FINDING REFERENCE NUMBER 2023-046 (See Finding Reference Number 2023-018) FEDERAL PROGRAM ALL FEDERAL PROGRAMS ON THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AWARD NUMBER ALL AWARDS COMPLIANCE REQUIREMENT REPORTING – FINANCIAL STATEMENT ACCOUNTING RECORDS TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA 2 CFR Part 200, Section 302 and 45 CFR Part 75, Section 302- Financial management and standards for financial management systems state 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. (b) The recipient's and subrecipient's financial management system must provide for the following: (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. (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 Internal controls for creating financial reports about state and Federal funds received and spent through the Puerto Rico Integrated Financial System (PRIFAS) have not been put in place by the PRDF. The PRDF lacks an adequate system of internal controls to stop, identify, and fix errors. There was no supervision or review procedure in place to identify and allow for the correction of errors before submission and before the financial data was entered into PRIFAS. There was a delay in getting timely and correct financial information for the year under audit, and the PRDF staff had difficulties preparing and presenting the cash receipt and disbursement report, which included the schedule of federal spending for the audit. The following weaknesses were discovered when the PRDF's initial Financial Statement was reviewed: • Transactions that weren't related to the fiscal year being reported were included in the initial financial data. • The Office of the Secretariat and the four Programmatic Administrations lack uniform policies and procedures to guarantee that the amounts and disclosures in the PRDF's financial reports, financial statement notes, and necessary supplemental information are correctly recognized and reported. • Reports for several significant programs were prepared informally and, in some instances, only by one person, which resulted in significant mistakes in some of the programs. As a result, errors in the reports across the programs were not investigated or fixed. Additionally, we saw that for various financial reports, the PRIFAS data was not considered in the reconciliation process. • Several significant transactions were not entered into the PRIFAS by the Administration for Families and Children (ADFAN, by its Spanish Acronym) Finance Department, they were recorded as encumbrances, and not actual expenditures. This led to an understatement of expenditures in the PRDF's general fund of about $52,300,494. Additionally, Federal spending in one of the major programs was understated by $6,886,156. PERSPECTIVE INFORMATION The PRDF failed to properly registered in its accounting system all transactions needed to prepared the financial statement and to produce accurate financial reports for Federal grants that they received and expended during the fiscal year. No reconciliation procedures are performed regularly to identified errors in recording transactions in PRIFAS. This cause that when the PRDF prepared cash received and disbursement financial statement and the SEFA for audit purposes was incomplete and misstated (see Finding Reference Number 2023-017). STATEMENT OF CAUSE To make sure that all the PRDF's transactions had been accurately documented and reported, the PRDF did not thoroughly examine the financial data that was created and submitted in PRIFAS and used to prepare the financial statement and supplementary information. Due to lack of supervision or a review procedure to identify errors prior to submission, the ADFAN Finance Director recorded transactions as encumbrances, instead of actual expenditures. POSSIBLE ASSERTED EFFECT The PRDF is unable to provide accurate, up-to-date, and comprehensive disclosure of state and Federal funds activities in compliance with the agreement's requirements due to inadequate and inconsistent financial accounting reporting methods. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS To comply with the requirements of state and local agreements and enable the PRDF to monitor trustworthy financial data for use within the agency and for upcoming audits, we recommend the PRDF update its accounting practices and policies to provide for an accurate, comprehensive, and timely financial reporting system. Implementing an accounting and financial management system that enables the creation of financial data and reports needed by the various oversight organizations. The process should involve defining precise procedures for the creation and evaluation of financial reports, with different roles allocated to various people.
FINDING REFERENCE NUMBER 2023-046 (See Finding Reference Number 2023-018) FEDERAL PROGRAM ALL FEDERAL PROGRAMS ON THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AWARD NUMBER ALL AWARDS COMPLIANCE REQUIREMENT REPORTING – FINANCIAL STATEMENT ACCOUNTING RECORDS TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA 2 CFR Part 200, Section 302 and 45 CFR Part 75, Section 302- Financial management and standards for financial management systems state 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. (b) The recipient's and subrecipient's financial management system must provide for the following: (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. (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 Internal controls for creating financial reports about state and Federal funds received and spent through the Puerto Rico Integrated Financial System (PRIFAS) have not been put in place by the PRDF. The PRDF lacks an adequate system of internal controls to stop, identify, and fix errors. There was no supervision or review procedure in place to identify and allow for the correction of errors before submission and before the financial data was entered into PRIFAS. There was a delay in getting timely and correct financial information for the year under audit, and the PRDF staff had difficulties preparing and presenting the cash receipt and disbursement report, which included the schedule of federal spending for the audit. The following weaknesses were discovered when the PRDF's initial Financial Statement was reviewed: • Transactions that weren't related to the fiscal year being reported were included in the initial financial data. • The Office of the Secretariat and the four Programmatic Administrations lack uniform policies and procedures to guarantee that the amounts and disclosures in the PRDF's financial reports, financial statement notes, and necessary supplemental information are correctly recognized and reported. • Reports for several significant programs were prepared informally and, in some instances, only by one person, which resulted in significant mistakes in some of the programs. As a result, errors in the reports across the programs were not investigated or fixed. Additionally, we saw that for various financial reports, the PRIFAS data was not considered in the reconciliation process. • Several significant transactions were not entered into the PRIFAS by the Administration for Families and Children (ADFAN, by its Spanish Acronym) Finance Department, they were recorded as encumbrances, and not actual expenditures. This led to an understatement of expenditures in the PRDF's general fund of about $52,300,494. Additionally, Federal spending in one of the major programs was understated by $6,886,156. PERSPECTIVE INFORMATION The PRDF failed to properly registered in its accounting system all transactions needed to prepared the financial statement and to produce accurate financial reports for Federal grants that they received and expended during the fiscal year. No reconciliation procedures are performed regularly to identified errors in recording transactions in PRIFAS. This cause that when the PRDF prepared cash received and disbursement financial statement and the SEFA for audit purposes was incomplete and misstated (see Finding Reference Number 2023-017). STATEMENT OF CAUSE To make sure that all the PRDF's transactions had been accurately documented and reported, the PRDF did not thoroughly examine the financial data that was created and submitted in PRIFAS and used to prepare the financial statement and supplementary information. Due to lack of supervision or a review procedure to identify errors prior to submission, the ADFAN Finance Director recorded transactions as encumbrances, instead of actual expenditures. POSSIBLE ASSERTED EFFECT The PRDF is unable to provide accurate, up-to-date, and comprehensive disclosure of state and Federal funds activities in compliance with the agreement's requirements due to inadequate and inconsistent financial accounting reporting methods. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS To comply with the requirements of state and local agreements and enable the PRDF to monitor trustworthy financial data for use within the agency and for upcoming audits, we recommend the PRDF update its accounting practices and policies to provide for an accurate, comprehensive, and timely financial reporting system. Implementing an accounting and financial management system that enables the creation of financial data and reports needed by the various oversight organizations. The process should involve defining precise procedures for the creation and evaluation of financial reports, with different roles allocated to various people.
FINDING REFERENCE NUMBER 2023-046 (See Finding Reference Number 2023-018) FEDERAL PROGRAM ALL FEDERAL PROGRAMS ON THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AWARD NUMBER ALL AWARDS COMPLIANCE REQUIREMENT REPORTING – FINANCIAL STATEMENT ACCOUNTING RECORDS TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA 2 CFR Part 200, Section 302 and 45 CFR Part 75, Section 302- Financial management and standards for financial management systems state 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. (b) The recipient's and subrecipient's financial management system must provide for the following: (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. (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 Internal controls for creating financial reports about state and Federal funds received and spent through the Puerto Rico Integrated Financial System (PRIFAS) have not been put in place by the PRDF. The PRDF lacks an adequate system of internal controls to stop, identify, and fix errors. There was no supervision or review procedure in place to identify and allow for the correction of errors before submission and before the financial data was entered into PRIFAS. There was a delay in getting timely and correct financial information for the year under audit, and the PRDF staff had difficulties preparing and presenting the cash receipt and disbursement report, which included the schedule of federal spending for the audit. The following weaknesses were discovered when the PRDF's initial Financial Statement was reviewed: • Transactions that weren't related to the fiscal year being reported were included in the initial financial data. • The Office of the Secretariat and the four Programmatic Administrations lack uniform policies and procedures to guarantee that the amounts and disclosures in the PRDF's financial reports, financial statement notes, and necessary supplemental information are correctly recognized and reported. • Reports for several significant programs were prepared informally and, in some instances, only by one person, which resulted in significant mistakes in some of the programs. As a result, errors in the reports across the programs were not investigated or fixed. Additionally, we saw that for various financial reports, the PRIFAS data was not considered in the reconciliation process. • Several significant transactions were not entered into the PRIFAS by the Administration for Families and Children (ADFAN, by its Spanish Acronym) Finance Department, they were recorded as encumbrances, and not actual expenditures. This led to an understatement of expenditures in the PRDF's general fund of about $52,300,494. Additionally, Federal spending in one of the major programs was understated by $6,886,156. PERSPECTIVE INFORMATION The PRDF failed to properly registered in its accounting system all transactions needed to prepared the financial statement and to produce accurate financial reports for Federal grants that they received and expended during the fiscal year. No reconciliation procedures are performed regularly to identified errors in recording transactions in PRIFAS. This cause that when the PRDF prepared cash received and disbursement financial statement and the SEFA for audit purposes was incomplete and misstated (see Finding Reference Number 2023-017). STATEMENT OF CAUSE To make sure that all the PRDF's transactions had been accurately documented and reported, the PRDF did not thoroughly examine the financial data that was created and submitted in PRIFAS and used to prepare the financial statement and supplementary information. Due to lack of supervision or a review procedure to identify errors prior to submission, the ADFAN Finance Director recorded transactions as encumbrances, instead of actual expenditures. POSSIBLE ASSERTED EFFECT The PRDF is unable to provide accurate, up-to-date, and comprehensive disclosure of state and Federal funds activities in compliance with the agreement's requirements due to inadequate and inconsistent financial accounting reporting methods. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS To comply with the requirements of state and local agreements and enable the PRDF to monitor trustworthy financial data for use within the agency and for upcoming audits, we recommend the PRDF update its accounting practices and policies to provide for an accurate, comprehensive, and timely financial reporting system. Implementing an accounting and financial management system that enables the creation of financial data and reports needed by the various oversight organizations. The process should involve defining precise procedures for the creation and evaluation of financial reports, with different roles allocated to various people.
FINDING REFERENCE NUMBER 2023-046 (See Finding Reference Number 2023-018) FEDERAL PROGRAM ALL FEDERAL PROGRAMS ON THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AWARD NUMBER ALL AWARDS COMPLIANCE REQUIREMENT REPORTING – FINANCIAL STATEMENT ACCOUNTING RECORDS TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA 2 CFR Part 200, Section 302 and 45 CFR Part 75, Section 302- Financial management and standards for financial management systems state 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. (b) The recipient's and subrecipient's financial management system must provide for the following: (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. (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 Internal controls for creating financial reports about state and Federal funds received and spent through the Puerto Rico Integrated Financial System (PRIFAS) have not been put in place by the PRDF. The PRDF lacks an adequate system of internal controls to stop, identify, and fix errors. There was no supervision or review procedure in place to identify and allow for the correction of errors before submission and before the financial data was entered into PRIFAS. There was a delay in getting timely and correct financial information for the year under audit, and the PRDF staff had difficulties preparing and presenting the cash receipt and disbursement report, which included the schedule of federal spending for the audit. The following weaknesses were discovered when the PRDF's initial Financial Statement was reviewed: • Transactions that weren't related to the fiscal year being reported were included in the initial financial data. • The Office of the Secretariat and the four Programmatic Administrations lack uniform policies and procedures to guarantee that the amounts and disclosures in the PRDF's financial reports, financial statement notes, and necessary supplemental information are correctly recognized and reported. • Reports for several significant programs were prepared informally and, in some instances, only by one person, which resulted in significant mistakes in some of the programs. As a result, errors in the reports across the programs were not investigated or fixed. Additionally, we saw that for various financial reports, the PRIFAS data was not considered in the reconciliation process. • Several significant transactions were not entered into the PRIFAS by the Administration for Families and Children (ADFAN, by its Spanish Acronym) Finance Department, they were recorded as encumbrances, and not actual expenditures. This led to an understatement of expenditures in the PRDF's general fund of about $52,300,494. Additionally, Federal spending in one of the major programs was understated by $6,886,156. PERSPECTIVE INFORMATION The PRDF failed to properly registered in its accounting system all transactions needed to prepared the financial statement and to produce accurate financial reports for Federal grants that they received and expended during the fiscal year. No reconciliation procedures are performed regularly to identified errors in recording transactions in PRIFAS. This cause that when the PRDF prepared cash received and disbursement financial statement and the SEFA for audit purposes was incomplete and misstated (see Finding Reference Number 2023-017). STATEMENT OF CAUSE To make sure that all the PRDF's transactions had been accurately documented and reported, the PRDF did not thoroughly examine the financial data that was created and submitted in PRIFAS and used to prepare the financial statement and supplementary information. Due to lack of supervision or a review procedure to identify errors prior to submission, the ADFAN Finance Director recorded transactions as encumbrances, instead of actual expenditures. POSSIBLE ASSERTED EFFECT The PRDF is unable to provide accurate, up-to-date, and comprehensive disclosure of state and Federal funds activities in compliance with the agreement's requirements due to inadequate and inconsistent financial accounting reporting methods. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS To comply with the requirements of state and local agreements and enable the PRDF to monitor trustworthy financial data for use within the agency and for upcoming audits, we recommend the PRDF update its accounting practices and policies to provide for an accurate, comprehensive, and timely financial reporting system. Implementing an accounting and financial management system that enables the creation of financial data and reports needed by the various oversight organizations. The process should involve defining precise procedures for the creation and evaluation of financial reports, with different roles allocated to various people.
FINDING REFERENCE NUMBER 2023-046 (See Finding Reference Number 2023-018) FEDERAL PROGRAM ALL FEDERAL PROGRAMS ON THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AWARD NUMBER ALL AWARDS COMPLIANCE REQUIREMENT REPORTING – FINANCIAL STATEMENT ACCOUNTING RECORDS TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA 2 CFR Part 200, Section 302 and 45 CFR Part 75, Section 302- Financial management and standards for financial management systems state 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. (b) The recipient's and subrecipient's financial management system must provide for the following: (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. (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 Internal controls for creating financial reports about state and Federal funds received and spent through the Puerto Rico Integrated Financial System (PRIFAS) have not been put in place by the PRDF. The PRDF lacks an adequate system of internal controls to stop, identify, and fix errors. There was no supervision or review procedure in place to identify and allow for the correction of errors before submission and before the financial data was entered into PRIFAS. There was a delay in getting timely and correct financial information for the year under audit, and the PRDF staff had difficulties preparing and presenting the cash receipt and disbursement report, which included the schedule of federal spending for the audit. The following weaknesses were discovered when the PRDF's initial Financial Statement was reviewed: • Transactions that weren't related to the fiscal year being reported were included in the initial financial data. • The Office of the Secretariat and the four Programmatic Administrations lack uniform policies and procedures to guarantee that the amounts and disclosures in the PRDF's financial reports, financial statement notes, and necessary supplemental information are correctly recognized and reported. • Reports for several significant programs were prepared informally and, in some instances, only by one person, which resulted in significant mistakes in some of the programs. As a result, errors in the reports across the programs were not investigated or fixed. Additionally, we saw that for various financial reports, the PRIFAS data was not considered in the reconciliation process. • Several significant transactions were not entered into the PRIFAS by the Administration for Families and Children (ADFAN, by its Spanish Acronym) Finance Department, they were recorded as encumbrances, and not actual expenditures. This led to an understatement of expenditures in the PRDF's general fund of about $52,300,494. Additionally, Federal spending in one of the major programs was understated by $6,886,156. PERSPECTIVE INFORMATION The PRDF failed to properly registered in its accounting system all transactions needed to prepared the financial statement and to produce accurate financial reports for Federal grants that they received and expended during the fiscal year. No reconciliation procedures are performed regularly to identified errors in recording transactions in PRIFAS. This cause that when the PRDF prepared cash received and disbursement financial statement and the SEFA for audit purposes was incomplete and misstated (see Finding Reference Number 2023-017). STATEMENT OF CAUSE To make sure that all the PRDF's transactions had been accurately documented and reported, the PRDF did not thoroughly examine the financial data that was created and submitted in PRIFAS and used to prepare the financial statement and supplementary information. Due to lack of supervision or a review procedure to identify errors prior to submission, the ADFAN Finance Director recorded transactions as encumbrances, instead of actual expenditures. POSSIBLE ASSERTED EFFECT The PRDF is unable to provide accurate, up-to-date, and comprehensive disclosure of state and Federal funds activities in compliance with the agreement's requirements due to inadequate and inconsistent financial accounting reporting methods. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS To comply with the requirements of state and local agreements and enable the PRDF to monitor trustworthy financial data for use within the agency and for upcoming audits, we recommend the PRDF update its accounting practices and policies to provide for an accurate, comprehensive, and timely financial reporting system. Implementing an accounting and financial management system that enables the creation of financial data and reports needed by the various oversight organizations. The process should involve defining precise procedures for the creation and evaluation of financial reports, with different roles allocated to various people.
FINDING REFERENCE NUMBER 2023-046 (See Finding Reference Number 2023-018) FEDERAL PROGRAM ALL FEDERAL PROGRAMS ON THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AWARD NUMBER ALL AWARDS COMPLIANCE REQUIREMENT REPORTING – FINANCIAL STATEMENT ACCOUNTING RECORDS TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA 2 CFR Part 200, Section 302 and 45 CFR Part 75, Section 302- Financial management and standards for financial management systems state 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. (b) The recipient's and subrecipient's financial management system must provide for the following: (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. (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 Internal controls for creating financial reports about state and Federal funds received and spent through the Puerto Rico Integrated Financial System (PRIFAS) have not been put in place by the PRDF. The PRDF lacks an adequate system of internal controls to stop, identify, and fix errors. There was no supervision or review procedure in place to identify and allow for the correction of errors before submission and before the financial data was entered into PRIFAS. There was a delay in getting timely and correct financial information for the year under audit, and the PRDF staff had difficulties preparing and presenting the cash receipt and disbursement report, which included the schedule of federal spending for the audit. The following weaknesses were discovered when the PRDF's initial Financial Statement was reviewed: • Transactions that weren't related to the fiscal year being reported were included in the initial financial data. • The Office of the Secretariat and the four Programmatic Administrations lack uniform policies and procedures to guarantee that the amounts and disclosures in the PRDF's financial reports, financial statement notes, and necessary supplemental information are correctly recognized and reported. • Reports for several significant programs were prepared informally and, in some instances, only by one person, which resulted in significant mistakes in some of the programs. As a result, errors in the reports across the programs were not investigated or fixed. Additionally, we saw that for various financial reports, the PRIFAS data was not considered in the reconciliation process. • Several significant transactions were not entered into the PRIFAS by the Administration for Families and Children (ADFAN, by its Spanish Acronym) Finance Department, they were recorded as encumbrances, and not actual expenditures. This led to an understatement of expenditures in the PRDF's general fund of about $52,300,494. Additionally, Federal spending in one of the major programs was understated by $6,886,156. PERSPECTIVE INFORMATION The PRDF failed to properly registered in its accounting system all transactions needed to prepared the financial statement and to produce accurate financial reports for Federal grants that they received and expended during the fiscal year. No reconciliation procedures are performed regularly to identified errors in recording transactions in PRIFAS. This cause that when the PRDF prepared cash received and disbursement financial statement and the SEFA for audit purposes was incomplete and misstated (see Finding Reference Number 2023-017). STATEMENT OF CAUSE To make sure that all the PRDF's transactions had been accurately documented and reported, the PRDF did not thoroughly examine the financial data that was created and submitted in PRIFAS and used to prepare the financial statement and supplementary information. Due to lack of supervision or a review procedure to identify errors prior to submission, the ADFAN Finance Director recorded transactions as encumbrances, instead of actual expenditures. POSSIBLE ASSERTED EFFECT The PRDF is unable to provide accurate, up-to-date, and comprehensive disclosure of state and Federal funds activities in compliance with the agreement's requirements due to inadequate and inconsistent financial accounting reporting methods. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS To comply with the requirements of state and local agreements and enable the PRDF to monitor trustworthy financial data for use within the agency and for upcoming audits, we recommend the PRDF update its accounting practices and policies to provide for an accurate, comprehensive, and timely financial reporting system. Implementing an accounting and financial management system that enables the creation of financial data and reports needed by the various oversight organizations. The process should involve defining precise procedures for the creation and evaluation of financial reports, with different roles allocated to various people.
FINDING REFERENCE NUMBER 2023-046 (See Finding Reference Number 2023-018) FEDERAL PROGRAM ALL FEDERAL PROGRAMS ON THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AWARD NUMBER ALL AWARDS COMPLIANCE REQUIREMENT REPORTING – FINANCIAL STATEMENT ACCOUNTING RECORDS TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA 2 CFR Part 200, Section 302 and 45 CFR Part 75, Section 302- Financial management and standards for financial management systems state 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. (b) The recipient's and subrecipient's financial management system must provide for the following: (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. (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 Internal controls for creating financial reports about state and Federal funds received and spent through the Puerto Rico Integrated Financial System (PRIFAS) have not been put in place by the PRDF. The PRDF lacks an adequate system of internal controls to stop, identify, and fix errors. There was no supervision or review procedure in place to identify and allow for the correction of errors before submission and before the financial data was entered into PRIFAS. There was a delay in getting timely and correct financial information for the year under audit, and the PRDF staff had difficulties preparing and presenting the cash receipt and disbursement report, which included the schedule of federal spending for the audit. The following weaknesses were discovered when the PRDF's initial Financial Statement was reviewed: • Transactions that weren't related to the fiscal year being reported were included in the initial financial data. • The Office of the Secretariat and the four Programmatic Administrations lack uniform policies and procedures to guarantee that the amounts and disclosures in the PRDF's financial reports, financial statement notes, and necessary supplemental information are correctly recognized and reported. • Reports for several significant programs were prepared informally and, in some instances, only by one person, which resulted in significant mistakes in some of the programs. As a result, errors in the reports across the programs were not investigated or fixed. Additionally, we saw that for various financial reports, the PRIFAS data was not considered in the reconciliation process. • Several significant transactions were not entered into the PRIFAS by the Administration for Families and Children (ADFAN, by its Spanish Acronym) Finance Department, they were recorded as encumbrances, and not actual expenditures. This led to an understatement of expenditures in the PRDF's general fund of about $52,300,494. Additionally, Federal spending in one of the major programs was understated by $6,886,156. PERSPECTIVE INFORMATION The PRDF failed to properly registered in its accounting system all transactions needed to prepared the financial statement and to produce accurate financial reports for Federal grants that they received and expended during the fiscal year. No reconciliation procedures are performed regularly to identified errors in recording transactions in PRIFAS. This cause that when the PRDF prepared cash received and disbursement financial statement and the SEFA for audit purposes was incomplete and misstated (see Finding Reference Number 2023-017). STATEMENT OF CAUSE To make sure that all the PRDF's transactions had been accurately documented and reported, the PRDF did not thoroughly examine the financial data that was created and submitted in PRIFAS and used to prepare the financial statement and supplementary information. Due to lack of supervision or a review procedure to identify errors prior to submission, the ADFAN Finance Director recorded transactions as encumbrances, instead of actual expenditures. POSSIBLE ASSERTED EFFECT The PRDF is unable to provide accurate, up-to-date, and comprehensive disclosure of state and Federal funds activities in compliance with the agreement's requirements due to inadequate and inconsistent financial accounting reporting methods. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS To comply with the requirements of state and local agreements and enable the PRDF to monitor trustworthy financial data for use within the agency and for upcoming audits, we recommend the PRDF update its accounting practices and policies to provide for an accurate, comprehensive, and timely financial reporting system. Implementing an accounting and financial management system that enables the creation of financial data and reports needed by the various oversight organizations. The process should involve defining precise procedures for the creation and evaluation of financial reports, with different roles allocated to various people.
FINDING REFERENCE NUMBER 2023-046 (See Finding Reference Number 2023-018) FEDERAL PROGRAM ALL FEDERAL PROGRAMS ON THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AWARD NUMBER ALL AWARDS COMPLIANCE REQUIREMENT REPORTING – FINANCIAL STATEMENT ACCOUNTING RECORDS TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA 2 CFR Part 200, Section 302 and 45 CFR Part 75, Section 302- Financial management and standards for financial management systems state 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. (b) The recipient's and subrecipient's financial management system must provide for the following: (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. (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 Internal controls for creating financial reports about state and Federal funds received and spent through the Puerto Rico Integrated Financial System (PRIFAS) have not been put in place by the PRDF. The PRDF lacks an adequate system of internal controls to stop, identify, and fix errors. There was no supervision or review procedure in place to identify and allow for the correction of errors before submission and before the financial data was entered into PRIFAS. There was a delay in getting timely and correct financial information for the year under audit, and the PRDF staff had difficulties preparing and presenting the cash receipt and disbursement report, which included the schedule of federal spending for the audit. The following weaknesses were discovered when the PRDF's initial Financial Statement was reviewed: • Transactions that weren't related to the fiscal year being reported were included in the initial financial data. • The Office of the Secretariat and the four Programmatic Administrations lack uniform policies and procedures to guarantee that the amounts and disclosures in the PRDF's financial reports, financial statement notes, and necessary supplemental information are correctly recognized and reported. • Reports for several significant programs were prepared informally and, in some instances, only by one person, which resulted in significant mistakes in some of the programs. As a result, errors in the reports across the programs were not investigated or fixed. Additionally, we saw that for various financial reports, the PRIFAS data was not considered in the reconciliation process. • Several significant transactions were not entered into the PRIFAS by the Administration for Families and Children (ADFAN, by its Spanish Acronym) Finance Department, they were recorded as encumbrances, and not actual expenditures. This led to an understatement of expenditures in the PRDF's general fund of about $52,300,494. Additionally, Federal spending in one of the major programs was understated by $6,886,156. PERSPECTIVE INFORMATION The PRDF failed to properly registered in its accounting system all transactions needed to prepared the financial statement and to produce accurate financial reports for Federal grants that they received and expended during the fiscal year. No reconciliation procedures are performed regularly to identified errors in recording transactions in PRIFAS. This cause that when the PRDF prepared cash received and disbursement financial statement and the SEFA for audit purposes was incomplete and misstated (see Finding Reference Number 2023-017). STATEMENT OF CAUSE To make sure that all the PRDF's transactions had been accurately documented and reported, the PRDF did not thoroughly examine the financial data that was created and submitted in PRIFAS and used to prepare the financial statement and supplementary information. Due to lack of supervision or a review procedure to identify errors prior to submission, the ADFAN Finance Director recorded transactions as encumbrances, instead of actual expenditures. POSSIBLE ASSERTED EFFECT The PRDF is unable to provide accurate, up-to-date, and comprehensive disclosure of state and Federal funds activities in compliance with the agreement's requirements due to inadequate and inconsistent financial accounting reporting methods. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS To comply with the requirements of state and local agreements and enable the PRDF to monitor trustworthy financial data for use within the agency and for upcoming audits, we recommend the PRDF update its accounting practices and policies to provide for an accurate, comprehensive, and timely financial reporting system. Implementing an accounting and financial management system that enables the creation of financial data and reports needed by the various oversight organizations. The process should involve defining precise procedures for the creation and evaluation of financial reports, with different roles allocated to various people.
FINDING REFERENCE NUMBER 2023-046 (See Finding Reference Number 2023-018) FEDERAL PROGRAM ALL FEDERAL PROGRAMS ON THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AWARD NUMBER ALL AWARDS COMPLIANCE REQUIREMENT REPORTING – FINANCIAL STATEMENT ACCOUNTING RECORDS TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA 2 CFR Part 200, Section 302 and 45 CFR Part 75, Section 302- Financial management and standards for financial management systems state 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. (b) The recipient's and subrecipient's financial management system must provide for the following: (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. (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 Internal controls for creating financial reports about state and Federal funds received and spent through the Puerto Rico Integrated Financial System (PRIFAS) have not been put in place by the PRDF. The PRDF lacks an adequate system of internal controls to stop, identify, and fix errors. There was no supervision or review procedure in place to identify and allow for the correction of errors before submission and before the financial data was entered into PRIFAS. There was a delay in getting timely and correct financial information for the year under audit, and the PRDF staff had difficulties preparing and presenting the cash receipt and disbursement report, which included the schedule of federal spending for the audit. The following weaknesses were discovered when the PRDF's initial Financial Statement was reviewed: • Transactions that weren't related to the fiscal year being reported were included in the initial financial data. • The Office of the Secretariat and the four Programmatic Administrations lack uniform policies and procedures to guarantee that the amounts and disclosures in the PRDF's financial reports, financial statement notes, and necessary supplemental information are correctly recognized and reported. • Reports for several significant programs were prepared informally and, in some instances, only by one person, which resulted in significant mistakes in some of the programs. As a result, errors in the reports across the programs were not investigated or fixed. Additionally, we saw that for various financial reports, the PRIFAS data was not considered in the reconciliation process. • Several significant transactions were not entered into the PRIFAS by the Administration for Families and Children (ADFAN, by its Spanish Acronym) Finance Department, they were recorded as encumbrances, and not actual expenditures. This led to an understatement of expenditures in the PRDF's general fund of about $52,300,494. Additionally, Federal spending in one of the major programs was understated by $6,886,156. PERSPECTIVE INFORMATION The PRDF failed to properly registered in its accounting system all transactions needed to prepared the financial statement and to produce accurate financial reports for Federal grants that they received and expended during the fiscal year. No reconciliation procedures are performed regularly to identified errors in recording transactions in PRIFAS. This cause that when the PRDF prepared cash received and disbursement financial statement and the SEFA for audit purposes was incomplete and misstated (see Finding Reference Number 2023-017). STATEMENT OF CAUSE To make sure that all the PRDF's transactions had been accurately documented and reported, the PRDF did not thoroughly examine the financial data that was created and submitted in PRIFAS and used to prepare the financial statement and supplementary information. Due to lack of supervision or a review procedure to identify errors prior to submission, the ADFAN Finance Director recorded transactions as encumbrances, instead of actual expenditures. POSSIBLE ASSERTED EFFECT The PRDF is unable to provide accurate, up-to-date, and comprehensive disclosure of state and Federal funds activities in compliance with the agreement's requirements due to inadequate and inconsistent financial accounting reporting methods. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS To comply with the requirements of state and local agreements and enable the PRDF to monitor trustworthy financial data for use within the agency and for upcoming audits, we recommend the PRDF update its accounting practices and policies to provide for an accurate, comprehensive, and timely financial reporting system. Implementing an accounting and financial management system that enables the creation of financial data and reports needed by the various oversight organizations. The process should involve defining precise procedures for the creation and evaluation of financial reports, with different roles allocated to various people.
FINDING REFERENCE NUMBER 2023-046 (See Finding Reference Number 2023-018) FEDERAL PROGRAM ALL FEDERAL PROGRAMS ON THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AWARD NUMBER ALL AWARDS COMPLIANCE REQUIREMENT REPORTING – FINANCIAL STATEMENT ACCOUNTING RECORDS TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA 2 CFR Part 200, Section 302 and 45 CFR Part 75, Section 302- Financial management and standards for financial management systems state 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. (b) The recipient's and subrecipient's financial management system must provide for the following: (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. (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 Internal controls for creating financial reports about state and Federal funds received and spent through the Puerto Rico Integrated Financial System (PRIFAS) have not been put in place by the PRDF. The PRDF lacks an adequate system of internal controls to stop, identify, and fix errors. There was no supervision or review procedure in place to identify and allow for the correction of errors before submission and before the financial data was entered into PRIFAS. There was a delay in getting timely and correct financial information for the year under audit, and the PRDF staff had difficulties preparing and presenting the cash receipt and disbursement report, which included the schedule of federal spending for the audit. The following weaknesses were discovered when the PRDF's initial Financial Statement was reviewed: • Transactions that weren't related to the fiscal year being reported were included in the initial financial data. • The Office of the Secretariat and the four Programmatic Administrations lack uniform policies and procedures to guarantee that the amounts and disclosures in the PRDF's financial reports, financial statement notes, and necessary supplemental information are correctly recognized and reported. • Reports for several significant programs were prepared informally and, in some instances, only by one person, which resulted in significant mistakes in some of the programs. As a result, errors in the reports across the programs were not investigated or fixed. Additionally, we saw that for various financial reports, the PRIFAS data was not considered in the reconciliation process. • Several significant transactions were not entered into the PRIFAS by the Administration for Families and Children (ADFAN, by its Spanish Acronym) Finance Department, they were recorded as encumbrances, and not actual expenditures. This led to an understatement of expenditures in the PRDF's general fund of about $52,300,494. Additionally, Federal spending in one of the major programs was understated by $6,886,156. PERSPECTIVE INFORMATION The PRDF failed to properly registered in its accounting system all transactions needed to prepared the financial statement and to produce accurate financial reports for Federal grants that they received and expended during the fiscal year. No reconciliation procedures are performed regularly to identified errors in recording transactions in PRIFAS. This cause that when the PRDF prepared cash received and disbursement financial statement and the SEFA for audit purposes was incomplete and misstated (see Finding Reference Number 2023-017). STATEMENT OF CAUSE To make sure that all the PRDF's transactions had been accurately documented and reported, the PRDF did not thoroughly examine the financial data that was created and submitted in PRIFAS and used to prepare the financial statement and supplementary information. Due to lack of supervision or a review procedure to identify errors prior to submission, the ADFAN Finance Director recorded transactions as encumbrances, instead of actual expenditures. POSSIBLE ASSERTED EFFECT The PRDF is unable to provide accurate, up-to-date, and comprehensive disclosure of state and Federal funds activities in compliance with the agreement's requirements due to inadequate and inconsistent financial accounting reporting methods. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS To comply with the requirements of state and local agreements and enable the PRDF to monitor trustworthy financial data for use within the agency and for upcoming audits, we recommend the PRDF update its accounting practices and policies to provide for an accurate, comprehensive, and timely financial reporting system. Implementing an accounting and financial management system that enables the creation of financial data and reports needed by the various oversight organizations. The process should involve defining precise procedures for the creation and evaluation of financial reports, with different roles allocated to various people.
FINDING REFERENCE NUMBER 2023-049 (See Finding Reference Number 2023-020) FEDERAL PROGRAM (ALN – 10.566) NUTRITION ASSISTANCE FOR PUERTO RICO U.S. DEPARTMENT OF AGRICULTURE AWARD NUMBERS 221PR426S7003/4; 231PR426S7003/4 (Federal Award Years: 2021 through 2023) 211PR476V1003/4 – ARPA (Federal Award Years: March 11, 2021 through September 30, 2025) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT REPORTING TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS 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 221PR426S7003 and 221PR426S7004 we noted the following deficiency: • The auditee was unable to provide supporting documentation for the administrative expenditures that reconcile the figures reported with the PRIFAS accounting system. • 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 No questioned costs identified. 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 No reported as prior audit finding. 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 2023-051 (See Finding Reference Number 2023-021) FEDERAL PROGRAM (ALN – 93.568) LOW-INCOME HOME ENERGY ASSISTANCE U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2101PRLIEA (Federal Award Years: 2021 through 2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT REPORTING TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS 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. STATEMENT OF CONDITION As part of our audit procedures over the reporting requirement for LIHEAP program, we selected two reports submitted during our fiscal year. We noted that the administrative expenditures do not reconcile with the accounting information from PRIFAS. In addition, for the amount of encumbrances of $11,032,784.51, the amount of $9,943,769.52 was not supported by a detail. QUESTIONED COSTS No questioned costs identified. 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. 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. 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 No reported as prior audit finding. 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.
FINDING REFERENCE NUMBER 2023-052 FEDERAL PROGRAM (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2021G996117; 2022G996117; 2023996117 (Federal Award Years: 2021 through 2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT REPORTING – PERFORMANCE TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS 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. To evaluate compliance with the reported data, the quarter ending June 2023 was selected. From this period, forty (40) participants were selected. ADSEF was required to provide us with the corresponding participant worksheet appendix and the physical file to corroborate the information included in the report. ADSEF provided us with evidence of the hand-completed forms; however, we were not provided with the physical files to validate the information included in each document. This represents a scope limitation. QUESTIONED COSTS No questioned costs identified. PERSPECTIVE INFORMATION This is a systemic deficiency. After sample selection, ADSEF did not demonstrate a control structure that would allow the files to be located within a reasonable period of time. STATEMENT OF CAUSE ADSEF does not maintain an internal control structure for participant files that allows each file to be located within a reasonable period of time. Additionally, they do not have internal control procedure manuals that allow for the validation of the process they carry out and the individuals responsible for compiling, validating, and submitting this report. POSSIBLE ASSERTED EFFECT ADSEF may be including data in this report that has not been corroborated with the participants' physical records. The lack of a uniform process for archiving participant records prevented them from providing us with evidence of the requested records. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. 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 2023-054 (See Finding Reference Number 2023-023) 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 2101PRFPSS (Federal Award Years: 2021 through 2022) 2211PRSOSR (Federal Award Years: 2021 through 2022) ADMINISTRATION ADMINISTRATION FOR FAMILIES AND CHILDREN (ADFAN, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT REPORTING TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS 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 Grants Awards 2101PRFPSS and 2111PRSOSR, which closes in the audit period from July 2022 to June 2023, to validate the recorded amounts. Upon evaluating the report for the Grant Award 2101PRFPSS, we found the following deficiencies: (1) The total Federal expenditure reported on line (e) does not match the database provided by the PRDF. (2) The matching expenditure on line (j) does not match the database provided by the PRDF, and (3) The report was not submitted within the established deadline, and an extension was granted to settle and report the funds until March 31, 2023, and they submitted on August 10, 2023. For both Grants Awards we found the following deficiencies: (4) 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. (5) 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 No questioned costs identified. 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 statement of 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 No reported as prior audit finding. 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 2023-054 (See Finding Reference Number 2023-023) 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 2101PRFPSS (Federal Award Years: 2021 through 2022) 2211PRSOSR (Federal Award Years: 2021 through 2022) ADMINISTRATION ADMINISTRATION FOR FAMILIES AND CHILDREN (ADFAN, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT REPORTING TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS 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 Grants Awards 2101PRFPSS and 2111PRSOSR, which closes in the audit period from July 2022 to June 2023, to validate the recorded amounts. Upon evaluating the report for the Grant Award 2101PRFPSS, we found the following deficiencies: (1) The total Federal expenditure reported on line (e) does not match the database provided by the PRDF. (2) The matching expenditure on line (j) does not match the database provided by the PRDF, and (3) The report was not submitted within the established deadline, and an extension was granted to settle and report the funds until March 31, 2023, and they submitted on August 10, 2023. For both Grants Awards we found the following deficiencies: (4) 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. (5) 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 No questioned costs identified. 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 statement of 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 No reported as prior audit finding. 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 2023-056 (See Finding Reference Number 2023-025) 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 2021G996117; 2022G996117; 2023996117 (Federal Award Years: 2021 through 2023) 2022G9922PT; 2301PRTABD (Federal Award Years: 2022 through 2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT REPORTING – FINANCIAL TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS 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 requirement for TANF and Payment to Territories – Adult programs, we selected two reports submitted during our fiscal year. We found the following deficiencies: i. Administrative expenditures related to both programs are recorded under the same accounting account number, and the assistance listing number of TANF. That is, in PRIFAS, the administrative expenditures of both programs are not segregated by grant award and assistance listing number. ii. The ACF-196TR reports report expenditures under both programs that are not reconciled with the PRIFAS accounting system, specifically in administrative expenditures. We requested evidence of the expenditures incurred or details that were used to prepare the reports; this information was not available, and it was generated upon our request. iii. In both reports evaluated, the amounts reported on lines 2 and 3, related to the amounts that the TANF program transfers to two other federal programs, are recorded inconsistently. During the quarters from October to June, these lines report the amount of the budget that is allowed to be transferred, without validating whether the Federal programs incurred any expenditures. In the quarterly report of September, the expenditure for these lines is reported based on the amount of drawdowns incurred. This practice is inconsistent and does not reflect the actual expenditure incurred. iv. In the quarterly report of June 2023, an expenditure of $3,733,668 was reported on line 5(a). According to PRIFAS, the reported expenditure was $1,988,000. QUESTIONED COSTS Undetermined. 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 program 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 No reported as prior audit finding. 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.
FINDING REFERENCE NUMBER 2023-056 (See Finding Reference Number 2023-025) 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 2021G996117; 2022G996117; 2023996117 (Federal Award Years: 2021 through 2023) 2022G9922PT; 2301PRTABD (Federal Award Years: 2022 through 2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT REPORTING – FINANCIAL TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS 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 requirement for TANF and Payment to Territories – Adult programs, we selected two reports submitted during our fiscal year. We found the following deficiencies: i. Administrative expenditures related to both programs are recorded under the same accounting account number, and the assistance listing number of TANF. That is, in PRIFAS, the administrative expenditures of both programs are not segregated by grant award and assistance listing number. ii. The ACF-196TR reports report expenditures under both programs that are not reconciled with the PRIFAS accounting system, specifically in administrative expenditures. We requested evidence of the expenditures incurred or details that were used to prepare the reports; this information was not available, and it was generated upon our request. iii. In both reports evaluated, the amounts reported on lines 2 and 3, related to the amounts that the TANF program transfers to two other federal programs, are recorded inconsistently. During the quarters from October to June, these lines report the amount of the budget that is allowed to be transferred, without validating whether the Federal programs incurred any expenditures. In the quarterly report of September, the expenditure for these lines is reported based on the amount of drawdowns incurred. This practice is inconsistent and does not reflect the actual expenditure incurred. iv. In the quarterly report of June 2023, an expenditure of $3,733,668 was reported on line 5(a). According to PRIFAS, the reported expenditure was $1,988,000. QUESTIONED COSTS Undetermined. 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 program 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 No reported as prior audit finding. 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.
2023-005 – Inadequate Policies and Procedures (Significant Deficiency in Internal Controls over Compliance) Federal Program Information Federal Award Title and ALN: Research & Development Cluster, 84.031 Federal Awarding Agency: U.S. Department of Education Federal Award ID Number: P031S210287, P031S210288, P031C200002, P031C210215 Federal Award Year: 2023 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. Questioned Costs: None Auditor recommendation: We recommend the College establish the required written procedures for federal monies and have them available to all personnel who work with federal programs.
2023-005 – Inadequate Policies and Procedures (Significant Deficiency in Internal Controls over Compliance) Federal Program Information Federal Award Title and ALN: Research & Development Cluster, 84.031 Federal Awarding Agency: U.S. Department of Education Federal Award ID Number: P031S210287, P031S210288, P031C200002, P031C210215 Federal Award Year: 2023 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. Questioned Costs: None Auditor recommendation: We recommend the College establish the required written procedures for federal monies and have them available to all personnel who work with federal programs.
2023-005 – Inadequate Policies and Procedures (Significant Deficiency in Internal Controls over Compliance) Federal Program Information Federal Award Title and ALN: Research & Development Cluster, 84.031 Federal Awarding Agency: U.S. Department of Education Federal Award ID Number: P031S210287, P031S210288, P031C200002, P031C210215 Federal Award Year: 2023 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. Questioned Costs: None Auditor recommendation: We recommend the College establish the required written procedures for federal monies and have them available to all personnel who work with federal programs.
2023-005 – Inadequate Policies and Procedures (Significant Deficiency in Internal Controls over Compliance) Federal Program Information Federal Award Title and ALN: Research & Development Cluster, 84.031 Federal Awarding Agency: U.S. Department of Education Federal Award ID Number: P031S210287, P031S210288, P031C200002, P031C210215 Federal Award Year: 2023 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. Questioned Costs: None Auditor recommendation: We recommend the College establish the required written procedures for federal monies and have them available to all personnel who work with federal programs.
CASH MANAGEMENT - CASH DRAWS Repeat of finding 2022-003 Finding Type: Material Weakness in Internal Controls over Compliance, Material Noncompliance ALN/CSFA 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: 90ZU0362 (direct), 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 nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Condition: The Organization drew cash down in excess of the total program disbursements during the year ended June 30, 2023, and requested additional cash draws prior to disbursing available funds for this 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: 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, until such time as the money is legitimately needed to pay for grant activities. 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 57.
CASH MANAGEMENT - INTEREST ON EXCESS FUNDS Finding Type: Significant Deficiency in Internal Controls over Compliance, Noncompliance ALN/CSFA 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: 90ZU0362 (direct), 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 has cash draws in excess of the total program disbursements during the year ended June 30, 2023 and in previous years, 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 57.
2023-001 – Cash Management Federal Agency: U.S. Department of Education Federal Program: Arts in Education Federal Assistance Listing Number: 84.351 Pass-through Entity: Not applicable. Award Identification Number: S351A210115 and U351D180067 Year: 2022 and 2023 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 $659,355 out of $1,481,628 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 $659,355, calculated as the excess of cumulative federal drawdowns over allowable program expenses as of June 30, 2023. Repeat Finding: No 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.
2023-002 Financial Management and Internal Controls (Continued) Compliance Requirement Allowable Costs/Cost Principles Category Significant Deficiency in Internal Control and Noncompliance Federal Agency U.S. Department of the Treasury Pass-Through Entity Puerto Rico Fiscal Agency and Financial Advisory Authority ALN 21.027 Federal Program COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Federal Agency U.S. Small Business Administration ALN 59.075 Federal Program COVID-19 - Shuttered Venue Operators Program Federal Agency U.S. Department of Homeland Security through the Federal Emergency Management Agency Pass-Through Entity Central Office for Recovery, Reconstruction and Resiliency ALN 97.036 Federal Program Disaster Grants - Public Assistance (Presidentially Declared Disasters) Cause In 2022, the Corporation became subject to Single Audit compliance requirements for the first time. However, it underestimated the complexity of navigating the intricate laws, regulations, and financial management requirements associated with federal funds. The lack of prior experience in implementing adequate internal controls, coupled with the absence of established written policies, contributed to challenges in ensuring compliance with federal cost principles and financial reporting obligations. Effect Failure to comply with 2 CFR sections 200.302 and 200.305 could result in the Corporation incurring unallowable costs. Consequently, the Corporation may face temporary withholding of cash payments until the deficiency is corrected. Additionally, continued noncompliance could lead to further sanctions, including the suspension or termination of federal funding for the program, ultimately impacting the Corporation’s ability to fulfill its obligations and sustain operations. Questioned Costs None. Repeated Item Refer to Item No. 2022-002 in the Summary Schedule of Prior Audit Findings. Recommendation The Corporation should draft written policies under subpart E, Cost Principles of 2 CFR Part 200. In addition, the staff involved with federal funds should take courses on federal awards. Views of responsible officials Refer to Unaudited Corrective Action Plan.
U.S. Department of Health and Human Services Leading Edge Acceleration Projects (LEAP) in Health Information Technology - 93.345 Award# 90AX0034/01-00 Criteria or Specific Requirement – Allowable Costs/Cost Principles/Cash Management Federal regulations state that “charges to federal awards for salaries and wages, must be based on records that accurately reflect the work performed.” The regulations also state that “the records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated” and “budget estimates alone do not qualify as support for charges to federal awards” (2 CFR 200.430(i)). Additionally, costs may not be included as a cost of any other federally-financed program in either the current or a prior period (2 CFR 200.403(f)). Non-federal entities must minimize the time elapsing between the transfer of funds from the U.S. Treasury or pass-through entity and disbursement by the non-federal entity for direct program or project costs and the proportionate share of allowable indirect costs, whether the payment is made by electronic funds transfer, or issuance or redemption of checks, warrants, or payment by other means (2 CFR Section 200.305(b)).issuance or redemption of checks, warrants, or payment by other means (2 CFR Section 200.305(b)). Condition – During our test work over the LEAP grant, we noted the Organization did not have time and activity records with sufficient detail per federal regulations to support its compensation and fringe benefit expenses. Additionally, it appeared a substantial portion of certain employee's time was 100% charged to the LEAP award; however, may have also been included on other federal awards and been reimbursed. Lastly, indirect costs were charged to the federal program on the salary expenses which were not fully supported as required by the Uniform Guidance. Cause – There is a lack of understanding of the requirements of the time and activity reports and a lack of detail tracking by project of personnel time. Effect – Based on testing completed, the Organization did not have sufficient procedures to record and verify employees time and activity throughout fiscal year 2023. This resulted in the Organization drawing down funds for unsupported expenses. Questioned Costs – Total questioned costs are $278,735. This includes $192,231 of all salaries and benefits charged to the award which lacked documentation to support the charge and allocation to the grant and $86,504 in indirect costs charged on these related expenses. Context - There was a total of $192,231 in salaries and fringe benefits charged to the LEAP award during the year ended June 30, 2023 which encompassed six employees. One hundred percent of the employees were reviewed and none had proper documentation to support the charge and allocation to the grant (e.g ., daily time and activity records, etc.). Per discussions with management and further review, the amounts charged to the grant were based on the approved budget for the position and the internal allocation performed each payroll period. Additionally, it is uncertain how much of these employees' were also charged to other federally financed programs during the year. Identification as a Repeat Finding, if applicable – Not applicable Recommendation – We recommend that management utilize a time and activity method which meets the requirements of federal regulations. We also recommend employees and their supervisors are provided training on the requirements. Views of Responsible Official and Planned Corrective Actions – Management agrees with finding. See corrective action plan.
Finding 2023-006: Cash Management – Significant Deficiency Information on the federal program: Federal program is Crime Victim Assistance from the U.S. Department of Justice passed through the Criminal Justice Information Authority. 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 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, 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: This is not a repeat finding. 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.
Material Weakness Finding No. 2023-006: Cash Management U.S. Department of Education Native Hawaiian Education Act Program Federal Assistance Listing Number 84.362A. 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. Recommendation We recommend that the Organization incorporate internal controls over cash management to ensure compliance with 2 CFR §200.305.
SIGNIFICANT DEFICIENCY 2023-006 - Cash Management Federal Program Information: ALN - 66.458 - Clean Water State Revolving Funds Criteria: The following CFR(s) apply to this finding: 2 CFR section 200.302(b)(6)) & 2 CFR section 200.305(b) (3). Condition: During audit procedures, it was identified that the Town did not have a cash management policy in place. Cause: The Town has experienced turnover in the Treasurer’s position over the past few years, which has delayed the policy implementation. Effect: The Town may not have adequate policy and procedures in place to safeguard its most liquid assets. Identification of Questioned Costs: None identified. Context: The population consisted of 6 out of 10 pay requisites deposit of reimbursements from the fiscal year were examined. Out of the 6 selections all 6 were not properly recorded. Repeat Finding: This is a repeat finding of 2022-007. Recommendation: It is recommended that the Town adopt a cash management policy that follows the Uniform Guidance and that the Town implement internal control processes and procedures to ensure that the adopted policy is followed. Views of Responsible Officials and Corrective Action Plan: Client agrees with finding and a version of their response can be found in the Corrective Action Plan. Please see the Corrective Action Plan issued by the Town of Livermore Falls.
Federal Agency Program – U.S. Department of Education, Higher Education Emergency Relief Fund Strengthening Institutions Program, Assistance Listing Number 84.425M Program Year - June 1, 2022 – May 31, 2023 Criteria or Specific Requirement – Cash Management – 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. 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. (2 CFR Section 200.305(b)). Condition – During our testing, we noted the final draw of funds for the Strengthening Institutions Program was completed on November 8, 2022 while program costs funded by the draw were not incurred until December 2023. Questioned Costs – N/A Context – During our testing, it was noted that the University had one draw of funds under the program in the year ended May 31, 2023. The draw was completed in advance of disbursements for program costs, but was not as close as administratively feasible to the program disbursements. Cause – The University's draw of program funding was not planned in a manner to minimize the time elapsing between the transfer of funds to the University and the disbursement by the University. Effect – The University did not appropriately follow the requirements of 2 CFR 200.305(b) to time advance payments as close as is administratively feasible to the actual disbursement of program costs. Identification as a Repeat Finding – N/A Recommendation – We recommend that the University review it's process for drawing down federal grant funding to ensure processes are consistent with federal requirements and individuals involved in drawing down funds are aware of the applicable requirements. Views of Responsible Officials and Planned Corrective Action – Due to a turnover in the office of Controller, the grant was drawn down prematurely. While invoice and proposals were attained before the draw, the money was not expensed in the typical three to five days. The controller who drew the money is no longer at the University. The current administration will return to normal University practice of not drawing down money until is it ready to be dispersed to the appropriate entity. This is normal practice for the University, but the practice was not followed due to a lack of knowledge. This has been corrected.
Federal Agency Program – U.S. Department of Education, Higher Education Emergency Relief Fund Strengthening Institutions Program, Assistance Listing Number 84.425M Program Year - June 1, 2022 – May 31, 2023 Criteria or Specific Requirement – Cash Management – 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. 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. (2 CFR Section 200.305(b)). Condition – During our testing, we noted the final draw of funds for the Strengthening Institutions Program was completed on November 8, 2022 while program costs funded by the draw were not incurred until December 2023. Questioned Costs – N/A Context – During our testing, it was noted that the University had one draw of funds under the program in the year ended May 31, 2023. The draw was completed in advance of disbursements for program costs, but was not as close as administratively feasible to the program disbursements. Cause – The University's draw of program funding was not planned in a manner to minimize the time elapsing between the transfer of funds to the University and the disbursement by the University. Effect – The University did not appropriately follow the requirements of 2 CFR 200.305(b) to time advance payments as close as is administratively feasible to the actual disbursement of program costs. Identification as a Repeat Finding – N/A Recommendation – We recommend that the University review it's process for drawing down federal grant funding to ensure processes are consistent with federal requirements and individuals involved in drawing down funds are aware of the applicable requirements. Views of Responsible Officials and Planned Corrective Action – Due to a turnover in the office of Controller, the grant was drawn down prematurely. While invoice and proposals were attained before the draw, the money was not expensed in the typical three to five days. The controller who drew the money is no longer at the University. The current administration will return to normal University practice of not drawing down money until is it ready to be dispersed to the appropriate entity. This is normal practice for the University, but the practice was not followed due to a lack of knowledge. This has been corrected.
Federal Agency: U. S. Department of Health and Human Services Cluster: Health Centers Clusters AL No.: 93.224 Program Title: Community Health Centers Area: Cash Management Repeat Finding from Prior Audit? Yes Finding Type: Material Weakness in Internal Control over Compliance Questioned Cost: Unable to be determined Criteria: Under Uniform Guidance (2 CFR §200.305), non-federal entities must minimize the time elapsing between the transfer of federal funds and the disbursement of those funds. Specifically: • Non-federal entities receiving advance payments must limit drawdowns to immediate cash needs. • Trial balances should be reviewed for unearned revenue to assess whether advances are consistent with cash management requirements. • For cost-reimbursement arrangements, reimbursement requests should generally be limited to costs that have been disbursed or incurred in accordance with applicable regulations, including the Federal Acquisition Regulation (48 CFR §52.216-7(b)). Condition: Cash management testing for cash management could not be adequately performed. Trial balances, cash drawdown records, and supporting documentation necessary to determine whether federal funds were drawn and disbursed in compliance with cash management requirements were not available for audit review. Cause: Because adequate documentation was not available, the auditors were unable to determine whether Kagman Community Health Center, Inc. complied with federal cash management requirements for Assistance Listing No. 93.224. This increases the risk that federal funds may not have been drawn or disbursed in accordance with applicable regulations and weakens internal controls over compliance with cash management requirements. Effect: Because adequate documentation was not available, the auditors were unable to determine whether Kagman Community Health Center, Inc. complied with federal cash management requirements for AL No. 93.224. This increases the risk that federal funds may not have been drawn or disbursed in accordance with applicable regulations and weakens internal controls over compliance with cash management requirements. Recommendation: Kagman Community Health Center, Inc. should strengthen internal controls over federal cash management by: 1. Maintaining complete and accurate records of federal cash drawdowns, disbursements, and related trial balance activity. 2. Implementing procedures to regularly review unearned revenue balances to ensure compliance with cash management requirements. 3. Establishing formal turnover and record-retention procedures to ensure continuity of grant accounting and cash management documentation during personnel transitions. 4. Implementing supervisory review to ensure drawdowns and reimbursement requests comply with Uniform Guidance and applicable federal regulations. Views of the Officials: Kagman Community Health Center, Inc.’s response is documented in the corrective action plan.
Cash Management Public Housing Capital Fund - AL No. 14.872 Significant Deficiency in Internal Controls Other Matter to Reported Under the Uniform Control Condition: It was noted that funds were overdrawn during the year and never paid out to a vendor. Out of the 26 grant drawdowns during the year, 11 samples were tested and the following was noted: 6 drawdowns were missing invoice documentation. 4 drawdowns were missing payment documentation. Context: The auditor haphazardly selected 11 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 is unable to provide supporting documentation for the capital funds that were drawn during the year. Questioned Costs: $155,318 Auditor’s Recommendations: The Authority should continue to develop and implement internal controls over grant reporting and provide training opportunities to staff. View of Responsible Officials: See Corrective Action Plan.
Assistance Listing Number, Federal Agency, and Program Name: Assistance Listing Number 66.458, Environmental Protection Agency. Capitalization Grants for Clean Water State Revolving Funds Federal Award Identification Number and Year: 5749-01, Loan Period 06/18/2022-11/15/2024 Pass-through Entity: Michigan Department of Environment, Great Lakes, and Energy Finance Division - Water Infrastructure Financing Section Type: Material weakness in internal control and material noncompliance with laws and regulations Repeat Finding: No Criteria: As a precondition to receive federal awards, prospective recipients must have effective internal controls over the federal award. As described in 2 CFR, Part 200.303, nonfederal entities must have certain written policies and procedures surrounding the management of their federal awards. Such policies should include procedures for collecting payments of federal funds per 2 CRF 200.305, cash management (i.e., minimizing the time between draws and actual disbursing of federal awards) per 2 CFR 200.302(b)(6), allowable cost per 2 CFR 200.403, and conflict of interest per 2 CFR 200.318. Per 2 CFR 200.319 (d), the non-Federal entity must have written procedures for procurement transactions. Condition: The Township did not have written procedures for cash management, allowable cost or conflict of interest. In addition, the Township procurement policy did not include all necessary items specified in the Uniform Guidance. Identification of How Likely Questioned Costs Were Computed: N/A Known Questioned Costs: None Context: N/A Cause/Effect: The Township was not aware that they were required to have written policies and procedures for the items noted above and was using the grant agreement requirements for guidelines. The Township's controls were not adequate to ensure it followed the federal requirement over these processes. Recommendation: We recommend the Township adopt written policies and procedures over cash management, allowable costs, and conflicts of interest. In addition, we recommend that management review and modify the procedure policy to include all the necessary items outline in the Uniform Guidance. View of responsible officials and planned corrective action plan: See attached corrective action plan.
Cash Management Public Housing Capital Fund - AL No. 14.872 Significant Deficiency in Internal Controls Other Matter to Reported Under the Uniform Control Condition: It was noted that funds were overdrawn during the year and never paid out to a vendor. Out of the 26 grant drawdowns during the year, 11 samples were tested and the following was noted: 6 drawdowns were missing invoice documentation. 4 drawdowns were missing payment documentation. Context: The auditor haphazardly selected 11 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 is unable to provide supporting documentation for the capital funds that were drawn during the year. Questioned Costs: $155,318 Auditor’s Recommendations: The Authority should continue to develop and implement internal controls over grant reporting and provide training opportunities to staff. View of Responsible Officials: See Corrective Action Plan.
Assistance Listing Number, Federal Agency, and Program Name: Assistance Listing Number 66.458, Environmental Protection Agency. Capitalization Grants for Clean Water State Revolving Funds Federal Award Identification Number and Year: 5749-01, Loan Period 06/18/2022-11/15/2024 Pass-through Entity: Michigan Department of Environment, Great Lakes, and Energy Finance Division - Water Infrastructure Financing Section Type: Material weakness in internal control and material noncompliance with laws and regulations Repeat Finding: No Criteria: As a precondition to receive federal awards, prospective recipients must have effective internal controls over the federal award. As described in 2 CFR, Part 200.303, nonfederal entities must have certain written policies and procedures surrounding the management of their federal awards. Such policies should include procedures for collecting payments of federal funds per 2 CRF 200.305, cash management (i.e., minimizing the time between draws and actual disbursing of federal awards) per 2 CFR 200.302(b)(6), allowable cost per 2 CFR 200.403, and conflict of interest per 2 CFR 200.318. Per 2 CFR 200.319 (d), the non-Federal entity must have written procedures for procurement transactions. Condition: The Township did not have written procedures for cash management, allowable cost or conflict of interest. In addition, the Township procurement policy did not include all necessary items specified in the Uniform Guidance. Identification of How Likely Questioned Costs Were Computed: N/A Known Questioned Costs: None Context: N/A Cause/Effect: The Township was not aware that they were required to have written policies and procedures for the items noted above and was using the grant agreement requirements for guidelines. The Township's controls were not adequate to ensure it followed the federal requirement over these processes. Recommendation: We recommend the Township adopt written policies and procedures over cash management, allowable costs, and conflicts of interest. In addition, we recommend that management review and modify the procedure policy to include all the necessary items outline in the Uniform Guidance. View of responsible officials and planned corrective action plan: See attached corrective action plan.
Assistance Listing Number: 93.958 Name of Federal Program: Block Grants for Community Mental Health Services Name of Federal Agency: Department of Health and Human Services Name of Pass-through Entities and Award Periods: Wisconsin Department of Health Services – October 1, 2021 through September 30, 2022, April 1, 2022 through September 30, 2022, October 1, 2022 through September 30, 2023, Milwaukee County Behavioral Health Division – January 1, 2022 through December 31, 2022, and Milwaukee County Department of Health Services – January 1, 2022 through December 31, 2022 Criteria or Specific Requirement: Non-federal entities must establish policies and procedures to implement the requirements of 2 CFR section 200.305. Program costs must be incurred by non-federal entity before submitting a reimbursement request. Condition: During our testing of reimbursement requests, we identified amounts that were requested for reimbursement prior to the expenses being incurred. Cause: Sufficient internal controls for reimbursement requests have not been implemented to ensure costs have been incurred prior to requests for reimbursement. Effect or Potential Effect: Noncompliance with cash management requirements occurred within the federal program and costs incurred could be disallowed. Context and Questioned Costs: A sample of 6 reimbursement requests totaling $135,397 was selected for testing from a population of 10 reimbursement requests totaling $347,508. The testing found 1 reimbursement request totaling $32,073 that included $21,180 of expenses that had not been incurred as of the date of the reimbursement request. Repeat Finding: No Recommendation: Additional internal controls for reimbursement requests should be implemented, including having another individual outside the process review and approve reimbursement requests prior to submission or require detailed accounting expense transactions be included with reimbursement requests to ensure expenses have been incurred prior to reimbursement. Views of Responsible Officials: Management agrees with the finding and the Organization and outsourced accounting rep will meet monthly to review cost reports and correlating invoices together before approving and submitting to the funder to ensure no invoices are submitted in advance of incurring expenses.
Assistance Listing Number: 93.958 Name of Federal Program: Block Grants for Community Mental Health Services Name of Federal Agency: Department of Health and Human Services Name of Pass-through Entities and Award Periods: Wisconsin Department of Health Services – October 1, 2021 through September 30, 2022, April 1, 2022 through September 30, 2022, October 1, 2022 through September 30, 2023, Milwaukee County Behavioral Health Division – January 1, 2022 through December 31, 2022, and Milwaukee County Department of Health Services – January 1, 2022 through December 31, 2022 Criteria or Specific Requirement: Non-federal entities must establish policies and procedures to implement the requirements of 2 CFR section 200.305. Program costs must be incurred by non-federal entity before submitting a reimbursement request. Condition: During our testing of reimbursement requests, we identified amounts that were requested for reimbursement prior to the expenses being incurred. Cause: Sufficient internal controls for reimbursement requests have not been implemented to ensure costs have been incurred prior to requests for reimbursement. Effect or Potential Effect: Noncompliance with cash management requirements occurred within the federal program and costs incurred could be disallowed. Context and Questioned Costs: A sample of 6 reimbursement requests totaling $135,397 was selected for testing from a population of 10 reimbursement requests totaling $347,508. The testing found 1 reimbursement request totaling $32,073 that included $21,180 of expenses that had not been incurred as of the date of the reimbursement request. Repeat Finding: No Recommendation: Additional internal controls for reimbursement requests should be implemented, including having another individual outside the process review and approve reimbursement requests prior to submission or require detailed accounting expense transactions be included with reimbursement requests to ensure expenses have been incurred prior to reimbursement. Views of Responsible Officials: Management agrees with the finding and the Organization and outsourced accounting rep will meet monthly to review cost reports and correlating invoices together before approving and submitting to the funder to ensure no invoices are submitted in advance of incurring expenses.
Assistance Listing Number: 93.958 Name of Federal Program: Block Grants for Community Mental Health Services Name of Federal Agency: Department of Health and Human Services Name of Pass-through Entities and Award Periods: Wisconsin Department of Health Services – October 1, 2021 through September 30, 2022, April 1, 2022 through September 30, 2022, October 1, 2022 through September 30, 2023, Milwaukee County Behavioral Health Division – January 1, 2022 through December 31, 2022, and Milwaukee County Department of Health Services – January 1, 2022 through December 31, 2022 Criteria or Specific Requirement: Non-federal entities must establish policies and procedures to implement the requirements of 2 CFR section 200.305. Program costs must be incurred by non-federal entity before submitting a reimbursement request. Condition: During our testing of reimbursement requests, we identified amounts that were requested for reimbursement prior to the expenses being incurred. Cause: Sufficient internal controls for reimbursement requests have not been implemented to ensure costs have been incurred prior to requests for reimbursement. Effect or Potential Effect: Noncompliance with cash management requirements occurred within the federal program and costs incurred could be disallowed. Context and Questioned Costs: A sample of 6 reimbursement requests totaling $135,397 was selected for testing from a population of 10 reimbursement requests totaling $347,508. The testing found 1 reimbursement request totaling $32,073 that included $21,180 of expenses that had not been incurred as of the date of the reimbursement request. Repeat Finding: No Recommendation: Additional internal controls for reimbursement requests should be implemented, including having another individual outside the process review and approve reimbursement requests prior to submission or require detailed accounting expense transactions be included with reimbursement requests to ensure expenses have been incurred prior to reimbursement. Views of Responsible Officials: Management agrees with the finding and the Organization and outsourced accounting rep will meet monthly to review cost reports and correlating invoices together before approving and submitting to the funder to ensure no invoices are submitted in advance of incurring expenses.
Finding #: 2022-002 Cash Management – Noncompliance (not material to compliance requirement) Identification of Federal Program and Award Program title: U.S. Department of Health and Human Services (DHHS): Public Health Services Act, Title III, Section 330 (Health Center Cluster) CFDA #: 93.224/93.527 Award #: C8E44790 Program Year: 2022 Criteria Pursuant to 2 CFR section 200.305(b), Non-Federal entities must minimize the time elapsing between the transfer of funds from the U.S. Treasury or pass-through entity and disbursement by the non-Federal entity for direct program or project costs and the proportionate share of allowable indirect costs. Under the advance payment method, a non-Federal entity must be paid in advance provided that it maintains, or demonstrates the willingness to maintain, both written procedures that minimize the time elapsing between the transfer of funds from the U.S. Treasury and disbursement by the non-Federal entity, as well as a financial management system that meets the specified standards for fund control and accountability. Condition During our testing of cash management, we noted an instance of noncompliance relating to the health center’s effort to minimize the time between drawing and disbursing federal funds. 1 out of 6 drawdowns was identified as a portion of unearned revenue. Upon further inspection, auditor identified a total of $74,580 in deferred revenue that was not disbursed timely (time elapsed between the transfer of funds and disbursement exceeded the three-day rule). Cause Health center personnel were not following cash management policies and procedures (“DHHS Draw Down Procedure #2.530”) that comply with 2 CFR section 200.305(b). Effect Possibility of interest payments due, and of draw down restriction being placed on Payment Management System (PMS) account or denial of future funding. Questioned Costs $74,580 Perspective Information We tested a statistically valid sample of 6 out of 17 total cash drawdowns and determined that the audit finding represented an isolated instance. Repeat Finding This finding is not a repeated finding. Recommendation We recommend that management review DHHS draw down policies and procedures in place to ensure CAMcare is in compliance with the compliance requirements of 2 CFR section 200.305(b). Views of Responsible Officials Management recognizes the noncompliance; on November 29, 2023, CAMcare’s CEO, Jillian Hudspeth, and CFO, Christopher Bernardi, agreed with this finding, and explained that CAMcare’s original budget for the C8E grant was to expand operations at the Clementon location. However, after the initial site plans and architectural drawings were completed and paid for, the costs of materials and labor had increased significantly due to supply chain issues. Management made the decision to cancel the project and pivot to different areas of need. Because the project was cancelled, HRSA disallowed the site plan and architecture costs. CAMcare’s CFO and grant manager at the time were given verbal approval to reduce a future drawdown by the amount that had been disallowed.
Finding #: 2022-003 Period of Performance – Noncompliance (not material to compliance requirement) Identification of Federal Program and Award Program title: U.S. Department of Health and Human Services (DHHS): Public Health Services Act, Title III, Section 330 (Health Center Cluster) CFDA #: 93.224/93.527 Award #: H8DCS36483 Program Year: 2022 Criteria Pursuant to 2 CFR sections 200.308, 200.309, and 200.403(h), a non-Federal entity may charge to the Federal award only allowable costs incurred during the approved budget period of a federal award's period of performance and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award that were authorized by the Federal awarding agency or pass-through entity. Pursuant to 2 CFR section 200.305(b)(5), to the extent available, the non-Federal entity must disburse funds available from program income and interest earned on such funds before requesting additional cash payments. Condition During our testing of period of performance, we noted instances of noncompliance relating to the health center’s recognition of expenditures beyond the award’s period of performance. After inspection of invoices and canceled checks supporting disbursements tested, the auditor identified 3 out of 40 expenditures where costs were incurred after the period of performance end date. Upon further investigation, the auditor determined that $153,005 of the $433,455 amount reported as 2022 federal expenditures under award H8DCS36483 was incurred beyond the period of performance end date. Cause Health center personnel were not following financial expense allocation of revenue policies and procedures, which state that federal funds will be utilized according to regulations and what is established on the budget information form submitted with the grant application. Effect Possibility of interest payments due, and of draw down restriction being placed on Payment Management System (PMS) account or denial of future funding. Questioned Costs $153,005 Perspective Information We tested a statistically valid sample of 40 out of 250+ federal expenditures and determined that the audit finding represented a systemic problem. Repeat Finding This finding is not a repeated finding. Recommendation We recommend that management review financial expense allocation of revenue policies and closely monitor grant procedures in place to ensure CAMcare is in compliance with budget information stipulated in grant agreements. Views of Responsible Officials Management recognizes the noncompliance; on November 29, 2023, CAMcare’s CEO, Jillian Hudspeth, and CFO, Christopher Bernardi, agreed with this finding, and explained that the issue occurred during a time period when none of the current authorizing officials were employed by CAMcare.
U.S. DEPARTMENT OF HOMELAND SECURITY KANSAS ADJUANT GENERAL SIGNIFICANT DEFICIENCY 2022-001: Disaster Grants – Public Assistance Grant period: Year Ended December 31, 2022 Condition and Context: The County does not have a complete set of written cash management policies and procedures as required by the Uniform Guidance. The lack of written procedures did not result in any material noncompliance, fraud or abuse with respect to the major program. Criteria: The Uniform Guidance requires Non-Federal entities other than States, including those operating Federal programs as subrecipients of States, to follow the cash management standards set out at 2 CFR section 200.305. The County must have a complete set of written cash management policies, which conform to applicable Federal statutes and the cash management requirements identified in 2 CFR part 200. Cause: The County was unaware of the written cash management policy requirements required by the Uniform Guidance. Effect: An important component of internal controls is the existence of operating policies and procedures and that they are clearly understood and communicated. Without clear written policies and procedures, there is a higher risk of noncompliance with program requirements. Recommendation: Management should determine the scope of written policies needed for compliance with all federal programs and develop policies and procedures to comply with the Uniform Guidance. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and recommendation. The County’s existing policies are currently under review by management and staff to determine what updates/changes are necessary in order to meet the Uniform Guidance requirements. Once any updates/changes are drafted, the policy will be presented to the Governing Body for review and approval.
Criteria: Cash management requirements of federal grants are contained in 2 CFR sections 200.302(b)(6) and 200.305, 31 CFR part 205, 48 CFR sections 52.216-7(b) and 52.232-12, as well as federal awarding agency regulations and terms and conditions of the federal award. The Organization must establish written procedures around cash management and must minimize the time elapsing between the transfer of funds from the U.S. Treasury and disbursement by the Organization. Condition: The Organization does not have written procedures around cash management and requests to draw down funds from the federal agency were in excess of current expenditures, resulting in excess time between the transfer of funds and disbursement by the Organization. Effect: As of December 31, 2022, $70,267 of funds had been drawn down from the federal agency in excess of expenditures. Cause: The Organization tracks federal expenditures in the accounting software and the individual that requests the funds from the federal agency does not verify the amount of expenditures with the accounting software and requests an estimated amount each month. Identification of repeat finding: This is not a repeat finding from a previous audit. Recommendation: We recommend the Organization develop written policies and procedures around cash management and request funds monthly based on the actual expenditures of that month to minimize the time elapsing between the transfer of funds from the U.S. Treasury and disbursement by the Organization. Views of responsible officials and planned corrective actions: The Organization agrees with this finding and will implement written policies and procedures around cash management.
Information on the Federal Program: Assistance Listing Number 10.763—Emergency Community Water Assistance Grants, United States Department of Agriculture. 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 during fiscal year 2022. 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.
Information on the Federal Program: Assistance Listing Number 10.763—Emergency Community Water Assistance Grants, United States Department of Agriculture. 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 during fiscal year 2022. 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.
Finding 2022-002 ? Cash Management ? Pass-through Entities Identification of the federal program U.S. Department of Defense U.S. Department of Health and Human Services Research and Development Cluster All Assistance Listing Nos. with amounts provided to subrecipients ? 12.420, 93.242, 93.279, 93.351, 93.855, and 93.866 Federal Award Numbers Grant Period 5R01AI123047-05 8/15/2017-7/31/2022 1R56AG073316-01 9/01/2021-8/31/2023 W81XWH1910496 5/01/2020-10/31/2023 1R01MH130193-01 4/05/2022-2/28/2023 7R01MH116844-04 7/01/2020-1/31/2022 R01MH116844-05 2/01/2022-1/31/2024 5R01DA052845-03 7/01/2022-6/30/2023 5R01DA052845-02 7/01/2021-6/30/2022 2P51OD011133-23 5/01/2021-4/30/2022 2P51OD011133-18 5/01/2016-4/30/2017 5U42OD010442-21 2/01/2022-1/31/2023 5P51OD011133-24 5/01/2022-4/30/2023 5R21AI150445-02 2/01/2021-1/31/2024 5R01AI138587-05 5/01/2022-4/30/2023 5R01AI136831-04 8/01/2022-7/31/2023 5R01AI138587-04 5/01/2021-4/30/2022 5R01AI134245-05 2/01/2022-4/30/2023 1P30AI168439-01 3/10/2022-2/28/2023 5R01AI123047-05 8/01/2020-7/31/2022 7R01AI134245-05 9/01/2021-4/30/2022 5U34AG068482-03 6/01/2022-5/31/2022 U34AG068482 6/01/2021-5/31/2022 5P01AG051428-05 3/01/2020-2/28/2022 1R56AG073316-01 9/01/2021-8/31/2023 5R01AG065546-03 6/01/2022-5/31/2023 1R01AG065546-02 6/01/2021-5/31/2022 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).? 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 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. Texas Biomed paid 2 of 23 subrecipients after 30 days of receipt of the request for reimbursement from the subrecipient, resulting in noncompliance with 2 CFR 200.305(b)(3). 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 2 of 23 subrecipient payments, Texas Biomed made payments to subrecipients at 50 and 41 days after receipt of the requests for reimbursement. These payments were not made in accordance with the 30-day requirement (5R01AI123047-05 and 1R56AG073316-01). For 1 additional subrecipient payment, we noted approval by the principal investigator of the subrecipient?s request for reimbursement was made after the payment was made to the subrecipient (5R01AI123047-05). Texas Biomed?s subrecipient expenditures totaled $2.0 million during the period, which represented 5.2% of Texas Biomed?s total research and development expenditures of $38.1 million. Identification as a repeat finding, if applicable This is not a repeat finding. 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 Texas Biomed will implement a more effective operating procedure for subrecipient invoice approval and timely payment that will include timeline expectations for the initial approval request to the applicable principal investigator upon receipt of invoices from the subrecipient, timeline for following-up with the principal investigator on approval requests, timeline and direction for seeking proxy approval if the principal investigator is unavailable or unable to provide a timely response, and timeline for entering the subrecipient invoice in Texas Biomed financial systems facilitating payment upon approval. Texas Biomed will implement corrective action on June 1, 2023.
Finding 2022-002 ? Cash Management ? Pass-through Entities Identification of the federal program U.S. Department of Defense U.S. Department of Health and Human Services Research and Development Cluster All Assistance Listing Nos. with amounts provided to subrecipients ? 12.420, 93.242, 93.279, 93.351, 93.855, and 93.866 Federal Award Numbers Grant Period 5R01AI123047-05 8/15/2017-7/31/2022 1R56AG073316-01 9/01/2021-8/31/2023 W81XWH1910496 5/01/2020-10/31/2023 1R01MH130193-01 4/05/2022-2/28/2023 7R01MH116844-04 7/01/2020-1/31/2022 R01MH116844-05 2/01/2022-1/31/2024 5R01DA052845-03 7/01/2022-6/30/2023 5R01DA052845-02 7/01/2021-6/30/2022 2P51OD011133-23 5/01/2021-4/30/2022 2P51OD011133-18 5/01/2016-4/30/2017 5U42OD010442-21 2/01/2022-1/31/2023 5P51OD011133-24 5/01/2022-4/30/2023 5R21AI150445-02 2/01/2021-1/31/2024 5R01AI138587-05 5/01/2022-4/30/2023 5R01AI136831-04 8/01/2022-7/31/2023 5R01AI138587-04 5/01/2021-4/30/2022 5R01AI134245-05 2/01/2022-4/30/2023 1P30AI168439-01 3/10/2022-2/28/2023 5R01AI123047-05 8/01/2020-7/31/2022 7R01AI134245-05 9/01/2021-4/30/2022 5U34AG068482-03 6/01/2022-5/31/2022 U34AG068482 6/01/2021-5/31/2022 5P01AG051428-05 3/01/2020-2/28/2022 1R56AG073316-01 9/01/2021-8/31/2023 5R01AG065546-03 6/01/2022-5/31/2023 1R01AG065546-02 6/01/2021-5/31/2022 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).? 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 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. Texas Biomed paid 2 of 23 subrecipients after 30 days of receipt of the request for reimbursement from the subrecipient, resulting in noncompliance with 2 CFR 200.305(b)(3). 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 2 of 23 subrecipient payments, Texas Biomed made payments to subrecipients at 50 and 41 days after receipt of the requests for reimbursement. These payments were not made in accordance with the 30-day requirement (5R01AI123047-05 and 1R56AG073316-01). For 1 additional subrecipient payment, we noted approval by the principal investigator of the subrecipient?s request for reimbursement was made after the payment was made to the subrecipient (5R01AI123047-05). Texas Biomed?s subrecipient expenditures totaled $2.0 million during the period, which represented 5.2% of Texas Biomed?s total research and development expenditures of $38.1 million. Identification as a repeat finding, if applicable This is not a repeat finding. 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 Texas Biomed will implement a more effective operating procedure for subrecipient invoice approval and timely payment that will include timeline expectations for the initial approval request to the applicable principal investigator upon receipt of invoices from the subrecipient, timeline for following-up with the principal investigator on approval requests, timeline and direction for seeking proxy approval if the principal investigator is unavailable or unable to provide a timely response, and timeline for entering the subrecipient invoice in Texas Biomed financial systems facilitating payment upon approval. Texas Biomed will implement corrective action on June 1, 2023.
Finding 2022-002 ? Cash Management ? Pass-through Entities Identification of the federal program U.S. Department of Defense U.S. Department of Health and Human Services Research and Development Cluster All Assistance Listing Nos. with amounts provided to subrecipients ? 12.420, 93.242, 93.279, 93.351, 93.855, and 93.866 Federal Award Numbers Grant Period 5R01AI123047-05 8/15/2017-7/31/2022 1R56AG073316-01 9/01/2021-8/31/2023 W81XWH1910496 5/01/2020-10/31/2023 1R01MH130193-01 4/05/2022-2/28/2023 7R01MH116844-04 7/01/2020-1/31/2022 R01MH116844-05 2/01/2022-1/31/2024 5R01DA052845-03 7/01/2022-6/30/2023 5R01DA052845-02 7/01/2021-6/30/2022 2P51OD011133-23 5/01/2021-4/30/2022 2P51OD011133-18 5/01/2016-4/30/2017 5U42OD010442-21 2/01/2022-1/31/2023 5P51OD011133-24 5/01/2022-4/30/2023 5R21AI150445-02 2/01/2021-1/31/2024 5R01AI138587-05 5/01/2022-4/30/2023 5R01AI136831-04 8/01/2022-7/31/2023 5R01AI138587-04 5/01/2021-4/30/2022 5R01AI134245-05 2/01/2022-4/30/2023 1P30AI168439-01 3/10/2022-2/28/2023 5R01AI123047-05 8/01/2020-7/31/2022 7R01AI134245-05 9/01/2021-4/30/2022 5U34AG068482-03 6/01/2022-5/31/2022 U34AG068482 6/01/2021-5/31/2022 5P01AG051428-05 3/01/2020-2/28/2022 1R56AG073316-01 9/01/2021-8/31/2023 5R01AG065546-03 6/01/2022-5/31/2023 1R01AG065546-02 6/01/2021-5/31/2022 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).? 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 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. Texas Biomed paid 2 of 23 subrecipients after 30 days of receipt of the request for reimbursement from the subrecipient, resulting in noncompliance with 2 CFR 200.305(b)(3). 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 2 of 23 subrecipient payments, Texas Biomed made payments to subrecipients at 50 and 41 days after receipt of the requests for reimbursement. These payments were not made in accordance with the 30-day requirement (5R01AI123047-05 and 1R56AG073316-01). For 1 additional subrecipient payment, we noted approval by the principal investigator of the subrecipient?s request for reimbursement was made after the payment was made to the subrecipient (5R01AI123047-05). Texas Biomed?s subrecipient expenditures totaled $2.0 million during the period, which represented 5.2% of Texas Biomed?s total research and development expenditures of $38.1 million. Identification as a repeat finding, if applicable This is not a repeat finding. 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 Texas Biomed will implement a more effective operating procedure for subrecipient invoice approval and timely payment that will include timeline expectations for the initial approval request to the applicable principal investigator upon receipt of invoices from the subrecipient, timeline for following-up with the principal investigator on approval requests, timeline and direction for seeking proxy approval if the principal investigator is unavailable or unable to provide a timely response, and timeline for entering the subrecipient invoice in Texas Biomed financial systems facilitating payment upon approval. Texas Biomed will implement corrective action on June 1, 2023.
Finding 2022-002 ? Cash Management ? Pass-through Entities Identification of the federal program U.S. Department of Defense U.S. Department of Health and Human Services Research and Development Cluster All Assistance Listing Nos. with amounts provided to subrecipients ? 12.420, 93.242, 93.279, 93.351, 93.855, and 93.866 Federal Award Numbers Grant Period 5R01AI123047-05 8/15/2017-7/31/2022 1R56AG073316-01 9/01/2021-8/31/2023 W81XWH1910496 5/01/2020-10/31/2023 1R01MH130193-01 4/05/2022-2/28/2023 7R01MH116844-04 7/01/2020-1/31/2022 R01MH116844-05 2/01/2022-1/31/2024 5R01DA052845-03 7/01/2022-6/30/2023 5R01DA052845-02 7/01/2021-6/30/2022 2P51OD011133-23 5/01/2021-4/30/2022 2P51OD011133-18 5/01/2016-4/30/2017 5U42OD010442-21 2/01/2022-1/31/2023 5P51OD011133-24 5/01/2022-4/30/2023 5R21AI150445-02 2/01/2021-1/31/2024 5R01AI138587-05 5/01/2022-4/30/2023 5R01AI136831-04 8/01/2022-7/31/2023 5R01AI138587-04 5/01/2021-4/30/2022 5R01AI134245-05 2/01/2022-4/30/2023 1P30AI168439-01 3/10/2022-2/28/2023 5R01AI123047-05 8/01/2020-7/31/2022 7R01AI134245-05 9/01/2021-4/30/2022 5U34AG068482-03 6/01/2022-5/31/2022 U34AG068482 6/01/2021-5/31/2022 5P01AG051428-05 3/01/2020-2/28/2022 1R56AG073316-01 9/01/2021-8/31/2023 5R01AG065546-03 6/01/2022-5/31/2023 1R01AG065546-02 6/01/2021-5/31/2022 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).? 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 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. Texas Biomed paid 2 of 23 subrecipients after 30 days of receipt of the request for reimbursement from the subrecipient, resulting in noncompliance with 2 CFR 200.305(b)(3). 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 2 of 23 subrecipient payments, Texas Biomed made payments to subrecipients at 50 and 41 days after receipt of the requests for reimbursement. These payments were not made in accordance with the 30-day requirement (5R01AI123047-05 and 1R56AG073316-01). For 1 additional subrecipient payment, we noted approval by the principal investigator of the subrecipient?s request for reimbursement was made after the payment was made to the subrecipient (5R01AI123047-05). Texas Biomed?s subrecipient expenditures totaled $2.0 million during the period, which represented 5.2% of Texas Biomed?s total research and development expenditures of $38.1 million. Identification as a repeat finding, if applicable This is not a repeat finding. 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 Texas Biomed will implement a more effective operating procedure for subrecipient invoice approval and timely payment that will include timeline expectations for the initial approval request to the applicable principal investigator upon receipt of invoices from the subrecipient, timeline for following-up with the principal investigator on approval requests, timeline and direction for seeking proxy approval if the principal investigator is unavailable or unable to provide a timely response, and timeline for entering the subrecipient invoice in Texas Biomed financial systems facilitating payment upon approval. Texas Biomed will implement corrective action on June 1, 2023.
Finding 2022-002 ? Cash Management ? Pass-through Entities Identification of the federal program U.S. Department of Defense U.S. Department of Health and Human Services Research and Development Cluster All Assistance Listing Nos. with amounts provided to subrecipients ? 12.420, 93.242, 93.279, 93.351, 93.855, and 93.866 Federal Award Numbers Grant Period 5R01AI123047-05 8/15/2017-7/31/2022 1R56AG073316-01 9/01/2021-8/31/2023 W81XWH1910496 5/01/2020-10/31/2023 1R01MH130193-01 4/05/2022-2/28/2023 7R01MH116844-04 7/01/2020-1/31/2022 R01MH116844-05 2/01/2022-1/31/2024 5R01DA052845-03 7/01/2022-6/30/2023 5R01DA052845-02 7/01/2021-6/30/2022 2P51OD011133-23 5/01/2021-4/30/2022 2P51OD011133-18 5/01/2016-4/30/2017 5U42OD010442-21 2/01/2022-1/31/2023 5P51OD011133-24 5/01/2022-4/30/2023 5R21AI150445-02 2/01/2021-1/31/2024 5R01AI138587-05 5/01/2022-4/30/2023 5R01AI136831-04 8/01/2022-7/31/2023 5R01AI138587-04 5/01/2021-4/30/2022 5R01AI134245-05 2/01/2022-4/30/2023 1P30AI168439-01 3/10/2022-2/28/2023 5R01AI123047-05 8/01/2020-7/31/2022 7R01AI134245-05 9/01/2021-4/30/2022 5U34AG068482-03 6/01/2022-5/31/2022 U34AG068482 6/01/2021-5/31/2022 5P01AG051428-05 3/01/2020-2/28/2022 1R56AG073316-01 9/01/2021-8/31/2023 5R01AG065546-03 6/01/2022-5/31/2023 1R01AG065546-02 6/01/2021-5/31/2022 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).? 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 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. Texas Biomed paid 2 of 23 subrecipients after 30 days of receipt of the request for reimbursement from the subrecipient, resulting in noncompliance with 2 CFR 200.305(b)(3). 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 2 of 23 subrecipient payments, Texas Biomed made payments to subrecipients at 50 and 41 days after receipt of the requests for reimbursement. These payments were not made in accordance with the 30-day requirement (5R01AI123047-05 and 1R56AG073316-01). For 1 additional subrecipient payment, we noted approval by the principal investigator of the subrecipient?s request for reimbursement was made after the payment was made to the subrecipient (5R01AI123047-05). Texas Biomed?s subrecipient expenditures totaled $2.0 million during the period, which represented 5.2% of Texas Biomed?s total research and development expenditures of $38.1 million. Identification as a repeat finding, if applicable This is not a repeat finding. 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 Texas Biomed will implement a more effective operating procedure for subrecipient invoice approval and timely payment that will include timeline expectations for the initial approval request to the applicable principal investigator upon receipt of invoices from the subrecipient, timeline for following-up with the principal investigator on approval requests, timeline and direction for seeking proxy approval if the principal investigator is unavailable or unable to provide a timely response, and timeline for entering the subrecipient invoice in Texas Biomed financial systems facilitating payment upon approval. Texas Biomed will implement corrective action on June 1, 2023.