voucher details before finalization. This should include a verification step specifically focused on ensuring all amounts, including repayment agreement amounts, are accurately included. Training on the importance of detailed data entry and implementing a secondary review by another staff member could also help identify and correct errors before vouchers are processed. Views of responsible officials and planned corrective actions. The Project’s management agrees with this finding. Please refer to the corrective action plan on page 41
Information on the Federal Program: Assistance Listing Number 47.050—Geosciences, National Science Foundation. Award Number: 224242, 2303562, 2243827, 2246223, 2246225. Compliance Requirements: Cash Management Type of Finding: Material Noncompliance and Significant Deficiency. Criteria: Under 2 CFR § 200.305 - The recipient or subrecipient may retain up to $500 per year of interest earned on Federal funds to use for administrative expenses of the recipient or subrecipient. Any additional interest earned on Federal funds must be returned annually to the Department of Health and Human ServicesPayment Management System (PMS). All interest in excess of $500 per year must be returned to PMS regardless of whether the recipient or subrecipient was paid through PMS. Condition: For the year ended March 31, 2024, Future Earth did not comply with the requirement to minimize the time between the drawdown of federal funds and their disbursement. This resulted in interest accumulation on these advance payments. Future Earth failed to remit interest earned in excess of $500 annually to the PMS as stipulated by the regulations. Cause: This was the second year Future Earth was awarded Federal funding and was unaware of this requirement. Effect: Financial liabilities due to unremitted interest, subjecting the entity to potential penalties and repayment obligations. Questioned Costs: We were not able to determine the amount of interest earned on federal funds held during the year ended March 31, 2024. Context: In our review of the 4 grant draws occurring during the year, we noted that in 3 of 4 draw requests, funds were requested before expenditures. In 1 of the 4 draws, we noted that funds were drawn on September 8, 2023 were not yet expended as of March 31, 2024. Interest earned on these funds was in excess of $500, but was not tracked or remitted to the grantor. No controls were identified to ensure interest was tracked and remitted as required by the regulations. Recommendation: We recommend that Future Earth establish a policy to minimize the time between draw and expenditure. We would also recommend that any federal funds received in advance of expenditure be segregated into a separate bank account in order to better track any interest earned on federal funding. Views of Responsible Official: Management agrees with this finding. Please see corrective action plan at the end of this report.
Condition: Out of the 36 grant drawdowns during the year, of the 15 drawdowns that were tested, 3 of the drawdowns were made in advance of the supporting invoices being paid and subsequently the invoices were not paid within the 72-hours, as required. Context: The auditor haphazardly selected 15 grant drawdowns from the population, which we consider to be a statistically valid sample size. The auditor reviewed the drawdowns and supporting documentation to ensure proper procedures are being followed and that the Authority is in compliance with HUD requirements. Criteria: The U.S. Treasury per 2 CFR section 200.305 (2 CFR section 200.302(b)(6)) requires grant funds received by the Authority to be properly spent within 72 hours of receipt. HUD regulations require that proper documentation be maintained for all Capital Fund Program per 24 CFR 905.326. Cause: The Authority experienced staff turnover in the finance department as well as difficulty replacing personnel knowledgeable with HUD and grant reporting requirements. Effect: The Authority did not disburse the capital funds in a timely manner for some of the draws made during the year. Questioned Costs: $379,570 Auditor’s Recommendations: The Authority should continue to develop and implement internal controls over grant management to coordinate capital fund draws with the timing of invoice payments. View of Responsible Officials: See Corrective Action Plan
Finding No. 2024-001 – Repayment agreement requested in voucher. Federal Program ALN 14.157 - U.S. Department of Housing and Urban Development Section 202 Capital Advance Program – Supportive Housing for the Elderly Name of Federal Agency U. S. Department of Housing and Urban Development (HUD) Category Other Matter Compliance requirement Cash Management Criteria Under CFR 200.305 Federal payment states the following: (1) The non-Federal entity must be paid in advance, provided it maintains or demonstrates the willingness to maintain both written procedures that minimize the time elapsing between the transfer of funds and disbursement by the non-Federal entity, and financial management systems that meet the standards for fund control and accountability as established in this part. Advance payments to a non-Federal entity must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the non-Federal entity in carrying out the purpose of the approved program or project. The timing and amount of advance payments must be as close as is administratively feasible to the actual disbursements by the non_x0002_Federal entity for direct program or project costs and the proportionate share of any allowable indirect costs. The non-Federal entity must make timely payment to contractors in accordance with the contract provisions. Condition During the audit testing of cash management, we identified one voucher for the month of August 2023, that incorrectly included $1,348 of funds pertaining to a tenant repayment agreement. The management of the Project acknowledged that they did not detect that the repayment agreement amount had been included in the voucher. Additionally, the tenant disappeared after signing the repayment agreement without fulfilling her obligation. Cause The inclusion of the incorrect amount corresponding to a repayment agreement was due to administrative errors and to lack of effective internal controls for the review and approval of vouchers to be submitted to HUD. Effect Funds amounting to $1,348 had to be returned due to inaccuracies in the original voucher requests submitted to HUD. Questioned Cost Total known question cost to be reimbursed to HUD amounting to $1,348. Context The population consists of twelve vouchers. We selected a sample of two vouchers from this population. Upon audit procedures, we identified an error in one of the vouchers, which amounted to a total of $1,348 that needs to be refunded. Prior year finding No Recommendation We recommended that the Project administrator implement a more thorough review process for voucher details before finalization. This should include a verification step specifically focused on ensuring all amounts, including repayment agreement amounts, are accurately included. Training on the importance of detailed data entry and implementing a secondary review by another staff member could also help identify and correct errors before vouchers are processed. Views of responsible officials and planned corrective actions. The Project’s management agrees with this finding. Please refer to the corrective action plan on page 41
Information on the Federal Program: Assistance Listing Number 47.050—Geosciences, National Science Foundation. Award Number: 224242, 2303562, 2243827, 2246223, 2246225. Compliance Requirements: Cash Management Type of Finding: Material Noncompliance and Significant Deficiency. Criteria: Under 2 CFR § 200.305 - The recipient or subrecipient may retain up to $500 per year of interest earned on Federal funds to use for administrative expenses of the recipient or subrecipient. Any additional interest earned on Federal funds must be returned annually to the Department of Health and Human ServicesPayment Management System (PMS). All interest in excess of $500 per year must be returned to PMS regardless of whether the recipient or subrecipient was paid through PMS. Condition: For the year ended March 31, 2024, Future Earth did not comply with the requirement to minimize the time between the drawdown of federal funds and their disbursement. This resulted in interest accumulation on these advance payments. Future Earth failed to remit interest earned in excess of $500 annually to the PMS as stipulated by the regulations. Cause: This was the second year Future Earth was awarded Federal funding and was unaware of this requirement. Effect: Financial liabilities due to unremitted interest, subjecting the entity to potential penalties and repayment obligations. Questioned Costs: We were not able to determine the amount of interest earned on federal funds held during the year ended March 31, 2024. Context: In our review of the 4 grant draws occurring during the year, we noted that in 3 of 4 draw requests, funds were requested before expenditures. In 1 of the 4 draws, we noted that funds were drawn on September 8, 2023 were not yet expended as of March 31, 2024. Interest earned on these funds was in excess of $500, but was not tracked or remitted to the grantor. No controls were identified to ensure interest was tracked and remitted as required by the regulations. Recommendation: We recommend that Future Earth establish a policy to minimize the time between draw and expenditure. We would also recommend that any federal funds received in advance of expenditure be segregated into a separate bank account in order to better track any interest earned on federal funding. Views of Responsible Official: Management agrees with this finding. Please see corrective action plan at the end of this report.
Condition: Out of the 36 grant drawdowns during the year, of the 15 drawdowns that were tested, 3 of the drawdowns were made in advance of the supporting invoices being paid and subsequently the invoices were not paid within the 72-hours, as required. Context: The auditor haphazardly selected 15 grant drawdowns from the population, which we consider to be a statistically valid sample size. The auditor reviewed the drawdowns and supporting documentation to ensure proper procedures are being followed and that the Authority is in compliance with HUD requirements. Criteria: The U.S. Treasury per 2 CFR section 200.305 (2 CFR section 200.302(b)(6)) requires grant funds received by the Authority to be properly spent within 72 hours of receipt. HUD regulations require that proper documentation be maintained for all Capital Fund Program per 24 CFR 905.326. Cause: The Authority experienced staff turnover in the finance department as well as difficulty replacing personnel knowledgeable with HUD and grant reporting requirements. Effect: The Authority did not disburse the capital funds in a timely manner for some of the draws made during the year. Questioned Costs: $379,570 Auditor’s Recommendations: The Authority should continue to develop and implement internal controls over grant management to coordinate capital fund draws with the timing of invoice payments. View of Responsible Officials: See Corrective Action Plan
2024-011 Timely Grant Draws Material Weakness This is a repeat finding. The prior-year’s auditing finding number is 2023-011. Condition: Grant dollars were not drawn in a timely fashion during the year to cover current grant expenditures. The Housing Authority’s grant funded cost reimbursable program was carrying in excess of 60 days operating capital in grants receivable. Concurrently, the Housing Authority’s cash and cash equivalents were insufficient to cover its unearned revenue, which totaled $169,703. Had the grant draws been completed in a timely manner, the cash received would have been sufficient to cover the unearned revenue. Criteria: The Housing Authority does not have written policies to address the timeliness of grant draw procedures. Grant funds should be drawn as grant expenditures occur. Carrying anything in excess of 60 days operating capital in grants receivable is considered untimely and indicates that the expenditures carried within these grant funded cost reimbursable programs are being “floated” by other funds. 2 CFR section 200.305 of the Uniform Guidance states that “For non-Federal entities other than states, payments methods must minimize the time elapsing between the transfer of funds from the United States Treasury or the pass-through entity and the disbursement by the non-Federal entity whether the payment is made by electronic funds transfer, or issuance or redemption of checks, warrants, or payment by other means.” Cause: Lack of a written grant draw policy and procedures as well as a lack of staff “hands-on” training in those necessary areas. Effect: The untimely HUD grant draws have created a significant liquidity risk and forced the Housing Authority to use its unearned revenue funds from the Department of Treasury for purposes other than their intended use. This misapplication of funds places the Housing Authority at risk of failing to meet its financial obligations and jeopardizes compliance with terms of multiple grant awards. Recommendation: The Housing Authority should adopt written grant draw policies into its financial policies and procedures manual. Financials should be reviewed monthly, and drawdowns made as needed. Views of Responsible Officials and Planned Corrective Actions: See Corrective Action Plan.
2024-008 Cash Management Program Information Federal Organization U.S Department of Health and Human Services Assistance Listing Numbers 93.224 & 93.527 Health Center Program Cluster Award Numbers H80CS00513, H8FCS41684, H8GC48547, H8LCS51197 Criteria [X] Compliance Finding [ ] Significant Deficiency [X] Material Weakness Title 2 CFR 200.305 requires that organizations “must minimize the time elapsing between the transfer of funds from the United States Treasury or the pass-through entity and the disbursement by the non-federal entity whether the payment is made by electronic funds transfer, or issuance or redemption of checks, warrants, or payment by other means.” Condition Cash draws were made without support of approved documentation. Supporting documentation for other draws included invoices for expenditures that were dated several months after the draw was made. This finding appears to be a systemic problem Cause The Organization’s internal controls over cash management and PMS draws does not include procedures for non-payroll expenditures. As a result, draws were made without supporting documentation. In addition, the Organization did not always maintain documentation of the payroll calculations supporting draws, as required by company policy. Effect The Organization may not have minimized the timing between draws from the PMS and the related payments for expenditures incurred as required. Questioned Costs Indeterminable. Context Out of thirteen draws tested, the Organization was not able to provide supporting documentation for one draw and support for two additional draws included expenses that were not incurred within a reasonable time after the draw. Recommendation We recommend the Organization implement controls requiring all draws from the Payment Management System (PMS) to be based on detailed reports of expenditures claimed for reimbursement and retain this documentation along with the supporting invoices and payroll reports supporting the expenditures. In addition, we recommend that the listing of expenditures be reviewed by qualified personnel to ensure that the expenditures claimed are allowable and cash payments for the expenditures are made before the date of the draw or within a reasonable time after the draw. Views of responsible officials and planned corrective action Management is in agreement with this finding and will take corrective action as outlined below.
2024-008 Cash Management Program Information Federal Organization U.S Department of Health and Human Services Assistance Listing Numbers 93.224 & 93.527 Health Center Program Cluster Award Numbers H80CS00513, H8FCS41684, H8GC48547, H8LCS51197 Criteria [X] Compliance Finding [ ] Significant Deficiency [X] Material Weakness Title 2 CFR 200.305 requires that organizations “must minimize the time elapsing between the transfer of funds from the United States Treasury or the pass-through entity and the disbursement by the non-federal entity whether the payment is made by electronic funds transfer, or issuance or redemption of checks, warrants, or payment by other means.” Condition Cash draws were made without support of approved documentation. Supporting documentation for other draws included invoices for expenditures that were dated several months after the draw was made. This finding appears to be a systemic problem Cause The Organization’s internal controls over cash management and PMS draws does not include procedures for non-payroll expenditures. As a result, draws were made without supporting documentation. In addition, the Organization did not always maintain documentation of the payroll calculations supporting draws, as required by company policy. Effect The Organization may not have minimized the timing between draws from the PMS and the related payments for expenditures incurred as required. Questioned Costs Indeterminable. Context Out of thirteen draws tested, the Organization was not able to provide supporting documentation for one draw and support for two additional draws included expenses that were not incurred within a reasonable time after the draw. Recommendation We recommend the Organization implement controls requiring all draws from the Payment Management System (PMS) to be based on detailed reports of expenditures claimed for reimbursement and retain this documentation along with the supporting invoices and payroll reports supporting the expenditures. In addition, we recommend that the listing of expenditures be reviewed by qualified personnel to ensure that the expenditures claimed are allowable and cash payments for the expenditures are made before the date of the draw or within a reasonable time after the draw. Views of responsible officials and planned corrective action Management is in agreement with this finding and will take corrective action as outlined below.
2024-008 Cash Management Program Information Federal Organization U.S Department of Health and Human Services Assistance Listing Numbers 93.224 & 93.527 Health Center Program Cluster Award Numbers H80CS00513, H8FCS41684, H8GC48547, H8LCS51197 Criteria [X] Compliance Finding [ ] Significant Deficiency [X] Material Weakness Title 2 CFR 200.305 requires that organizations “must minimize the time elapsing between the transfer of funds from the United States Treasury or the pass-through entity and the disbursement by the non-federal entity whether the payment is made by electronic funds transfer, or issuance or redemption of checks, warrants, or payment by other means.” Condition Cash draws were made without support of approved documentation. Supporting documentation for other draws included invoices for expenditures that were dated several months after the draw was made. This finding appears to be a systemic problem Cause The Organization’s internal controls over cash management and PMS draws does not include procedures for non-payroll expenditures. As a result, draws were made without supporting documentation. In addition, the Organization did not always maintain documentation of the payroll calculations supporting draws, as required by company policy. Effect The Organization may not have minimized the timing between draws from the PMS and the related payments for expenditures incurred as required. Questioned Costs Indeterminable. Context Out of thirteen draws tested, the Organization was not able to provide supporting documentation for one draw and support for two additional draws included expenses that were not incurred within a reasonable time after the draw. Recommendation We recommend the Organization implement controls requiring all draws from the Payment Management System (PMS) to be based on detailed reports of expenditures claimed for reimbursement and retain this documentation along with the supporting invoices and payroll reports supporting the expenditures. In addition, we recommend that the listing of expenditures be reviewed by qualified personnel to ensure that the expenditures claimed are allowable and cash payments for the expenditures are made before the date of the draw or within a reasonable time after the draw. Views of responsible officials and planned corrective action Management is in agreement with this finding and will take corrective action as outlined below.
2024-008 Cash Management Program Information Federal Organization U.S Department of Health and Human Services Assistance Listing Numbers 93.224 & 93.527 Health Center Program Cluster Award Numbers H80CS00513, H8FCS41684, H8GC48547, H8LCS51197 Criteria [X] Compliance Finding [ ] Significant Deficiency [X] Material Weakness Title 2 CFR 200.305 requires that organizations “must minimize the time elapsing between the transfer of funds from the United States Treasury or the pass-through entity and the disbursement by the non-federal entity whether the payment is made by electronic funds transfer, or issuance or redemption of checks, warrants, or payment by other means.” Condition Cash draws were made without support of approved documentation. Supporting documentation for other draws included invoices for expenditures that were dated several months after the draw was made. This finding appears to be a systemic problem Cause The Organization’s internal controls over cash management and PMS draws does not include procedures for non-payroll expenditures. As a result, draws were made without supporting documentation. In addition, the Organization did not always maintain documentation of the payroll calculations supporting draws, as required by company policy. Effect The Organization may not have minimized the timing between draws from the PMS and the related payments for expenditures incurred as required. Questioned Costs Indeterminable. Context Out of thirteen draws tested, the Organization was not able to provide supporting documentation for one draw and support for two additional draws included expenses that were not incurred within a reasonable time after the draw. Recommendation We recommend the Organization implement controls requiring all draws from the Payment Management System (PMS) to be based on detailed reports of expenditures claimed for reimbursement and retain this documentation along with the supporting invoices and payroll reports supporting the expenditures. In addition, we recommend that the listing of expenditures be reviewed by qualified personnel to ensure that the expenditures claimed are allowable and cash payments for the expenditures are made before the date of the draw or within a reasonable time after the draw. Views of responsible officials and planned corrective action Management is in agreement with this finding and will take corrective action as outlined below.
2024-008 Cash Management Program Information Federal Organization U.S Department of Health and Human Services Assistance Listing Numbers 93.224 & 93.527 Health Center Program Cluster Award Numbers H80CS00513, H8FCS41684, H8GC48547, H8LCS51197 Criteria [X] Compliance Finding [ ] Significant Deficiency [X] Material Weakness Title 2 CFR 200.305 requires that organizations “must minimize the time elapsing between the transfer of funds from the United States Treasury or the pass-through entity and the disbursement by the non-federal entity whether the payment is made by electronic funds transfer, or issuance or redemption of checks, warrants, or payment by other means.” Condition Cash draws were made without support of approved documentation. Supporting documentation for other draws included invoices for expenditures that were dated several months after the draw was made. This finding appears to be a systemic problem Cause The Organization’s internal controls over cash management and PMS draws does not include procedures for non-payroll expenditures. As a result, draws were made without supporting documentation. In addition, the Organization did not always maintain documentation of the payroll calculations supporting draws, as required by company policy. Effect The Organization may not have minimized the timing between draws from the PMS and the related payments for expenditures incurred as required. Questioned Costs Indeterminable. Context Out of thirteen draws tested, the Organization was not able to provide supporting documentation for one draw and support for two additional draws included expenses that were not incurred within a reasonable time after the draw. Recommendation We recommend the Organization implement controls requiring all draws from the Payment Management System (PMS) to be based on detailed reports of expenditures claimed for reimbursement and retain this documentation along with the supporting invoices and payroll reports supporting the expenditures. In addition, we recommend that the listing of expenditures be reviewed by qualified personnel to ensure that the expenditures claimed are allowable and cash payments for the expenditures are made before the date of the draw or within a reasonable time after the draw. Views of responsible officials and planned corrective action Management is in agreement with this finding and will take corrective action as outlined below.
2024-008 Cash Management Program Information Federal Organization U.S Department of Health and Human Services Assistance Listing Numbers 93.224 & 93.527 Health Center Program Cluster Award Numbers H80CS00513, H8FCS41684, H8GC48547, H8LCS51197 Criteria [X] Compliance Finding [ ] Significant Deficiency [X] Material Weakness Title 2 CFR 200.305 requires that organizations “must minimize the time elapsing between the transfer of funds from the United States Treasury or the pass-through entity and the disbursement by the non-federal entity whether the payment is made by electronic funds transfer, or issuance or redemption of checks, warrants, or payment by other means.” Condition Cash draws were made without support of approved documentation. Supporting documentation for other draws included invoices for expenditures that were dated several months after the draw was made. This finding appears to be a systemic problem Cause The Organization’s internal controls over cash management and PMS draws does not include procedures for non-payroll expenditures. As a result, draws were made without supporting documentation. In addition, the Organization did not always maintain documentation of the payroll calculations supporting draws, as required by company policy. Effect The Organization may not have minimized the timing between draws from the PMS and the related payments for expenditures incurred as required. Questioned Costs Indeterminable. Context Out of thirteen draws tested, the Organization was not able to provide supporting documentation for one draw and support for two additional draws included expenses that were not incurred within a reasonable time after the draw. Recommendation We recommend the Organization implement controls requiring all draws from the Payment Management System (PMS) to be based on detailed reports of expenditures claimed for reimbursement and retain this documentation along with the supporting invoices and payroll reports supporting the expenditures. In addition, we recommend that the listing of expenditures be reviewed by qualified personnel to ensure that the expenditures claimed are allowable and cash payments for the expenditures are made before the date of the draw or within a reasonable time after the draw. Views of responsible officials and planned corrective action Management is in agreement with this finding and will take corrective action as outlined below.
2024-008 Cash Management Program Information Federal Organization U.S Department of Health and Human Services Assistance Listing Numbers 93.224 & 93.527 Health Center Program Cluster Award Numbers H80CS00513, H8FCS41684, H8GC48547, H8LCS51197 Criteria [X] Compliance Finding [ ] Significant Deficiency [X] Material Weakness Title 2 CFR 200.305 requires that organizations “must minimize the time elapsing between the transfer of funds from the United States Treasury or the pass-through entity and the disbursement by the non-federal entity whether the payment is made by electronic funds transfer, or issuance or redemption of checks, warrants, or payment by other means.” Condition Cash draws were made without support of approved documentation. Supporting documentation for other draws included invoices for expenditures that were dated several months after the draw was made. This finding appears to be a systemic problem Cause The Organization’s internal controls over cash management and PMS draws does not include procedures for non-payroll expenditures. As a result, draws were made without supporting documentation. In addition, the Organization did not always maintain documentation of the payroll calculations supporting draws, as required by company policy. Effect The Organization may not have minimized the timing between draws from the PMS and the related payments for expenditures incurred as required. Questioned Costs Indeterminable. Context Out of thirteen draws tested, the Organization was not able to provide supporting documentation for one draw and support for two additional draws included expenses that were not incurred within a reasonable time after the draw. Recommendation We recommend the Organization implement controls requiring all draws from the Payment Management System (PMS) to be based on detailed reports of expenditures claimed for reimbursement and retain this documentation along with the supporting invoices and payroll reports supporting the expenditures. In addition, we recommend that the listing of expenditures be reviewed by qualified personnel to ensure that the expenditures claimed are allowable and cash payments for the expenditures are made before the date of the draw or within a reasonable time after the draw. Views of responsible officials and planned corrective action Management is in agreement with this finding and will take corrective action as outlined below.
2024-008 Cash Management Program Information Federal Organization U.S Department of Health and Human Services Assistance Listing Numbers 93.224 & 93.527 Health Center Program Cluster Award Numbers H80CS00513, H8FCS41684, H8GC48547, H8LCS51197 Criteria [X] Compliance Finding [ ] Significant Deficiency [X] Material Weakness Title 2 CFR 200.305 requires that organizations “must minimize the time elapsing between the transfer of funds from the United States Treasury or the pass-through entity and the disbursement by the non-federal entity whether the payment is made by electronic funds transfer, or issuance or redemption of checks, warrants, or payment by other means.” Condition Cash draws were made without support of approved documentation. Supporting documentation for other draws included invoices for expenditures that were dated several months after the draw was made. This finding appears to be a systemic problem Cause The Organization’s internal controls over cash management and PMS draws does not include procedures for non-payroll expenditures. As a result, draws were made without supporting documentation. In addition, the Organization did not always maintain documentation of the payroll calculations supporting draws, as required by company policy. Effect The Organization may not have minimized the timing between draws from the PMS and the related payments for expenditures incurred as required. Questioned Costs Indeterminable. Context Out of thirteen draws tested, the Organization was not able to provide supporting documentation for one draw and support for two additional draws included expenses that were not incurred within a reasonable time after the draw. Recommendation We recommend the Organization implement controls requiring all draws from the Payment Management System (PMS) to be based on detailed reports of expenditures claimed for reimbursement and retain this documentation along with the supporting invoices and payroll reports supporting the expenditures. In addition, we recommend that the listing of expenditures be reviewed by qualified personnel to ensure that the expenditures claimed are allowable and cash payments for the expenditures are made before the date of the draw or within a reasonable time after the draw. Views of responsible officials and planned corrective action Management is in agreement with this finding and will take corrective action as outlined below.
2024-003: U.S. Department of Health and Human Services Health Center Program Cluster- Health Center Program, Assistance Listing No. 93.224 Compliance Requirements: Cash Management Type of Finding - Material Noncompliance and Material Weakness in Internal Control over Compliance Condition – During our testing of grant drawdowns, we noted that the payroll expenditure support provided for individual drawdowns did not consistently agree to the amounts requested. Specifically, on a sample-by-sample basis, certain drawdowns were either overstated or understated when compared to the underlying payroll expenditures incurred for the respective period. While the aggregate payroll expenditures tested did reconcile to the total drawdown activity, the lack of alignment at the individual draw level indicates that draw requests were not consistently calculated based on contemporaneous, actual expenditures incurred at the time of each request. Criteria - In accordance with 2 CFR §200.305 (Payment), non-federal entities must minimize the time elapsing between the transfer of funds from the federal government and disbursement for program purposes. Additionally, entities are required to establish and maintain effective internal controls over compliance to ensure that drawdowns are based on actual, allowable expenditures and reflect immediate cash needs. Federal guidance further requires that amounts reported through drawdown systems agree to underlying accounting records. Cause – The Center does not have adequate internal controls in place to ensure that individual drawdown requests are supported by detailed, contemporaneous expenditure data. Specifically: there is no formal reconciliation process performed at the individual draw level between payroll expenditures and requested amounts prior to submission. Drawdowns appear to be based on cumulative or estimated balances, rather than actual expenditures incurred for the specific draw period. Review controls over the preparation and approval of draw requests are not sufficiently granular to detect discrepancies at the transaction level. Effect – Federal funds may not have been drawn in alignment with immediate cash needs at the time of each request. There is an increased risk of: temporary overdraws, which could result in excess federal cash on hand and potential interest liability. Underdraws, which could impact cash flow and program operations. Although total drawdowns reconciled in the aggregate, the lack of precision at the individual draw level indicates a systemic control deficiency that could lead to material noncompliance if not corrected. Questioned Costs – None Recommendation - We recommend that management strengthen internal controls over cash management by: Implementing a formal reconciliation process at the time of each drawdown, comparing: Actual payroll expenditures incurred for the draw period; the specific amount requested; requiring all draw requests to be supported by detailed, contemporaneous payroll reports; enhancing supervisory review procedures to ensure that each draw is individually supported and accurate, rather than relying on aggregate reconciliation; establishing documented procedures to ensure compliance with 2 CFR §200.305 requirements for timing and accuracy of federal cash draws Management Response to Findings – Management concurs with the finding.
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.
Significant Deficiency in Internal Control over Federal Programs Lack of Fiscal Policies and Procedures in Accordance with the Uniform Guidance Assistance Listing Number: 93.328 Name of Federal Program or Cluster: Epidemiology and Laboratory Capacity for Infectious Diseases Name of Federal Agency: Department of Health and Human Services Name of Pass-Through Entities: State of Wisconsin Department of Health Services The Code of Federal Regulations (CFR) Section 200.303 requires that nonfederal entities receiving federal awards establish and maintain internal control over the federal awards that provides reasonable assurance that the nonfederal entity is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. 2 CFR§200.302(b)(6-7) Financial Management: - Written procedures are required to implement the requirements of §200.305. - Written procedures are required for determining the allowability of costs in accordance with subpart E of this part and the terms and conditions of the Federal award.WHCA’s written policies and procedures lack some of the requirements required by the Code of Federal Regulations. There is an increased risk that the Association could potentially charge unallowable costs to federal awards or be noncompliant with other areas of the Code of Federal Regulations. We recommend the Association create formal written fiscal policies and procedures that conform to the uniform guidance. No Staff at the WHCA are dedicated to adhering to the regulations. The Executive Director, Vice President of Workforce Development, and the Director of Administration & Association completed a certification course on Federal allowable costs. In managing the federal awards, staff references this knowledge to guide the spending of the award.
Significant Deficiency in Internal Control over Federal Programs Lack of Fiscal Policies and Procedures in Accordance with the Uniform Guidance Assistance Listing Number: 93.328 Name of Federal Program or Cluster: Epidemiology and Laboratory Capacity for Infectious Diseases Name of Federal Agency: Department of Health and Human Services Name of Pass-Through Entities: State of Wisconsin Department of Health Services The Code of Federal Regulations (CFR) Section 200.303 requires that nonfederal entities receiving federal awards establish and maintain internal control over the federal awards that provides reasonable assurance that the nonfederal entity is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. 2 CFR§200.302(b)(6-7) Financial Management: - Written procedures are required to implement the requirements of §200.305. - Written procedures are required for determining the allowability of costs in accordance with subpart E of this part and the terms and conditions of the Federal award.WHCA’s written policies and procedures lack some of the requirements required by the Code of Federal Regulations. There is an increased risk that the Association could potentially charge unallowable costs to federal awards or be noncompliant with other areas of the Code of Federal Regulations. We recommend the Association create formal written fiscal policies and procedures that conform to the uniform guidance. No Staff at the WHCA are dedicated to adhering to the regulations. The Executive Director, Vice President of Workforce Development, and the Director of Administration & Association completed a certification course on Federal allowable costs. In managing the federal awards, staff references this knowledge to guide the spending of the award.
Finding No. 2023-001 U.S. Department of the Treasury, Community Development Financial Institutions Fund Federal Assistance Listing Number #21.011 Capital Magnet Fund - Compliance Requirement: J – Program Income Criteria In accordance with 2 CFR, Part 200.305(9), interest earned on advance payments in excess of $500 per year must be remitted annually to the Department of Health and Human Services, Payment Management System. Condition During our testing, we noted that the Organization did not remit interest earned on advance payments. Cause Interest earned on advance payments was calculated, however the Organization did not have adequate procedures and controls in place to ensure the interest was remitted. Effect or Potential Effect Failure to remit interest earned on advance payments could result in misuse of funds. Questioned Costs: Not applicable. Context For two program income samples out of a total two tested, management did not remit a total of $148,180 related to 2023 interest earned on advance payments. Repeat Finding: No Recommendation Management should establish controls to ensure the annual remittance of interest earned on advance payments in excess of $500. Views of Responsible Officials In 2024, all required interest refunds were remitted. Additionally, management established a policy to remit annual calculated interest refunds by March 31st of the subsequent year.
Ineffective Controls Over the Cash Management Requirement Federal Agency: Department of Health and Human Service Federal Program: Health Center Program Assistance Listing Number: 93:224/93.527 Type of Finding: Significant Deficiency Condition Community Health Concern, Inc. (“CHC”) did not minimize the times between drawdowns and disbursements of Federal funds in accordance with Federal regulations. There were three cash drawdowns made by management that were at least two months (60 days) in advance of actual expenditures or immediate requirement need for payment. Possible Asserted Criteria: In accordance with 2 CFR 200.305 (b), for non-Federal entities other than states, payment methods must minimize the time elapsing between the transfer of funds from the United States Treasury or the pass-through entity and the disbursement by the non-Federal entity whether the payment is made by electronic funds transfer, or issuance or redemption of checks, warrants, or payment by other means. Advance payments to a non-Federal entity must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the non-Federal entity in carrying out the purpose of the approved program or project. Possible Asserted Cause: Management made two (2) early drawdowns to have funds available fearing a government shutdown. An additional early drawdown was made to meet a project deadline. Potential Asserted Effect of Condition: The Federal government may: • Require the funds to be paid back immediately. • Require the use of a more stringent cash drawdown method for the program. • Potential interest liability may be required. Questioned Costs: $967,117. Recommendation: We recommend that CHC improve its procedures to ensure that Federal cash is requested based on immediate cash needs and within the correct period. Additionally, management should consult with its Project Officer for helpful guidance and/or actions to take during cases of looming uncertainties such as government shutdowns, missing project deadlines, etc. Management’s Views: Management’s response is included inthe “Management’s Views and Corrective Action Plan” included at the end of this report after “Section IV – Status of Financial Statements Findings of Prior Audits.”
Statement of Condition/Criteria 2 CFR Section 3603.1 gives regulatory effect to the Office of National Drug Control Policy for 2 CFR Section 200.305(b) which states, in part: Non-Federal entities other than states must minimize the time elapsing between the transfer of funds from the United States Treasury or pass-through entity and disbursement by the non-Federal entity whether the payment is made by electronic funds transfer or issuance or redemption of checks, warrants, or payment by other means. Section 7.25.2 of the High Intensity Drug Trafficking Area (HIDTA) Program Policy and Guidance states if an advance of funds is requested, details specifying the need for the advance must accompany the request. Documentation of how the advance was spent must be submitted within 21 days of use of funds and prior to another advance or reimbursement request. During our testing, we noted in 7 out of 34 receipts the advance was not spent within 21 days after the advance was deposited into HIDTA’s account. The timeliness of the submissions was not in compliance with the above-mentioned requirements. Cause/Effect Failure to properly document how advances are spent per the HIDTA Program Policy and Guidance may result in a reduction of future funding. Recommendation We recommend the City review this matter with the HIDTA Financial Manager to establish procedures in order to submit support for expenses within the 21-day requirement. HIDTA may consider requesting advances of smaller dollar amounts, or requesting reimbursement rather than advances of funds. Client’s Response See Corrective Action Plan on the next page of this document.
Identification of the federal program U.S. Department of Health and Human Services Research and Development Cluster All Assistance Listing Numbers with amounts provided to subrecipients: 93.242 – Mental Health Research Grants 93.279 – Drug Abuse and Addiction Research Programs 93.351 – Research Infrastructure Programs 93.838 – Lung Diseases Research 93.855 – Allergy and Infectious Diseases Research 93.866 – Aging Research Federal Award Numbers Award Period R01MH116844-05 2/1/2022-1/31/2024 1R01MH130193-01 4/5/2022-2/28/2023 5R01MH130193-02 3/1/2023-2/29/2024 5R01DA052845-03 7/1/2022-6/30/2023 5R01DA052845-04 7/1/2023-6/30/2024 5P51OD011133-24 5/1/2022-4/30/2023 5P51OD011133-25 5/1/2023-4/30/2024 7R01HL145411-05 1/1/2023-12/31/2024 2R01AI048071-21 12/1/2022-11/30/2023 5R01AI133749-05 7/1/2021-6/30/2023 5R01AI138587-05 5/1/2022-4/30/2024 5R01AI136831-04 8/1/2022-7/31/2024 5R21AI150445-02 2/1/2021-1/31/2024 7R01AI134245-05 9/1/2021-4/30/2022 5R01AI134245-06 2/1/2022-4/30/2023 5R01AI134245-07 5/1/2023-4/30/2025 1P30AI168439-01 3/10/2022-2/28/2023 5P30AI168439-02 3/1/2023-2/29/2024 1R61AI169026-01 5/10/2022-4/30/2023 5R61AI169026-02 5/1/2023-4/30/2024 1R56AI174877-01 4/1/2023-3/31/2025 1R01AI176309-01 4/1/2023-3/31/2024 5U34AG068482-03 6/1/2022-5/31/2024 5R01AG065546-03 6/1/2022-5/31/2023 5R01AG065546-04 6/1/2023-5/31/2024 1R56AG073316-01 9/1/2021-8/31/2023 Criteria or specific requirement (including statutory, regulatory, or other citation) 2 CFR 200.303(a) requires that a non-federal entity must “(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 and the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).” Criteria or specific requirement (including statutory, regulatory, or other citation) (continued) 2 CFR 200.305(b)(1) requires “The non-Federal entity must be paid in advance, provided it maintains or demonstrates the willingness to maintain both written procedures that minimize the time elapsing between the transfer of funds and disbursement by the non-Federal entity, and financial management systems that meet the standards for fund control and accountability as established in this part. Advance payments to a non-Federal entity must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the non-Federal entity in carrying out the purpose of the approved program or project. The timing and amount of advance payments must be as close as is administratively feasible to the actual disbursements by the non-Federal entity for direct program or project costs and the proportionate share of any allowable indirect costs. The non-Federal entity must make timely payment to contractors in accordance with the contract provisions.” 2 CFR 200.305(b)(3) requires “when the reimbursement method is used, the Federal agency or pass-through entity must make payment within 30 calendar days after receipt of the billing, unless the Federal awarding agency or pass-through entity reasonably believes the request to be improper.” Condition Texas Biomed Research Institute (Texas Biomed) did not provide evidence of effectively designed internal controls to ensure subrecipients are paid by Texas Biomed within 30 days of requests for reimbursement received by Texas Biomed. In 5 instances, Texas Biomed paid subrecipients after 30 days of receipt of the request for reimbursement from the subrecipient, resulting in noncompliance with 2 CFR 200.305(b)(3). Section III – Federal Award Findings and Questioned Costs (continued) Finding 2023-001 – Cash Management – Pass-Through Entities (continued) Cause Texas Biomed’s internal controls around payments to subrecipients were not precisely designed to ensure the issuance of payments to subrecipients occurs within 30 days of requests for reimbursement by the subrecipient. Effect or potential effect Texas Biomed did not comply with the cash management requirements of the Uniform Guidance to pay subrecipients within 30 days of their requests for reimbursement. Questioned costs None. Context For 5 of 30 subrecipient payments, Texas Biomed made payments to subrecipients at dates ranging from 40 to 132 days (40, 41, 71, 110 and 132 days) after receipt of the requests for reimbursement. These payments were not made in accordance with the 30-day requirement (2R01AI048071-21, P51OD011133-24, 5U34AG068482-03, 1P30AI168439-01 and 1R61AI169026-01). Texas Biomed’s subrecipient expenditures totaled $2.8 million during the period, which represented 6.3% of Texas Biomed’s total research and development expenditures of $44.6 million. Identification as a repeat finding, if applicable This is a repeat finding – Finding 2022-001. Recommendation We recommend Texas Biomed design and implement internal controls with the required precision to ensure subrecipients are paid within 30 days of the receipt of requests for reimbursement from the subrecipient and approved by the principal investigator prior to paying the subrecipient. Views of responsible officials Management agrees with the finding and will implement corrective action to implement controls to ensure payments to subrecipients are made timely.