Federal Agency: Department of Education Federal Program: Special Education Cluster Pass-Through Agency: Massachusetts State Department of Elementary and Secondary Education Pass-Through Number(s): Various – See Schedule of Expenditures of Federal Awards Assistance Listing Numbers: 84.027, 84.173 Type of Finding: • Significant Deficiency in Internal Control Over Compliance Compliance Requirement: Allowable Costs/Cost Principles Criteria or specific requirement: 2 CFR, Part 200, 200.303 requires an auditee to establish and maintain effective internal controls over federal awards to ensure compliance with federal statutes, regulations and terms and conditions of the federal award. 2 CFR Part 200.403 (g) states that costs must be adequately documented to be allowable under federal awards. Condition: The District charged costs to the program which were not properly approved. Questioned Costs: None. Context: For 2 of 40 transactions selected for testing, the District was unable to provide documentation of supervisory review and approval prior to issuance of payment. Cause: The District’s procedures were not sufficient to ensure that payments were reviewed and approved prior to issuance of payment. Effect: Unallowable costs could be charged to the program if disbursements are not reviewed by a supervisor who is knowledgeable of program regulations regarding allowable costs. Recommendation: We recommend the District reviews and enhances its procedures and controls regarding payment processing to ensure that, prior to charging costs to the program, they are reviewed by a supervisor who is knowledgeable of the regulations regarding allowable program costs and that documentation of the review is maintained. Views of responsible officials: There is no disagreement with the audit finding.
Federal Agency: Department of Education Federal Program: Special Education Cluster Pass-Through Agency: Massachusetts State Department of Elementary and Secondary Education Pass-Through Number(s): Various – See Schedule of Expenditures of Federal Awards Assistance Listing Numbers: 84.027, 84.173 Type of Finding: • Significant Deficiency in Internal Control Over Compliance Compliance Requirement: Allowable Costs/Cost Principles Criteria or specific requirement: 2 CFR, Part 200, 200.303 requires an auditee to establish and maintain effective internal controls over federal awards to ensure compliance with federal statutes, regulations and terms and conditions of the federal award. 2 CFR Part 200.403 (g) states that costs must be adequately documented to be allowable under federal awards. Condition: The District charged costs to the program which were not properly approved. Questioned Costs: None. Context: For 2 of 40 transactions selected for testing, the District was unable to provide documentation of supervisory review and approval prior to issuance of payment. Cause: The District’s procedures were not sufficient to ensure that payments were reviewed and approved prior to issuance of payment. Effect: Unallowable costs could be charged to the program if disbursements are not reviewed by a supervisor who is knowledgeable of program regulations regarding allowable costs. Recommendation: We recommend the District reviews and enhances its procedures and controls regarding payment processing to ensure that, prior to charging costs to the program, they are reviewed by a supervisor who is knowledgeable of the regulations regarding allowable program costs and that documentation of the review is maintained. Views of responsible officials: There is no disagreement with the audit finding.
Federal Agency: Department of Education Federal Program: Special Education Cluster Pass-Through Agency: Massachusetts State Department of Elementary and Secondary Education Pass-Through Number(s): Various – See Schedule of Expenditures of Federal Awards Assistance Listing Numbers: 84.027, 84.173 Type of Finding: • Significant Deficiency in Internal Control Over Compliance Compliance Requirement: Allowable Costs/Cost Principles Criteria or specific requirement: 2 CFR, Part 200, 200.303 requires an auditee to establish and maintain effective internal controls over federal awards to ensure compliance with federal statutes, regulations and terms and conditions of the federal award. 2 CFR Part 200.403 (g) states that costs must be adequately documented to be allowable under federal awards. Condition: The District charged costs to the program which were not properly approved. Questioned Costs: None. Context: For 2 of 40 transactions selected for testing, the District was unable to provide documentation of supervisory review and approval prior to issuance of payment. Cause: The District’s procedures were not sufficient to ensure that payments were reviewed and approved prior to issuance of payment. Effect: Unallowable costs could be charged to the program if disbursements are not reviewed by a supervisor who is knowledgeable of program regulations regarding allowable costs. Recommendation: We recommend the District reviews and enhances its procedures and controls regarding payment processing to ensure that, prior to charging costs to the program, they are reviewed by a supervisor who is knowledgeable of the regulations regarding allowable program costs and that documentation of the review is maintained. Views of responsible officials: There is no disagreement with the audit finding.
Federal Agency: Department of Education Federal Program: Special Education Cluster Pass-Through Agency: Massachusetts State Department of Elementary and Secondary Education Pass-Through Number(s): Various – See Schedule of Expenditures of Federal Awards Assistance Listing Numbers: 84.027, 84.173 Type of Finding: • Significant Deficiency in Internal Control Over Compliance Compliance Requirement: Allowable Costs/Cost Principles Criteria or specific requirement: 2 CFR, Part 200, 200.303 requires an auditee to establish and maintain effective internal controls over federal awards to ensure compliance with federal statutes, regulations and terms and conditions of the federal award. 2 CFR Part 200.403 (g) states that costs must be adequately documented to be allowable under federal awards. Condition: The District charged costs to the program which were not properly approved. Questioned Costs: None. Context: For 2 of 40 transactions selected for testing, the District was unable to provide documentation of supervisory review and approval prior to issuance of payment. Cause: The District’s procedures were not sufficient to ensure that payments were reviewed and approved prior to issuance of payment. Effect: Unallowable costs could be charged to the program if disbursements are not reviewed by a supervisor who is knowledgeable of program regulations regarding allowable costs. Recommendation: We recommend the District reviews and enhances its procedures and controls regarding payment processing to ensure that, prior to charging costs to the program, they are reviewed by a supervisor who is knowledgeable of the regulations regarding allowable program costs and that documentation of the review is maintained. Views of responsible officials: There is no disagreement with the audit finding.
Federal Agency: Department of Education Federal Program: Special Education Cluster Pass-Through Agency: Massachusetts State Department of Elementary and Secondary Education Pass-Through Number(s): Various – See Schedule of Expenditures of Federal Awards Assistance Listing Numbers: 84.027, 84.173 Type of Finding: • Significant Deficiency in Internal Control Over Compliance Compliance Requirement: Allowable Costs/Cost Principles Criteria or specific requirement: 2 CFR, Part 200, 200.303 requires an auditee to establish and maintain effective internal controls over federal awards to ensure compliance with federal statutes, regulations and terms and conditions of the federal award. 2 CFR Part 200.403 (g) states that costs must be adequately documented to be allowable under federal awards. Condition: The District charged costs to the program which were not properly approved. Questioned Costs: None. Context: For 2 of 40 transactions selected for testing, the District was unable to provide documentation of supervisory review and approval prior to issuance of payment. Cause: The District’s procedures were not sufficient to ensure that payments were reviewed and approved prior to issuance of payment. Effect: Unallowable costs could be charged to the program if disbursements are not reviewed by a supervisor who is knowledgeable of program regulations regarding allowable costs. Recommendation: We recommend the District reviews and enhances its procedures and controls regarding payment processing to ensure that, prior to charging costs to the program, they are reviewed by a supervisor who is knowledgeable of the regulations regarding allowable program costs and that documentation of the review is maintained. Views of responsible officials: There is no disagreement with the audit finding.
Federal Agency: Department of Education Federal Program: Special Education Cluster Pass-Through Agency: Massachusetts State Department of Elementary and Secondary Education Pass-Through Number(s): Various – See Schedule of Expenditures of Federal Awards Assistance Listing Numbers: 84.027, 84.173 Type of Finding: • Significant Deficiency in Internal Control Over Compliance Compliance Requirement: Allowable Costs/Cost Principles Criteria or specific requirement: 2 CFR, Part 200, 200.303 requires an auditee to establish and maintain effective internal controls over federal awards to ensure compliance with federal statutes, regulations and terms and conditions of the federal award. 2 CFR Part 200.403 (g) states that costs must be adequately documented to be allowable under federal awards. Condition: The District charged costs to the program which were not properly approved. Questioned Costs: None. Context: For 2 of 40 transactions selected for testing, the District was unable to provide documentation of supervisory review and approval prior to issuance of payment. Cause: The District’s procedures were not sufficient to ensure that payments were reviewed and approved prior to issuance of payment. Effect: Unallowable costs could be charged to the program if disbursements are not reviewed by a supervisor who is knowledgeable of program regulations regarding allowable costs. Recommendation: We recommend the District reviews and enhances its procedures and controls regarding payment processing to ensure that, prior to charging costs to the program, they are reviewed by a supervisor who is knowledgeable of the regulations regarding allowable program costs and that documentation of the review is maintained. Views of responsible officials: There is no disagreement with the audit finding.
Federal Agency: Department of Education Federal Program: Special Education Cluster Pass-Through Agency: Massachusetts State Department of Elementary and Secondary Education Pass-Through Number(s): Various – See Schedule of Expenditures of Federal Awards Assistance Listing Numbers: 84.027, 84.173 Type of Finding: • Significant Deficiency in Internal Control Over Compliance Compliance Requirement: Allowable Costs/Cost Principles Criteria or specific requirement: 2 CFR, Part 200, 200.303 requires an auditee to establish and maintain effective internal controls over federal awards to ensure compliance with federal statutes, regulations and terms and conditions of the federal award. 2 CFR Part 200.403 (g) states that costs must be adequately documented to be allowable under federal awards. Condition: The District charged costs to the program which were not properly approved. Questioned Costs: None. Context: For 2 of 40 transactions selected for testing, the District was unable to provide documentation of supervisory review and approval prior to issuance of payment. Cause: The District’s procedures were not sufficient to ensure that payments were reviewed and approved prior to issuance of payment. Effect: Unallowable costs could be charged to the program if disbursements are not reviewed by a supervisor who is knowledgeable of program regulations regarding allowable costs. Recommendation: We recommend the District reviews and enhances its procedures and controls regarding payment processing to ensure that, prior to charging costs to the program, they are reviewed by a supervisor who is knowledgeable of the regulations regarding allowable program costs and that documentation of the review is maintained. Views of responsible officials: There is no disagreement with the audit finding.
Condition: During our review of sixty-one (61) disbursements totaling $2,280,846, we noted that eight (8) purchase orders totaling $390,313 were not supported with adequate documentation. Cause of Condition: Policies and procedures have not been designed and implemented to ensure compliance with federal award requirements. Effect of Condition: This condition resulted in noncompliance with federal grant requirements and could result in loss of federal funds to the County. Recommendation: OSAI recommends county officials and department heads gain an understanding of federal programs awarded to the County. Internal control procedures should be designed and implemented to ensure compliance with federal award requirements. Management Response: Chairman of the Board of County Commissioners: These disbursement issues originated during the prior County Clerk’s administration, but the current leadership is focused on corrective measures. Together, we are: • developing a SOP to ensure compliance with grant requirements, • establishing written standards of conduct to address and set clear guidelines over grant requirements, • and enhancing oversight and review to ensure all processes are fully compliant with federal regulations. Our goal is to build a consistent, transparent procurement framework that safeguards both compliance and public trust. County Clerk: I was not the County Clerk in office at this time. To correct this issue. the County plans to develop a SOP to timely and accurately track and report on federal funds. The SOP will be reviewed, adopted, and monitored by the Board of County Commissioners. Criteria: 2 CFR § 200.403 – Factors affecting allowability costs states in part, Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (g) be adequately documented.
Criteria: 2 CFR section 200.303 requires that non-federal entities receiving federal awards establish and maintain internal control over the federal awards that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. In addition, 2 CFR section 200.403 requires that costs be adequately documented, among other criteria, to be allowable under federal awards. Condition: For 8 of 60 transactions tested, Orlando Shakespeare Theater, Inc. (the “Organization”) was unable to provide supporting documentation evidencing that the expenditure was incurred, allowable and within the period of performance of the Organization’s Shuttered Venue Operators Grant. The sample was not intended to be, and was not, a statistically valid sample. Cause: The inability to maintain appropriate supporting documentation was due to employee turnover during the pandemic and a lack of formal policies and procedures over expenditures incurred during a previously unforeseen time of remote working during the COVID-19 global pandemic. Effect or Potential Effect: Certain costs incurred by the Organization may be unallowable or outside the period of performance of the grant resulting in noncompliance and possible questioned costs. Recommendation: We recommend that the Organization implement policies, processes and internal controls surrounding expenditures and validate that adequate supporting documentation, including invoices and payment support, is maintained by the Organization to support compliance with grant requirements.
Criteria: 2 CFR section 200.303 requires that non-federal entities receiving federal awards establish and maintain internal control over the federal awards that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. In addition, 2 CFR section 200.403 requires that costs be adequately documented, among other criteria, to be allowable under federal awards. Condition: For 8 of 60 transactions tested, Orlando Shakespeare Theater, Inc. (the “Organization”) was unable to provide supporting documentation evidencing that the expenditure was incurred, allowable and within the period of performance of the Organization’s Shuttered Venue Operators Grant. The sample was not intended to be, and was not, a statistically valid sample. Cause: The inability to maintain appropriate supporting documentation was due to employee turnover during the pandemic and a lack of formal policies and procedures over expenditures incurred during a previously unforeseen time of remote working during the COVID-19 global pandemic. Effect or Potential Effect: Certain costs incurred by the Organization may be unallowable or outside the period of performance of the grant resulting in noncompliance and possible questioned costs. Recommendation: We recommend that the Organization implement policies, processes and internal controls surrounding expenditures and validate that adequate supporting documentation, including invoices and payment support, is maintained by the Organization to support compliance with grant requirements.
Federal Agency: U.S. Department of Health and Human Services AL Program: 93.224 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) Federal Award No.: H8031624, H8F41048, H8D36529 Area: Allowable Costs/Cost Principles Questioned Costs: $6,008 Criteria: In accordance with 2 CFR section 200.403(e), costs must be adequately documented. Condition: Of forty non-payroll expenditures tested, aggregating $128,258 of a total population of $2,220,614, the following were noted: 1. For one (or 3%), supporting Credit Card No Receipt Form (CCNRF) (document no C16791 totaling $51) indicates the original fuel receipt was provided to KCHC’s accounting office. However, no supporting fuel receipt was provided to the audit team supporting the CCNRF. 2. For one (or 3%), the invoice provided by KCHC did not match the expenditure details (invoice no. 21279098 totaling $5,957). The invoice provided by KCHC (invoice no. 212790986) was incorrect. Cause: KCHC did not enforce recordkeeping and monitoring controls over compliance with applicable allowable costs/cost principles requirements. Effect: KCHC is in noncompliance with applicable allowable costs/cost principles. Questioned costs of $6,008 result as the project questioned costs exceeds $25,000 threshold. Identification as a Repeat Finding: Finding No. 2021-004 Finding No. 2022-003, continued Federal Agency: U.S. Department of Health and Human Services AL Program: 93.224 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) Federal Award No.: H8031624, H8F41048, H8D36529 Area: Allowable Costs/Cost Principles Questioned Costs: $6,008 Recommendation: Program Expenditures should be approved only when supported by accurate and complete documents. Views of Responsible Officials: Management agrees with the finding and has developed a plan to correct the finding. Refer to separate Corrective Action Plan.
Federal Agency: U.S. Department of Health and Human Services AL Program: 93.224 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) Federal Award No.: H8031624, H8F41048, H8D36529 Area: Allowable Costs/Cost Principles Questioned Costs: $6,008 Criteria: In accordance with 2 CFR section 200.403(e), costs must be adequately documented. Condition: Of forty non-payroll expenditures tested, aggregating $128,258 of a total population of $2,220,614, the following were noted: 1. For one (or 3%), supporting Credit Card No Receipt Form (CCNRF) (document no C16791 totaling $51) indicates the original fuel receipt was provided to KCHC’s accounting office. However, no supporting fuel receipt was provided to the audit team supporting the CCNRF. 2. For one (or 3%), the invoice provided by KCHC did not match the expenditure details (invoice no. 21279098 totaling $5,957). The invoice provided by KCHC (invoice no. 212790986) was incorrect. Cause: KCHC did not enforce recordkeeping and monitoring controls over compliance with applicable allowable costs/cost principles requirements. Effect: KCHC is in noncompliance with applicable allowable costs/cost principles. Questioned costs of $6,008 result as the project questioned costs exceeds $25,000 threshold. Identification as a Repeat Finding: Finding No. 2021-004 Finding No. 2022-003, continued Federal Agency: U.S. Department of Health and Human Services AL Program: 93.224 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) Federal Award No.: H8031624, H8F41048, H8D36529 Area: Allowable Costs/Cost Principles Questioned Costs: $6,008 Recommendation: Program Expenditures should be approved only when supported by accurate and complete documents. Views of Responsible Officials: Management agrees with the finding and has developed a plan to correct the finding. Refer to separate Corrective Action Plan.
Federal Agency: U.S. Department of Health and Human Services AL Program: 93.224 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) Federal Award No.: H8031624, H8F41048, H8D36529 Area: Allowable Costs/Cost Principles Questioned Costs: $6,008 Criteria: In accordance with 2 CFR section 200.403(e), costs must be adequately documented. Condition: Of forty non-payroll expenditures tested, aggregating $128,258 of a total population of $2,220,614, the following were noted: 1. For one (or 3%), supporting Credit Card No Receipt Form (CCNRF) (document no C16791 totaling $51) indicates the original fuel receipt was provided to KCHC’s accounting office. However, no supporting fuel receipt was provided to the audit team supporting the CCNRF. 2. For one (or 3%), the invoice provided by KCHC did not match the expenditure details (invoice no. 21279098 totaling $5,957). The invoice provided by KCHC (invoice no. 212790986) was incorrect. Cause: KCHC did not enforce recordkeeping and monitoring controls over compliance with applicable allowable costs/cost principles requirements. Effect: KCHC is in noncompliance with applicable allowable costs/cost principles. Questioned costs of $6,008 result as the project questioned costs exceeds $25,000 threshold. Identification as a Repeat Finding: Finding No. 2021-004 Finding No. 2022-003, continued Federal Agency: U.S. Department of Health and Human Services AL Program: 93.224 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) Federal Award No.: H8031624, H8F41048, H8D36529 Area: Allowable Costs/Cost Principles Questioned Costs: $6,008 Recommendation: Program Expenditures should be approved only when supported by accurate and complete documents. Views of Responsible Officials: Management agrees with the finding and has developed a plan to correct the finding. Refer to separate Corrective Action Plan.
Federal Agency: U.S. Department of Health and Human Services AL Program: 93.224 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) Federal Award No.: H8031624, H8F41048, H8D36529 Area: Allowable Costs/Cost Principles Questioned Costs: $6,008 Criteria: In accordance with 2 CFR section 200.403(e), costs must be adequately documented. Condition: Of forty non-payroll expenditures tested, aggregating $128,258 of a total population of $2,220,614, the following were noted: 1. For one (or 3%), supporting Credit Card No Receipt Form (CCNRF) (document no C16791 totaling $51) indicates the original fuel receipt was provided to KCHC’s accounting office. However, no supporting fuel receipt was provided to the audit team supporting the CCNRF. 2. For one (or 3%), the invoice provided by KCHC did not match the expenditure details (invoice no. 21279098 totaling $5,957). The invoice provided by KCHC (invoice no. 212790986) was incorrect. Cause: KCHC did not enforce recordkeeping and monitoring controls over compliance with applicable allowable costs/cost principles requirements. Effect: KCHC is in noncompliance with applicable allowable costs/cost principles. Questioned costs of $6,008 result as the project questioned costs exceeds $25,000 threshold. Identification as a Repeat Finding: Finding No. 2021-004 Finding No. 2022-003, continued Federal Agency: U.S. Department of Health and Human Services AL Program: 93.224 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) Federal Award No.: H8031624, H8F41048, H8D36529 Area: Allowable Costs/Cost Principles Questioned Costs: $6,008 Recommendation: Program Expenditures should be approved only when supported by accurate and complete documents. Views of Responsible Officials: Management agrees with the finding and has developed a plan to correct the finding. Refer to separate Corrective Action Plan.
Federal Agency: U.S. Department of Health and Human Services AL Program: 93.224 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) Federal Award No.: H8031624, H8F41048, H8D36529 Area: Allowable Costs/Cost Principles Questioned Costs: $6,008 Criteria: In accordance with 2 CFR section 200.403(e), costs must be adequately documented. Condition: Of forty non-payroll expenditures tested, aggregating $128,258 of a total population of $2,220,614, the following were noted: 1. For one (or 3%), supporting Credit Card No Receipt Form (CCNRF) (document no C16791 totaling $51) indicates the original fuel receipt was provided to KCHC’s accounting office. However, no supporting fuel receipt was provided to the audit team supporting the CCNRF. 2. For one (or 3%), the invoice provided by KCHC did not match the expenditure details (invoice no. 21279098 totaling $5,957). The invoice provided by KCHC (invoice no. 212790986) was incorrect. Cause: KCHC did not enforce recordkeeping and monitoring controls over compliance with applicable allowable costs/cost principles requirements. Effect: KCHC is in noncompliance with applicable allowable costs/cost principles. Questioned costs of $6,008 result as the project questioned costs exceeds $25,000 threshold. Identification as a Repeat Finding: Finding No. 2021-004 Finding No. 2022-003, continued Federal Agency: U.S. Department of Health and Human Services AL Program: 93.224 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) Federal Award No.: H8031624, H8F41048, H8D36529 Area: Allowable Costs/Cost Principles Questioned Costs: $6,008 Recommendation: Program Expenditures should be approved only when supported by accurate and complete documents. Views of Responsible Officials: Management agrees with the finding and has developed a plan to correct the finding. Refer to separate Corrective Action Plan.
Federal Agency: U.S. Department of Health and Human Services AL Program: 93.224 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) Federal Award No.: H8031624, H8F41048, H8D36529 Area: Allowable Costs/Cost Principles Questioned Costs: $6,008 Criteria: In accordance with 2 CFR section 200.403(e), costs must be adequately documented. Condition: Of forty non-payroll expenditures tested, aggregating $128,258 of a total population of $2,220,614, the following were noted: 1. For one (or 3%), supporting Credit Card No Receipt Form (CCNRF) (document no C16791 totaling $51) indicates the original fuel receipt was provided to KCHC’s accounting office. However, no supporting fuel receipt was provided to the audit team supporting the CCNRF. 2. For one (or 3%), the invoice provided by KCHC did not match the expenditure details (invoice no. 21279098 totaling $5,957). The invoice provided by KCHC (invoice no. 212790986) was incorrect. Cause: KCHC did not enforce recordkeeping and monitoring controls over compliance with applicable allowable costs/cost principles requirements. Effect: KCHC is in noncompliance with applicable allowable costs/cost principles. Questioned costs of $6,008 result as the project questioned costs exceeds $25,000 threshold. Identification as a Repeat Finding: Finding No. 2021-004 Finding No. 2022-003, continued Federal Agency: U.S. Department of Health and Human Services AL Program: 93.224 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) Federal Award No.: H8031624, H8F41048, H8D36529 Area: Allowable Costs/Cost Principles Questioned Costs: $6,008 Recommendation: Program Expenditures should be approved only when supported by accurate and complete documents. Views of Responsible Officials: Management agrees with the finding and has developed a plan to correct the finding. Refer to separate Corrective Action Plan.
Finding 2022-004 ? Period of Performance Federal Agency: U.S. Department of Health and Human Services Federal Program Name: Grants for New and Expanded Services Under the Health Center Program Assistance Listing Number: 93.224/93.527 Federal Award Identification Number: L1CCS39368-01-00; L2CCS42352-01-00 Award Periods: July 1, 2020 ? June 30, 2021; July 1, 2021 ? June 30, 2023 respectively Type of Finding: Immaterial Noncompliance and Significant deficiency in internal control over compliance Criteria: A non-federal entity may charge 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 (2 CFR sections 200.308 200.309 and 200.403(h)). A period of performance may contain one or more budget periods. Condition: Costs outside of the period of performance were charged to the grant. Questioned Costs: $20,910 Context: Four (4) of sixteen (16) transactions tested. Cause: Unknown Effect: Legacy may allocate unallowable costs to the federal grant. Repeat Finding: No. Recommendation: We recommend that only costs incurred during the period of performance be charged to the grant. For payroll in which periods extend over multiple budget periods, we recommend prorating the amount charged to the grant by days worked within the grant period. Views of Responsible Officials: There is no disagreement with the audit finding.
Finding 2022-004 ? Period of Performance Federal Agency: U.S. Department of Health and Human Services Federal Program Name: Grants for New and Expanded Services Under the Health Center Program Assistance Listing Number: 93.224/93.527 Federal Award Identification Number: L1CCS39368-01-00; L2CCS42352-01-00 Award Periods: July 1, 2020 ? June 30, 2021; July 1, 2021 ? June 30, 2023 respectively Type of Finding: Immaterial Noncompliance and Significant deficiency in internal control over compliance Criteria: A non-federal entity may charge 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 (2 CFR sections 200.308 200.309 and 200.403(h)). A period of performance may contain one or more budget periods. Condition: Costs outside of the period of performance were charged to the grant. Questioned Costs: $20,910 Context: Four (4) of sixteen (16) transactions tested. Cause: Unknown Effect: Legacy may allocate unallowable costs to the federal grant. Repeat Finding: No. Recommendation: We recommend that only costs incurred during the period of performance be charged to the grant. For payroll in which periods extend over multiple budget periods, we recommend prorating the amount charged to the grant by days worked within the grant period. Views of Responsible Officials: There is no disagreement with the audit finding.
Finding 2022-004 ? Period of Performance Federal Agency: U.S. Department of Health and Human Services Federal Program Name: Grants for New and Expanded Services Under the Health Center Program Assistance Listing Number: 93.224/93.527 Federal Award Identification Number: L1CCS39368-01-00; L2CCS42352-01-00 Award Periods: July 1, 2020 ? June 30, 2021; July 1, 2021 ? June 30, 2023 respectively Type of Finding: Immaterial Noncompliance and Significant deficiency in internal control over compliance Criteria: A non-federal entity may charge 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 (2 CFR sections 200.308 200.309 and 200.403(h)). A period of performance may contain one or more budget periods. Condition: Costs outside of the period of performance were charged to the grant. Questioned Costs: $20,910 Context: Four (4) of sixteen (16) transactions tested. Cause: Unknown Effect: Legacy may allocate unallowable costs to the federal grant. Repeat Finding: No. Recommendation: We recommend that only costs incurred during the period of performance be charged to the grant. For payroll in which periods extend over multiple budget periods, we recommend prorating the amount charged to the grant by days worked within the grant period. Views of Responsible Officials: There is no disagreement with the audit finding.
Finding 2022-004 ? Period of Performance Federal Agency: U.S. Department of Health and Human Services Federal Program Name: Grants for New and Expanded Services Under the Health Center Program Assistance Listing Number: 93.224/93.527 Federal Award Identification Number: L1CCS39368-01-00; L2CCS42352-01-00 Award Periods: July 1, 2020 ? June 30, 2021; July 1, 2021 ? June 30, 2023 respectively Type of Finding: Immaterial Noncompliance and Significant deficiency in internal control over compliance Criteria: A non-federal entity may charge 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 (2 CFR sections 200.308 200.309 and 200.403(h)). A period of performance may contain one or more budget periods. Condition: Costs outside of the period of performance were charged to the grant. Questioned Costs: $20,910 Context: Four (4) of sixteen (16) transactions tested. Cause: Unknown Effect: Legacy may allocate unallowable costs to the federal grant. Repeat Finding: No. Recommendation: We recommend that only costs incurred during the period of performance be charged to the grant. For payroll in which periods extend over multiple budget periods, we recommend prorating the amount charged to the grant by days worked within the grant period. Views of Responsible Officials: There is no disagreement with the audit finding.
Federal Program Information: Funding Agency: U.S Department of Health and Human Services FALN: 93.926 Federal Award Identification Number: 5 H49MC00119‐21‐00 / 6 H49MC00119‐20‐01 Pass Through Entity: State of Georgia Department of Human Services Award Year: 2020‐2024 Criteria: Under 2 CFR Section 200.303(a), non‐federal entities must establish and maintain effective internal controls to provide reasonable assurance that the entity is managing the federal awards in compliance with statues, regulations, and the terms and conditions of the award. Additionally, under 2 CFR sections 200.308 200.309 and 200.403(h)), the Organization may charge 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. Condition: The Organization lacked supporting documentation for non‐payroll expenses. Due to lack of supporting documentation, period of performance could not be verified. Of the sixty (60) nonpayroll transactions examined, fourteen (14) lacked supporting documentation for review. Effect: Management possibly did not expend funds in accordance with the approved detailed lineitem budget and grant agreement and possibly expended funds in the incorrect period of performance. Cause: Expenses including approved invoices and/or supporting documentation were not properly maintained in part due to several changes in personnel within the accounting area and overall limited number of personnel for certain functions and lack of board oversight. Questioned costs: Known questioned costs of $2,066 and likely questioned costs of $11,507 for Healthy Start. Recommendation: We recommend that internal controls be strengthened and processes implemented to ensure all expenses include supporting documentation/invoice indicating period of performance.
Federal Program Information: Funding Agency: U.S Department of Health and Human Services FALN: 93.926 Federal Award Identification Number: 5 H49MC00119‐21‐00 / 6 H49MC00119‐20‐01 Pass Through Entity: State of Georgia Department of Human Services Award Year: 2020‐2024 Criteria: Under 2 CFR Section 200.303(a), non‐federal entities must establish and maintain effective internal controls to provide reasonable assurance that the entity is managing the federal awards in compliance with statues, regulations, and the terms and conditions of the award. Additionally, under 2 CFR sections 200.308 200.309 and 200.403(h)), the Organization may charge 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. Condition: The Organization lacked supporting documentation for non‐payroll expenses. Due to lack of supporting documentation, period of performance could not be verified. Of the sixty (60) nonpayroll transactions examined, fourteen (14) lacked supporting documentation for review. Effect: Management possibly did not expend funds in accordance with the approved detailed lineitem budget and grant agreement and possibly expended funds in the incorrect period of performance. Cause: Expenses including approved invoices and/or supporting documentation were not properly maintained in part due to several changes in personnel within the accounting area and overall limited number of personnel for certain functions and lack of board oversight. Questioned costs: Known questioned costs of $2,066 and likely questioned costs of $11,507 for Healthy Start. Recommendation: We recommend that internal controls be strengthened and processes implemented to ensure all expenses include supporting documentation/invoice indicating period of performance.
Criteria: Title 2 of the Code of Federal Regulations (2 CFR), Part 200, Subpart E defines and discusses the federal cost principles that apply to federal awards administered by nonprofit organizations. The applicable sections of these cost principes are as follows: • 2 CFR 200.403 Factors affecting allowability of costs • 2 CFR 200.404 Reasonable costs • 2 CFR 200.405 Allocable costs • 2 CFR 200.413 Direct costs • 2 CFR 200.414 Indirect (F&A) costs Condition: The following were noted as related to compliance with allowable costs, cost allocation and federal cost principles: • Internal control on time spent by employees related to administrative functions or other indirect cost activities has not been properly designed or implemented. • All employee time, including employees and professional services contractors are being recorded directly to programs. Time spent on indirect activities is not being properly identified or properly allocated to programs. • A portion of time of the Operations Manager (Chief Executive of the Organization) is spent related to administrative time or other indirect cost activities. However, none of that time has been identified or charged as indirect costs. • The time card for the Operations Manager (Chief Executive of the Organization) is not reviewed or approved by a board member or other senior executive of the Organization. • The accounting services of AIRS is being provided by a third-party outsourced accountant. The costs related to these services were improperly recorded as direct personnel costs to the program rather than properly classified as indirect costs. • Payroll taxes, employee benefits and other allowable employee related expenses were allocated to the program in a manner that does not accurately reflect the relative benefits received. These costs were allocated to the program as a percentage of total payroll costs, however, the percentage used exceeds that actual percentage of these costs as a percentage of total payroll costs. • A reasonable, consistent and uniform cost allocation methodology has not been properly designed or implemented. Costs that benefit both federal programs, non-federal programs and indirect costs are not being allocated properly across and to federal programs, non-federal programs and indirect costs in a reasonable, consistent and uniform manner. • Certain direct costs charged to the program were not based on actual costs incurred and the amounts charged were not adequately supported. • Indirect costs were not properly identified and segregated from direct costs. • Allowable indirect costs were not charged to the federal program. Cause: AIRS accounting staff and senior management do not appear to have a full and complete understanding of Uniform Guidance or of the applicable federal cost principles. Management has not properly applied the applicable federal costs principles in 2 CFR, Part 200, Subpart E to the costs charged to the federal program. Effect: Payroll costs and allowable employee related expenses, certain direct costs, allocable direct costs and indirect costs were not properly charged to the federal program. In order to estimate the questioned costs, the auditor, with the assistance of management, developed a costs allocation methodology that charges costs to the federal program in a reasonable, consistent and uniform manner in compliance with the costs principles contained in 2 CFR, Part 200, Subpart E. The primarily characteristics of this methodology are as follows: • Based upon discussions with management, review of the job description, roles and responsibilities of the Operations Manager and using prior experience and comparison to similar nonprofit organizations; an estimate of the percentage of time spent by the Operations Manager related to administration and other indirect activities was developed. • The time for the outsourced accounting services provider was removed from direct personnel costs and charged to indirect costs. • After the above revisions were made, the auditor assisted management in reallocating payroll costs across all federal and nonfederal programs and to indirect costs in a reasonable, consistent and uniform manner. • Allowable payroll taxes, benefits and other employee related expense charges were estimated using the actual percentage of these expenses as a percentage of total allowable payroll costs. • Non-allocable direct costs were charged to the program at the actual amount of those costs incurred. • Allocable direct costs charges were estimated by allocating those costs to the federal program on the basis of allowable payroll costs charged to program as a percentage of total allowable payroll costs (percentage of payroll methodology). This methodology is in compliance with the requirements of 2 CFR 200.405 and appears to produce a result that reasonably estimates the proportional benefit of these costs to all federal and non-federal programs, and to indirect cost activities. • Indirect costs were estimated and charged to the program using the 10% de minimis indirect cost rate as defined in 2 CFR 200.414. Questioned Costs: Using the methodology described above, the auditor has estimated total federal expenditures allowable to the program of $247,119. However, AIRS has charged federal expenditures of $272,781 to the program. Therefore, the estimated questioned costs related to this program are $25,662. Repeat Finding from Prior Year: No Recommendation: Senior management and accounting personnel should create procedures to ensure that direct program costs are charged at the actual amounts incurred, develop a payroll cost allocation methodology, and an allocable direct cost allocation methodology that ensures that costs are reasonably, consistently and uniformly charged to and across all federal and non-federal programs and to indirect costs relative to the proportional benefit of those costs, and in compliance with the applicable federal cost principles in 2 CFR, Part 200, Subpart E. Management and the board should consider providing senior management, accounting personnel and applicable program personnel additional training and education related to the proper application of and compliance with the federal costs principles as defined in 2 CFR, Part 200, Subpart E. Management and the board may also want to consider engaging a third-party CPA or other accounting professional who has extensive prior skills, knowledge and experience related to Uniform Guidance and federal cost principles. Views of Responsible Officials: Management concurs with this audit finding.
Assistance Listing Number, Federal Agency, and Program Name - 93.498, U.S. Department of Health and Human Services, COVID-19: Provider Relief Fund Finding Type - Material weakness and material noncompliance with laws and regulations Repeat Finding - No Criteria - According to 2 CFR § 200.403, HealthSource must maintain adequate documentation to support the allowability of costs charged to the grant. Condition - HealthSource did not have controls in place to ensure the inputs in their Covid related expense spreadsheet that was used to input the amount of Other PRF Expenses reported in the portal submissions agreed to source documentation. Questioned Costs - None Context - The CFO created a spreadsheet to track HealthSource's Covid related payroll expenses using an incremental cost approach. To create this spreadsheet, the CFO used multiple formulas and pulled information from various summary level reports. There was no review completed on HealthSource's Covid related expense spreadsheet after the CFO prepared it. The spreadsheet was subsequently used by the CFO to input expenses into the portal submissions. Cause and Effect - Appropriate review of the Covid related expense spreadsheet was not completed to ensure the inputs in the report agreed to supporting documentation. As a result, the report contained several inconsistencies and it is not possible to determine whether the expenses are allowable under the grant agreement. Recommendation - We recommend HealthSource implement controls, including levels of review, to ensure reports are accurate and can be agreed back to source documentation. Views of Responsible Officials and Planned Corrective Actions - Management agrees with the finding and all future submissions will be reviewed by the chief executive officer and the president for accuracy and thoroughness prior to submission upload.
Finding 2021-005 Program: Office for Coastal Management Federal Financial Assistance Listing: 11.473 Federal Grantor: U.S. Department of Commerce Passed-through: National Fish and Wildlife Foundation Award No. and Year: 0318.19.070225 (2020) Compliance Requirements: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Type of Finding: Significant Deficiency Criteria: 2 CFR 200.403(a) - Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. Condition: For one payroll sample that was selected, the amount of time charged to the grant was greater than the amount of time work was performed. As such, the program was overcharged. Questioned Costs: Questioned costs were identified as a result of our procedures in the amount of $74. Context/Sampling: A nonstatistical sample of 17 out of 82 total payroll costs ($25,275 of $35,106) were selected for testing for the Office for Coastal Management program. The condition noted above was identified during our procedures over the CFSC’s allowable costs provisions. EB expanded the sample to 22 ($26,792) and no further questioned costs were identified. Repeat Finding from Prior Year: No Effect: CFSC did not identify the error to be able to make the appropriate corrections before receiving reimbursement for incorrect payroll related expenditures. Cause: CFSC did not consistently ensure that the hours worked by each employee related to the federal program were accurate applying the cost to the grant. Recommendation: We recommend that CFSC strengthen its current policies and procedures to ensure that all payroll amounts applied to the grant were for actual hours worked based on employee timesheets. Views of Responsible Officials and Planned Corrective Actions: See Separate Corrective Action Plan.
CONDITION: During the calendar year 2021, the City did not record the necessary adjustments to the various ‘Fund’ general ledgers of the City to properly reconcile the balance sheet accounts, such as cash, receivables, payables, and payroll-related liabilities to the underlying supporting documentation available at the City (which includes reconciliations of cash prepared independently by City personnel but do not agree to amounts reported in the various general ledgers). This included ‘Funds” containing significant federal funding such as the City’s Community Development Block Grant (CDBG) Program and American Rescue Plan Act (ARPA) funding known as the Coronavirus State and Local Fiscal Recovery Fund. As a result, the financial position and results of operations as shown throughout the calendar year were inaccurately stated. However, it should be noted that the Community Development Department of the City and other City personnel maintain separate financial reporting for these federal funds, independent of the aforementioned ‘Fund’ general ledgers sufficient to ascertain the revenues and expenditures of the federal programs.CRITERIA: Prudent internal control procedures in the areas of general ledger management and financial reporting include the reconciliation of all general ledger account balances to underlying supporting documentation monthly with independent oversight and approval as part of the process. In specific as it relates to federal programs, Section 2 CFR 200.403(g) of the Uniform Guidance requires that federal costs must be adequately documented which would include the applicable general ledgers of the City.EFFECT: The lack of procedures in place for reconciling balance sheet accounts throughout the calendar year, with independent oversight, 1) reduces the City’s internal control over the financial reporting processes, 2) exposes the City to inaccurate financial reporting to management for decision-making purposes, and 3) increases the potential for irregularities that may result (unintentional or otherwise) that are not detected in a timely manner. Had these reconciliations been performed, issues such as non-postings, and inaccurate postings to the City’s various general ledgers could have been detected and corrected in a timely manner to enhance internal controls and financial reporting in this important area of financial management. As a result, the City is not incompliance with Section 2 CFR 200.403(g) of the Uniform Guidance which requires federal costs to be adequately documented in the applicable general ledgers of the City. CAUSE: City business office personnel perform a variety of duties such as accounting for deposits, invoice processing, reconciliation of cash (but not to the various general ledger accounts of the City), preparation of payroll, and posting of financial transactions to the City’s general ledgers. However, no one individual is responsible for managing and reconciling all of the aforementioned procedures to the various ‘Fund’ general ledgers at the City. RECOMMENDATION: I am recommending that the management of the City establish written procedures for all accounting functions, but most notably for recording the necessary adjustments to the City’s general ledgers throughout the calendar year (monthly) to ensure that all balance sheet account balances are supported by the underlying documentation available at the City. It is anticipated that additional training will be required for in-house personnel to perform this function, or the City may want to consider contracting these services to a third-party professional with the expertise to perform these functions for the City on a monthly or quarterly basis throughout the year. These procedures should significantly enhance the internal control over the financial accounting and reporting process relative to the City’s general ledgers for each Fund. VIEWS OF RESPONSIBLE OFFICIALS: The City concurs with the above noted finding and addresses this issue in the ‘Corrective Action Plan’ included within this report.
CONDITION: During the calendar year 2021, the City did not record the necessary adjustments to the various ‘Fund’ general ledgers of the City to properly reconcile the balance sheet accounts, such as cash, receivables, payables, and payroll-related liabilities to the underlying supporting documentation available at the City (which includes reconciliations of cash prepared independently by City personnel but do not agree to amounts reported in the various general ledgers). This included ‘Funds” containing significant federal funding such as the City’s Community Development Block Grant (CDBG) Program and American Rescue Plan Act (ARPA) funding known as the Coronavirus State and Local Fiscal Recovery Fund. As a result, the financial position and results of operations as shown throughout the calendar year were inaccurately stated. However, it should be noted that the Community Development Department of the City and other City personnel maintain separate financial reporting for these federal funds, independent of the aforementioned ‘Fund’ general ledgers sufficient to ascertain the revenues and expenditures of the federal programs.CRITERIA: Prudent internal control procedures in the areas of general ledger management and financial reporting include the reconciliation of all general ledger account balances to underlying supporting documentation monthly with independent oversight and approval as part of the process. In specific as it relates to federal programs, Section 2 CFR 200.403(g) of the Uniform Guidance requires that federal costs must be adequately documented which would include the applicable general ledgers of the City.EFFECT: The lack of procedures in place for reconciling balance sheet accounts throughout the calendar year, with independent oversight, 1) reduces the City’s internal control over the financial reporting processes, 2) exposes the City to inaccurate financial reporting to management for decision-making purposes, and 3) increases the potential for irregularities that may result (unintentional or otherwise) that are not detected in a timely manner. Had these reconciliations been performed, issues such as non-postings, and inaccurate postings to the City’s various general ledgers could have been detected and corrected in a timely manner to enhance internal controls and financial reporting in this important area of financial management. As a result, the City is not incompliance with Section 2 CFR 200.403(g) of the Uniform Guidance which requires federal costs to be adequately documented in the applicable general ledgers of the City. CAUSE: City business office personnel perform a variety of duties such as accounting for deposits, invoice processing, reconciliation of cash (but not to the various general ledger accounts of the City), preparation of payroll, and posting of financial transactions to the City’s general ledgers. However, no one individual is responsible for managing and reconciling all of the aforementioned procedures to the various ‘Fund’ general ledgers at the City. RECOMMENDATION: I am recommending that the management of the City establish written procedures for all accounting functions, but most notably for recording the necessary adjustments to the City’s general ledgers throughout the calendar year (monthly) to ensure that all balance sheet account balances are supported by the underlying documentation available at the City. It is anticipated that additional training will be required for in-house personnel to perform this function, or the City may want to consider contracting these services to a third-party professional with the expertise to perform these functions for the City on a monthly or quarterly basis throughout the year. These procedures should significantly enhance the internal control over the financial accounting and reporting process relative to the City’s general ledgers for each Fund. VIEWS OF RESPONSIBLE OFFICIALS: The City concurs with the above noted finding and addresses this issue in the ‘Corrective Action Plan’ included within this report.
CONDITION: During the calendar year 2021, the City did not record the necessary adjustments to the various ‘Fund’ general ledgers of the City to properly reconcile the balance sheet accounts, such as cash, receivables, payables, and payroll-related liabilities to the underlying supporting documentation available at the City (which includes reconciliations of cash prepared independently by City personnel but do not agree to amounts reported in the various general ledgers). This included ‘Funds” containing significant federal funding such as the City’s Community Development Block Grant (CDBG) Program and American Rescue Plan Act (ARPA) funding known as the Coronavirus State and Local Fiscal Recovery Fund. As a result, the financial position and results of operations as shown throughout the calendar year were inaccurately stated. However, it should be noted that the Community Development Department of the City and other City personnel maintain separate financial reporting for these federal funds, independent of the aforementioned ‘Fund’ general ledgers sufficient to ascertain the revenues and expenditures of the federal programs.CRITERIA: Prudent internal control procedures in the areas of general ledger management and financial reporting include the reconciliation of all general ledger account balances to underlying supporting documentation monthly with independent oversight and approval as part of the process. In specific as it relates to federal programs, Section 2 CFR 200.403(g) of the Uniform Guidance requires that federal costs must be adequately documented which would include the applicable general ledgers of the City.EFFECT: The lack of procedures in place for reconciling balance sheet accounts throughout the calendar year, with independent oversight, 1) reduces the City’s internal control over the financial reporting processes, 2) exposes the City to inaccurate financial reporting to management for decision-making purposes, and 3) increases the potential for irregularities that may result (unintentional or otherwise) that are not detected in a timely manner. Had these reconciliations been performed, issues such as non-postings, and inaccurate postings to the City’s various general ledgers could have been detected and corrected in a timely manner to enhance internal controls and financial reporting in this important area of financial management. As a result, the City is not incompliance with Section 2 CFR 200.403(g) of the Uniform Guidance which requires federal costs to be adequately documented in the applicable general ledgers of the City. CAUSE: City business office personnel perform a variety of duties such as accounting for deposits, invoice processing, reconciliation of cash (but not to the various general ledger accounts of the City), preparation of payroll, and posting of financial transactions to the City’s general ledgers. However, no one individual is responsible for managing and reconciling all of the aforementioned procedures to the various ‘Fund’ general ledgers at the City. RECOMMENDATION: I am recommending that the management of the City establish written procedures for all accounting functions, but most notably for recording the necessary adjustments to the City’s general ledgers throughout the calendar year (monthly) to ensure that all balance sheet account balances are supported by the underlying documentation available at the City. It is anticipated that additional training will be required for in-house personnel to perform this function, or the City may want to consider contracting these services to a third-party professional with the expertise to perform these functions for the City on a monthly or quarterly basis throughout the year. These procedures should significantly enhance the internal control over the financial accounting and reporting process relative to the City’s general ledgers for each Fund. VIEWS OF RESPONSIBLE OFFICIALS: The City concurs with the above noted finding and addresses this issue in the ‘Corrective Action Plan’ included within this report.
CONDITION: During the calendar year 2021, the City did not record the necessary adjustments to the various ‘Fund’ general ledgers of the City to properly reconcile the balance sheet accounts, such as cash, receivables, payables, and payroll-related liabilities to the underlying supporting documentation available at the City (which includes reconciliations of cash prepared independently by City personnel but do not agree to amounts reported in the various general ledgers). This included ‘Funds” containing significant federal funding such as the City’s Community Development Block Grant (CDBG) Program and American Rescue Plan Act (ARPA) funding known as the Coronavirus State and Local Fiscal Recovery Fund. As a result, the financial position and results of operations as shown throughout the calendar year were inaccurately stated. However, it should be noted that the Community Development Department of the City and other City personnel maintain separate financial reporting for these federal funds, independent of the aforementioned ‘Fund’ general ledgers sufficient to ascertain the revenues and expenditures of the federal programs.CRITERIA: Prudent internal control procedures in the areas of general ledger management and financial reporting include the reconciliation of all general ledger account balances to underlying supporting documentation monthly with independent oversight and approval as part of the process. In specific as it relates to federal programs, Section 2 CFR 200.403(g) of the Uniform Guidance requires that federal costs must be adequately documented which would include the applicable general ledgers of the City.EFFECT: The lack of procedures in place for reconciling balance sheet accounts throughout the calendar year, with independent oversight, 1) reduces the City’s internal control over the financial reporting processes, 2) exposes the City to inaccurate financial reporting to management for decision-making purposes, and 3) increases the potential for irregularities that may result (unintentional or otherwise) that are not detected in a timely manner. Had these reconciliations been performed, issues such as non-postings, and inaccurate postings to the City’s various general ledgers could have been detected and corrected in a timely manner to enhance internal controls and financial reporting in this important area of financial management. As a result, the City is not incompliance with Section 2 CFR 200.403(g) of the Uniform Guidance which requires federal costs to be adequately documented in the applicable general ledgers of the City. CAUSE: City business office personnel perform a variety of duties such as accounting for deposits, invoice processing, reconciliation of cash (but not to the various general ledger accounts of the City), preparation of payroll, and posting of financial transactions to the City’s general ledgers. However, no one individual is responsible for managing and reconciling all of the aforementioned procedures to the various ‘Fund’ general ledgers at the City. RECOMMENDATION: I am recommending that the management of the City establish written procedures for all accounting functions, but most notably for recording the necessary adjustments to the City’s general ledgers throughout the calendar year (monthly) to ensure that all balance sheet account balances are supported by the underlying documentation available at the City. It is anticipated that additional training will be required for in-house personnel to perform this function, or the City may want to consider contracting these services to a third-party professional with the expertise to perform these functions for the City on a monthly or quarterly basis throughout the year. These procedures should significantly enhance the internal control over the financial accounting and reporting process relative to the City’s general ledgers for each Fund. VIEWS OF RESPONSIBLE OFFICIALS: The City concurs with the above noted finding and addresses this issue in the ‘Corrective Action Plan’ included within this report.
CONDITION: During the calendar year 2021, the City did not record the necessary adjustments to the various ‘Fund’ general ledgers of the City to properly reconcile the balance sheet accounts, such as cash, receivables, payables, and payroll-related liabilities to the underlying supporting documentation available at the City (which includes reconciliations of cash prepared independently by City personnel but do not agree to amounts reported in the various general ledgers). This included ‘Funds” containing significant federal funding such as the City’s Community Development Block Grant (CDBG) Program and American Rescue Plan Act (ARPA) funding known as the Coronavirus State and Local Fiscal Recovery Fund. As a result, the financial position and results of operations as shown throughout the calendar year were inaccurately stated. However, it should be noted that the Community Development Department of the City and other City personnel maintain separate financial reporting for these federal funds, independent of the aforementioned ‘Fund’ general ledgers sufficient to ascertain the revenues and expenditures of the federal programs.CRITERIA: Prudent internal control procedures in the areas of general ledger management and financial reporting include the reconciliation of all general ledger account balances to underlying supporting documentation monthly with independent oversight and approval as part of the process. In specific as it relates to federal programs, Section 2 CFR 200.403(g) of the Uniform Guidance requires that federal costs must be adequately documented which would include the applicable general ledgers of the City.EFFECT: The lack of procedures in place for reconciling balance sheet accounts throughout the calendar year, with independent oversight, 1) reduces the City’s internal control over the financial reporting processes, 2) exposes the City to inaccurate financial reporting to management for decision-making purposes, and 3) increases the potential for irregularities that may result (unintentional or otherwise) that are not detected in a timely manner. Had these reconciliations been performed, issues such as non-postings, and inaccurate postings to the City’s various general ledgers could have been detected and corrected in a timely manner to enhance internal controls and financial reporting in this important area of financial management. As a result, the City is not incompliance with Section 2 CFR 200.403(g) of the Uniform Guidance which requires federal costs to be adequately documented in the applicable general ledgers of the City. CAUSE: City business office personnel perform a variety of duties such as accounting for deposits, invoice processing, reconciliation of cash (but not to the various general ledger accounts of the City), preparation of payroll, and posting of financial transactions to the City’s general ledgers. However, no one individual is responsible for managing and reconciling all of the aforementioned procedures to the various ‘Fund’ general ledgers at the City. RECOMMENDATION: I am recommending that the management of the City establish written procedures for all accounting functions, but most notably for recording the necessary adjustments to the City’s general ledgers throughout the calendar year (monthly) to ensure that all balance sheet account balances are supported by the underlying documentation available at the City. It is anticipated that additional training will be required for in-house personnel to perform this function, or the City may want to consider contracting these services to a third-party professional with the expertise to perform these functions for the City on a monthly or quarterly basis throughout the year. These procedures should significantly enhance the internal control over the financial accounting and reporting process relative to the City’s general ledgers for each Fund. VIEWS OF RESPONSIBLE OFFICIALS: The City concurs with the above noted finding and addresses this issue in the ‘Corrective Action Plan’ included within this report.
CONDITION: During the calendar year 2021, the City did not record the necessary adjustments to the various ‘Fund’ general ledgers of the City to properly reconcile the balance sheet accounts, such as cash, receivables, payables, and payroll-related liabilities to the underlying supporting documentation available at the City (which includes reconciliations of cash prepared independently by City personnel but do not agree to amounts reported in the various general ledgers). This included ‘Funds” containing significant federal funding such as the City’s Community Development Block Grant (CDBG) Program and American Rescue Plan Act (ARPA) funding known as the Coronavirus State and Local Fiscal Recovery Fund. As a result, the financial position and results of operations as shown throughout the calendar year were inaccurately stated. However, it should be noted that the Community Development Department of the City and other City personnel maintain separate financial reporting for these federal funds, independent of the aforementioned ‘Fund’ general ledgers sufficient to ascertain the revenues and expenditures of the federal programs.CRITERIA: Prudent internal control procedures in the areas of general ledger management and financial reporting include the reconciliation of all general ledger account balances to underlying supporting documentation monthly with independent oversight and approval as part of the process. In specific as it relates to federal programs, Section 2 CFR 200.403(g) of the Uniform Guidance requires that federal costs must be adequately documented which would include the applicable general ledgers of the City.EFFECT: The lack of procedures in place for reconciling balance sheet accounts throughout the calendar year, with independent oversight, 1) reduces the City’s internal control over the financial reporting processes, 2) exposes the City to inaccurate financial reporting to management for decision-making purposes, and 3) increases the potential for irregularities that may result (unintentional or otherwise) that are not detected in a timely manner. Had these reconciliations been performed, issues such as non-postings, and inaccurate postings to the City’s various general ledgers could have been detected and corrected in a timely manner to enhance internal controls and financial reporting in this important area of financial management. As a result, the City is not incompliance with Section 2 CFR 200.403(g) of the Uniform Guidance which requires federal costs to be adequately documented in the applicable general ledgers of the City. CAUSE: City business office personnel perform a variety of duties such as accounting for deposits, invoice processing, reconciliation of cash (but not to the various general ledger accounts of the City), preparation of payroll, and posting of financial transactions to the City’s general ledgers. However, no one individual is responsible for managing and reconciling all of the aforementioned procedures to the various ‘Fund’ general ledgers at the City. RECOMMENDATION: I am recommending that the management of the City establish written procedures for all accounting functions, but most notably for recording the necessary adjustments to the City’s general ledgers throughout the calendar year (monthly) to ensure that all balance sheet account balances are supported by the underlying documentation available at the City. It is anticipated that additional training will be required for in-house personnel to perform this function, or the City may want to consider contracting these services to a third-party professional with the expertise to perform these functions for the City on a monthly or quarterly basis throughout the year. These procedures should significantly enhance the internal control over the financial accounting and reporting process relative to the City’s general ledgers for each Fund. VIEWS OF RESPONSIBLE OFFICIALS: The City concurs with the above noted finding and addresses this issue in the ‘Corrective Action Plan’ included within this report.
• CONDITION: During the calendar year 2021, the City did not utilize a formal general ledger system of accounting to track the financial activity (financial position and results of operations) for several ‘Funds’ held at the City. The activity of these funds is either 1) maintained in spreadsheet fashion similar to a checkbook used in personal finances, 2) recorded partially (expenses only with no revenue), or 3) not tracked at all. As these funds are not maintained using the City’s accounting software package, management does not have the ability to efficiently generate financial reports necessary to provide management with the proper fiscal oversight. This condition included the American Rescue Plan Act (ARPA) funding known as the Coronavirus State and Local Fiscal Recovery Fund. However, it should be noted that City personnel were able to prepare spreadsheets to document which expenditures were utilized to prepare the necessary quarterly reporting requirements to the Department of Treasury. CRITERIA: Prudent internal control procedures in the areas of general ledger management and financial reporting include maintaining a formal general ledger system of accounting to track the activity of all ‘Funds’ maintained by the City. In specific as it relates to federal programs, Section 2 CFR 200.403(g) of the Uniform Guidance requires that federal costs must be adequately documented which would include the maintaining of a formal general ledger system of accounting for all ‘Funds’ of the City. EFFECT: The lack of procedures in place for maintaining a formal general ledger system of accounting for all ‘Funds’ of the City 1) reduces the City’s internal control over the financial reporting processes, 2) exposes the City to inaccurate financial reporting to management for decision-making purposes, and 3) increases the potential for irregularities that may result (unintentional or otherwise) that are not detected in a timely manner. As a result, the City is not incompliance with Section 2 CFR 200.403(g) of the Uniform Guidance which requires federal costs to be adequately documented in the applicable general ledgers of the City. CAUSE: The City began the process during calendar year 2019 of creating general ledgers on the computer accounting software system for all funds of the City, however due to changes in business office personnel, and other workload responsibilities, the City has not been able to fully complete this process. RECOMMENDATION: I am recommending that the City continue the process of making sure the financial activity for all funds individually is entered into the software accounting system. It is anticipated that additional training will be required for in-house personnel to perform this function, or the City may want to consider contracting these services to a third-party professional with the expertise to perform these functions for the City on a monthly or quarterly basis throughout the year. These procedures should significantly enhance the internal control over the financial accounting and reporting process relative to the City’s general ledgers for each Fund. VIEWS OF RESPONSIBLE OFFICIALS: The City concurs with the above noted finding and addresses this issue in the ‘Corrective Action Plan’ included within this report.
Finding 2021-003 – Allowable Costs/Cost Principles – Material Weakness in Internal Control Over Compliance and Instance of Material Noncompliance. See finding 2021-002 for the included table. Criteria: 2021 Compliance Supplement and 2 CFR 200.403(h) stated that a non-federal entity may charge only allowable costs incurred during the approved budget period of a federal award’s period of performance. In addition, the PRF terms and conditions noted that to be considered an allowable expense under PRF, the expense must be used to prevent, prepare for, and respond to COVID-19 and that those expenses were not reimbursed from other sources and other sources were not obligated to reimburse them. Condition/Context: The Organization decided that it was critical to keep Astria Toppenish Hospital (Toppenish) operating during the COVID-19 pandemic despite Toppenish experiencing losses. As a result, the Organization determined that all expenses of the Organization not explicitly unallowable per the related guidance and not reimbursed or obligated to be reimbursed by other sources qualified as allowable expenses that prevented, prepared for, and responded to COVID-19 during the period of availability that they were experiencing losses for Toppenish. Internal unaudited financial statements had losses in excess of the PRF funds used for expenses. Support was audited for expenses selected; however, because there were no financial statement audits performed from 2018 – 2020, we were unable to audit the Toppenish losses calculated by management. Repeat Findings from Prior Year(s): This is not a repeat finding. Cause/Effect: In addition to the challenges encountered while operating a health system during the COVID-19 pandemic, leading up to the audit period, the Organization was significantly impacted by bankruptcy and turnover of leadership. As a result, no financial statement audits were performed from 2018 – 2020. A financial statement audit was performed in 2021; however, the related Toppenish expenses were incurred prior to December 31, 2020. We were unable to obtain audit evidence supporting Toppenish’s losses for the year ended December 31, 2020. As a result of these matters, we were unable to determine whether the Organization complied with the allowable costs/cost principles requirements applicable to the major program. Questioned costs: Could not be determined. Recommendation: We recommend management implement policies and procedures to ensure that the Organization understands the terms and conditions of the Federal award and can meet the related compliance requirements. Views of Responsible Officials and Planned Corrective Action: Management agrees with the finding. The Organization will review and modify policies and procedures over the program to ensure management implements policies and procedures to ensure there is understanding of the terms and conditions of Federal awards.
Finding 2021-003 – Allowable Costs/Cost Principles – Material Weakness in Internal Control Over Compliance and Instance of Material Noncompliance. See finding 2021-002 for the included table. Criteria: 2021 Compliance Supplement and 2 CFR 200.403(h) stated that a non-federal entity may charge only allowable costs incurred during the approved budget period of a federal award’s period of performance. In addition, the PRF terms and conditions noted that to be considered an allowable expense under PRF, the expense must be used to prevent, prepare for, and respond to COVID-19 and that those expenses were not reimbursed from other sources and other sources were not obligated to reimburse them. Condition/Context: The Organization decided that it was critical to keep Astria Toppenish Hospital (Toppenish) operating during the COVID-19 pandemic despite Toppenish experiencing losses. As a result, the Organization determined that all expenses of the Organization not explicitly unallowable per the related guidance and not reimbursed or obligated to be reimbursed by other sources qualified as allowable expenses that prevented, prepared for, and responded to COVID-19 during the period of availability that they were experiencing losses for Toppenish. Internal unaudited financial statements had losses in excess of the PRF funds used for expenses. Support was audited for expenses selected; however, because there were no financial statement audits performed from 2018 – 2020, we were unable to audit the Toppenish losses calculated by management. Repeat Findings from Prior Year(s): This is not a repeat finding. Cause/Effect: In addition to the challenges encountered while operating a health system during the COVID-19 pandemic, leading up to the audit period, the Organization was significantly impacted by bankruptcy and turnover of leadership. As a result, no financial statement audits were performed from 2018 – 2020. A financial statement audit was performed in 2021; however, the related Toppenish expenses were incurred prior to December 31, 2020. We were unable to obtain audit evidence supporting Toppenish’s losses for the year ended December 31, 2020. As a result of these matters, we were unable to determine whether the Organization complied with the allowable costs/cost principles requirements applicable to the major program. Questioned costs: Could not be determined. Recommendation: We recommend management implement policies and procedures to ensure that the Organization understands the terms and conditions of the Federal award and can meet the related compliance requirements. Views of Responsible Officials and Planned Corrective Action: Management agrees with the finding. The Organization will review and modify policies and procedures over the program to ensure management implements policies and procedures to ensure there is understanding of the terms and conditions of Federal awards.
Finding 2021-003 – Allowable Costs/Cost Principles – Material Weakness in Internal Control Over Compliance and Instance of Material Noncompliance. See finding 2021-002 for the included table. Criteria: 2021 Compliance Supplement and 2 CFR 200.403(h) stated that a non-federal entity may charge only allowable costs incurred during the approved budget period of a federal award’s period of performance. In addition, the PRF terms and conditions noted that to be considered an allowable expense under PRF, the expense must be used to prevent, prepare for, and respond to COVID-19 and that those expenses were not reimbursed from other sources and other sources were not obligated to reimburse them. Condition/Context: The Organization decided that it was critical to keep Astria Toppenish Hospital (Toppenish) operating during the COVID-19 pandemic despite Toppenish experiencing losses. As a result, the Organization determined that all expenses of the Organization not explicitly unallowable per the related guidance and not reimbursed or obligated to be reimbursed by other sources qualified as allowable expenses that prevented, prepared for, and responded to COVID-19 during the period of availability that they were experiencing losses for Toppenish. Internal unaudited financial statements had losses in excess of the PRF funds used for expenses. Support was audited for expenses selected; however, because there were no financial statement audits performed from 2018 – 2020, we were unable to audit the Toppenish losses calculated by management. Repeat Findings from Prior Year(s): This is not a repeat finding. Cause/Effect: In addition to the challenges encountered while operating a health system during the COVID-19 pandemic, leading up to the audit period, the Organization was significantly impacted by bankruptcy and turnover of leadership. As a result, no financial statement audits were performed from 2018 – 2020. A financial statement audit was performed in 2021; however, the related Toppenish expenses were incurred prior to December 31, 2020. We were unable to obtain audit evidence supporting Toppenish’s losses for the year ended December 31, 2020. As a result of these matters, we were unable to determine whether the Organization complied with the allowable costs/cost principles requirements applicable to the major program. Questioned costs: Could not be determined. Recommendation: We recommend management implement policies and procedures to ensure that the Organization understands the terms and conditions of the Federal award and can meet the related compliance requirements. Views of Responsible Officials and Planned Corrective Action: Management agrees with the finding. The Organization will review and modify policies and procedures over the program to ensure management implements policies and procedures to ensure there is understanding of the terms and conditions of Federal awards.
Internal Controls and Compliance over Allowable Costs/Cost Principles and Period of Performance Identification of Federal Program: Coronavirus Relief Fund – Assistance Listing No. 21.019 Criteria: 2 CFR Part 200 requires that the City and its Contractor, a non-federal entity establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The provisions of the Coronavirus Relief Fund (CRF), as stipulated by the U.S. Treasury and subject to restrictions outlines in the guidance set forth in Section 601(d) of the Social Security Act, as added by Section 5001 of the “CARES” Act, restrict use of the funding for allowable costs and activities. Pursuant to Code of Federal Regulation (CFR) 200.403, except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under federal awards: (a) Be necessary and reasonable for the performance of the federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the federal award as to types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-federal entity. (d) Be accorded consistent treatment. A cost may not be assigned to a federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the federal award as an indirect cost. (e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian Tribes only, as otherwise provided for in this part. (f) Not be included as a cost or used to meet cost-sharing or matching requirements of any other federally-financed program in either the current or a prior period. See also CFR 200.306(b). (g) Be adequately documented. See also CFR 200.300 – 200.309. (h) Cost must be incurred during the approved budget period. The federal awarding agency is authorized, at its discretion, to waive prior written approvals to carry forward unobligated balances to subsequent budget periods pursuant to CFR 200.308(e)(3). Cause/Condition: During our testing of the Coronavirus Relief Fund program, we noted that the City, through its contracted employee services, failed to establish and adhere to an effective internal control structure that would facilitate its use of Coronavirus Relief Funding, comply with regulations and terms of the federal award and take prompt action when instances of noncompliance were identified. As a result, the City was not in compliance with certain provisions of the grant. Results of testing also indicated unallowable and questioned use of the grant funding. The results of testwork performed and correspondence with City management noted the following: • No backup or supporting documentation for the evaluation, criteria, and selection of the grantees to be disbursed CRF funding was available or maintained by City personnel. Online applications were submitted, but there was inadequate documentation and an absence of evidence of a functioning internal control structure for the disbursement of funding used for the City’s Small Business Relief Program. • Approximately $4.25 million use of the funding was disbursed to grantees as part of the City’s Small Business Relief Program. As there was no backup or supporting documentation for the evaluation, criteria, and selection of the grantees to be disbursed CRF funding and because there were individuals responsible for selecting grantees that were potentially involved in a fraudulent scheme, all amounts tested within our sample of eighty-one (81) were determined to be questioned costs, which amounted to $3,070,900. Based on our sample of eighty-one (81) grantees tested, $196,250 was confirmed by the grantees as amounts requested and/or directed by former City representatives to be remitted to outside entities for marketing services. Such services were potentially a part of a fraudulent scheme under direction by former City Officials and later prosecuted. Such questioned amounts would not tie into delivery or performance of allowable services. • During our testing of CRF expenditures, we sampled twenty-one (21) disbursements made for public health costs incurred as a response to the pandemic, which are an allowable use of funding. We noted one (1) payment made in the amount of $3,500 for which no copy or check or disbursement was able to be provided. In addition, we noted that the disbursement for $3,500 as well as an additional disbursement of $12,000 were both paid to a City vendor that employed two former contracted City staff. Both amounts totaling $15,500 were determined to be questioned costs. • During our testing of CRF expenditures, we sampled nine (9) payments made to contractors, organizations and special services procured with CRF funding. We noted one (1) payment made in the amount of $50,000 for which no copy or check or disbursement was able to be provided. In addition, such contractors, organizations, and special services procured with the funding were noted to have bypassed City procurement protocol and eight (8) of the payments, totaling $163,500, were for services outside of the initial period of performance of the grant. As a result, the total tested disbursements of $213,500 were determined to be questioned costs. Effects or Potential Effects: Noncompliance with CFR related to allowable costs and period of performance results in an increased risk that charges to the grant do not represent actual costs incurred. Internal control deficiencies surrounding the grant result in an increased risk that noncompliance may not be detected or corrected timely. Questioned Costs: Known questioned costs amounted to $3,299,900. Likely questioned costs amounted to $5,896,456. Recommendation: We recommend that incoming City management strengthen its internal control structure surrounding its designation, use and disbursement of grants as well as implement and adhere to policies and procedures for the retention and safeguarding of original source documents to properly substantiate charges made to grants. Auditee’s Response: DeKalb County was given $125 million directly from the federal government. Of that amount, and through an intergovernmental agreement dated August 10, 2020, $32.6 million was distributed to the County’s municipalities on a per capita basis. The City of Stonecrest received $6,227,098. The City was to administer and distribute the funds in accordance with the federal program requirements to combat the public health emergency and resulting economic impact related to the COVID-19 pandemic. The City was also charged with maintaining through and accurate records regarding expenditure of the funds. Following the execution of the agreement with DeKalb County, the City Council adopted a resolution on September 28, 2020 calling for the Stonecrest CARES Act Funding plan. The City Council assigned contractor staff to set up protocols to manage the program. The City Manager, who was not on staff at the time, or designee was authorized to employ an administrator for the Small Business Support Program, to develop an education component and to create a CARES Act Relief Fund Committee to vet and select a program administrator. The Stonecrest COVID CARES Act Relief Fund was created as the umbrella group that would have oversite over the programs. The Committee was later renamed the Aaron Matthew Allen COVID Small Business Relief/Stonecrest Cares Committee to honor a local resident. The Committee was organized by contractor staff and included two members of City Council, several Contractor staff and consultants who were later paid to assist with the program. The Committee met four times between November 4, 2020 and December 22, 2020, however, there is no evidence that the program management plan, as outlined in the September 28, 2020 resolution was executed in accordance with the resolution. Contractor staff reported to other Committee members on activities and events related to the use of CARES Act funds, and the other committee members had no functional roles in CARES Act fund program. The updates included the naming of consultants involved in the program, but did not disclose that consultant contracts had been executed by contractor staff using the emergency procurement section of the City’s Purchasing Policy. There appears to be no factual basis or authority for use of emergency procurement procedures or execution of contracts by the contractor staff. Significantly, on October 30, 2020, a contract was signed by a City contractor staff with a recently organized not-for-profit organization to prepare disbursements to organizations using CARES Act funds based on notifications by the City Contractor staff. There were duties related to records and accounting but no other performance requirements. Other contracts were executed by contractor City staff who had no authority to enter contracts on the City’s behalf. That process should have included the City Purchasing agent, also a contractor staff, City Attorney and City Council reviews and approvals. The City was successful in obtaining records from the program contractors primarily related to bank statements, program grant application documents, check copies, front and back, however no backup or supporting documentation for the evaluation, criteria, and selection of the grantees to be disbursed funds was available or maintained by the City. The contractor was in full control of the operation of the CARES Act program. The City contends that established internal control procedures were not followed by employees assigned by the private government services contractor retained to provide management and operations services in a manner sufficient to prevent, detect, and/or correct various issues related to the City’s CARES Program. The City concedes that City employed staff did not timely submit reports to DeKalb County pursuant to terms of the Intergovernmental Agreement.Like the response by Mayor and City Council with the purchasing card findings, the City Attorney was engaged to investigate the CARES Act program organization and operation. Pursuant to those findings, federal and local law enforcement agencies were notified, and criminal charges were prosecuted and convictions secured. Based on those prosecution, the City received restitutions that will be reimbursed to DeKalb County. In addition, the City has made a claim as part of the January 31, 2023, filed Complaint for damages and other relief to be indemnified by the contractor for any claims by DeKalb County, including questioned unallowable costs, for reimbursement of Cares Act funds.
Federal Program Information: Funding Agency: U.S Department of Health and Human Services FALN: 93.926 Federal Award Identification Number: 5 H49MC00119‐21‐00 / 6 H49MC00119‐20‐01 Pass Through Entity: State of Georgia Department of Human Services Award Year: 2020‐2024 Criteria: Under 2 CFR Section 200.303(a), non‐federal entities must establish and maintain effective internal controls to provide reasonable assurance that the entity is managing the federal awards in compliance with statues, regulations, and the terms and conditions of the award. Additionally, under 2 CFR sections 200.308 200.309 and 200.403(h)), the Organization may charge 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. Condition: The Organization lacked supporting documentation for non‐payroll expenses. Due to lack of supporting documentation, period of performance could not be verified. Of the sixty (60) nonpayroll transactions examined, fourteen (14) lacked supporting documentation for review. Effect: Management possibly did not expend funds in accordance with the approved detailed lineitem budget and grant agreement and possibly expended funds in the incorrect period of performance. Cause: Expenses including approved invoices and/or supporting documentation were not properly maintained in part due to several changes in personnel within the accounting area and overall limited number of personnel for certain functions and lack of board oversight. Questioned costs: Known questioned costs of $2,066 and likely questioned costs of $11,507 for Healthy Start. Recommendation: We recommend that internal controls be strengthened and processes implemented to ensure all expenses include supporting documentation/invoice indicating period of performance.
Federal Program Information: Funding Agency: U.S Department of Health and Human Services FALN: 93.926 Federal Award Identification Number: 5 H49MC00119‐21‐00 / 6 H49MC00119‐20‐01 Pass Through Entity: State of Georgia Department of Human Services Award Year: 2020‐2024 Criteria: Under 2 CFR Section 200.303(a), non‐federal entities must establish and maintain effective internal controls to provide reasonable assurance that the entity is managing the federal awards in compliance with statues, regulations, and the terms and conditions of the award. Additionally, under 2 CFR sections 200.308 200.309 and 200.403(h)), the Organization may charge 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. Condition: The Organization lacked supporting documentation for non‐payroll expenses. Due to lack of supporting documentation, period of performance could not be verified. Of the sixty (60) nonpayroll transactions examined, fourteen (14) lacked supporting documentation for review. Effect: Management possibly did not expend funds in accordance with the approved detailed lineitem budget and grant agreement and possibly expended funds in the incorrect period of performance. Cause: Expenses including approved invoices and/or supporting documentation were not properly maintained in part due to several changes in personnel within the accounting area and overall limited number of personnel for certain functions and lack of board oversight. Questioned costs: Known questioned costs of $2,066 and likely questioned costs of $11,507 for Healthy Start. Recommendation: We recommend that internal controls be strengthened and processes implemented to ensure all expenses include supporting documentation/invoice indicating period of performance.
Criteria: Title 2 of the Code of Federal Regulations (2 CFR), Part 200, Subpart E defines and discusses the federal cost principles that apply to federal awards administered by nonprofit organizations. The applicable sections of these cost principes are as follows: • 2 CFR 200.403 Factors affecting allowability of costs • 2 CFR 200.404 Reasonable costs • 2 CFR 200.405 Allocable costs • 2 CFR 200.413 Direct costs • 2 CFR 200.414 Indirect (F&A) costs Condition: The following were noted as related to compliance with allowable costs, cost allocation and federal cost principles: • Internal control on time spent by employees related to administrative functions or other indirect cost activities has not been properly designed or implemented. • All employee time, including employees and professional services contractors are being recorded directly to programs. Time spent on indirect activities is not being properly identified or properly allocated to programs. • A portion of time of the Operations Manager (Chief Executive of the Organization) is spent related to administrative time or other indirect cost activities. However, none of that time has been identified or charged as indirect costs. • The time card for the Operations Manager (Chief Executive of the Organization) is not reviewed or approved by a board member or other senior executive of the Organization. • The accounting services of AIRS is being provided by a third-party outsourced accountant. The costs related to these services were improperly recorded as direct personnel costs to the program rather than properly classified as indirect costs. • Payroll taxes, employee benefits and other allowable employee related expenses were allocated to the program in a manner that does not accurately reflect the relative benefits received. These costs were allocated to the program as a percentage of total payroll costs, however, the percentage used exceeds that actual percentage of these costs as a percentage of total payroll costs. • A reasonable, consistent and uniform cost allocation methodology has not been properly designed or implemented. Costs that benefit both federal programs, non-federal programs and indirect costs are not being allocated properly across and to federal programs, non-federal programs and indirect costs in a reasonable, consistent and uniform manner. • Certain direct costs charged to the program were not based on actual costs incurred and the amounts charged were not adequately supported. • Indirect costs were not properly identified and segregated from direct costs. • Allowable indirect costs were not charged to the federal program. Cause: AIRS accounting staff and senior management do not appear to have a full and complete understanding of Uniform Guidance or of the applicable federal cost principles. Management has not properly applied the applicable federal costs principles in 2 CFR, Part 200, Subpart E to the costs charged to the federal program. Effect: Payroll costs and allowable employee related expenses, certain direct costs, allocable direct costs and indirect costs were not properly charged to the federal program. In order to estimate the questioned costs, the auditor, with the assistance of management, developed a costs allocation methodology that charges costs to the federal program in a reasonable, consistent and uniform manner in compliance with the costs principles contained in 2 CFR, Part 200, Subpart E. The primarily characteristics of this methodology are as follows: • Based upon discussions with management, review of the job description, roles and responsibilities of the Operations Manager and using prior experience and comparison to similar nonprofit organizations; an estimate of the percentage of time spent by the Operations Manager related to administration and other indirect activities was developed. • The time for the outsourced accounting services provider was removed from direct personnel costs and charged to indirect costs. • After the above revisions were made, the auditor assisted management in reallocating payroll costs across all federal and nonfederal programs and to indirect costs in a reasonable, consistent and uniform manner. • Allowable payroll taxes, benefits and other employee related expense charges were estimated using the actual percentage of these expenses as a percentage of total allowable payroll costs. • Non-allocable direct costs were charged to the program at the actual amount of those costs incurred. • Allocable direct costs charges were estimated by allocating those costs to the federal program on the basis of allowable payroll costs charged to program as a percentage of total allowable payroll costs (percentage of payroll methodology). This methodology is in compliance with the requirements of 2 CFR 200.405 and appears to produce a result that reasonably estimates the proportional benefit of these costs to all federal and non-federal programs, and to indirect cost activities. • Indirect costs were estimated and charged to the program using the 10% de minimis indirect cost rate as defined in 2 CFR 200.414. Questioned Costs: Using the methodology described above, the auditor has estimated total federal expenditures allowable to the program of $247,119. However, AIRS has charged federal expenditures of $272,781 to the program. Therefore, the estimated questioned costs related to this program are $25,662. Repeat Finding from Prior Year: No Recommendation: Senior management and accounting personnel should create procedures to ensure that direct program costs are charged at the actual amounts incurred, develop a payroll cost allocation methodology, and an allocable direct cost allocation methodology that ensures that costs are reasonably, consistently and uniformly charged to and across all federal and non-federal programs and to indirect costs relative to the proportional benefit of those costs, and in compliance with the applicable federal cost principles in 2 CFR, Part 200, Subpart E. Management and the board should consider providing senior management, accounting personnel and applicable program personnel additional training and education related to the proper application of and compliance with the federal costs principles as defined in 2 CFR, Part 200, Subpart E. Management and the board may also want to consider engaging a third-party CPA or other accounting professional who has extensive prior skills, knowledge and experience related to Uniform Guidance and federal cost principles. Views of Responsible Officials: Management concurs with this audit finding.
Assistance Listing Number, Federal Agency, and Program Name - 93.498, U.S. Department of Health and Human Services, COVID-19: Provider Relief Fund Finding Type - Material weakness and material noncompliance with laws and regulations Repeat Finding - No Criteria - According to 2 CFR § 200.403, HealthSource must maintain adequate documentation to support the allowability of costs charged to the grant. Condition - HealthSource did not have controls in place to ensure the inputs in their Covid related expense spreadsheet that was used to input the amount of Other PRF Expenses reported in the portal submissions agreed to source documentation. Questioned Costs - None Context - The CFO created a spreadsheet to track HealthSource's Covid related payroll expenses using an incremental cost approach. To create this spreadsheet, the CFO used multiple formulas and pulled information from various summary level reports. There was no review completed on HealthSource's Covid related expense spreadsheet after the CFO prepared it. The spreadsheet was subsequently used by the CFO to input expenses into the portal submissions. Cause and Effect - Appropriate review of the Covid related expense spreadsheet was not completed to ensure the inputs in the report agreed to supporting documentation. As a result, the report contained several inconsistencies and it is not possible to determine whether the expenses are allowable under the grant agreement. Recommendation - We recommend HealthSource implement controls, including levels of review, to ensure reports are accurate and can be agreed back to source documentation. Views of Responsible Officials and Planned Corrective Actions - Management agrees with the finding and all future submissions will be reviewed by the chief executive officer and the president for accuracy and thoroughness prior to submission upload.
Finding 2021-005 Program: Office for Coastal Management Federal Financial Assistance Listing: 11.473 Federal Grantor: U.S. Department of Commerce Passed-through: National Fish and Wildlife Foundation Award No. and Year: 0318.19.070225 (2020) Compliance Requirements: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Type of Finding: Significant Deficiency Criteria: 2 CFR 200.403(a) - Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. Condition: For one payroll sample that was selected, the amount of time charged to the grant was greater than the amount of time work was performed. As such, the program was overcharged. Questioned Costs: Questioned costs were identified as a result of our procedures in the amount of $74. Context/Sampling: A nonstatistical sample of 17 out of 82 total payroll costs ($25,275 of $35,106) were selected for testing for the Office for Coastal Management program. The condition noted above was identified during our procedures over the CFSC’s allowable costs provisions. EB expanded the sample to 22 ($26,792) and no further questioned costs were identified. Repeat Finding from Prior Year: No Effect: CFSC did not identify the error to be able to make the appropriate corrections before receiving reimbursement for incorrect payroll related expenditures. Cause: CFSC did not consistently ensure that the hours worked by each employee related to the federal program were accurate applying the cost to the grant. Recommendation: We recommend that CFSC strengthen its current policies and procedures to ensure that all payroll amounts applied to the grant were for actual hours worked based on employee timesheets. Views of Responsible Officials and Planned Corrective Actions: See Separate Corrective Action Plan.
CONDITION: During the calendar year 2021, the City did not record the necessary adjustments to the various ‘Fund’ general ledgers of the City to properly reconcile the balance sheet accounts, such as cash, receivables, payables, and payroll-related liabilities to the underlying supporting documentation available at the City (which includes reconciliations of cash prepared independently by City personnel but do not agree to amounts reported in the various general ledgers). This included ‘Funds” containing significant federal funding such as the City’s Community Development Block Grant (CDBG) Program and American Rescue Plan Act (ARPA) funding known as the Coronavirus State and Local Fiscal Recovery Fund. As a result, the financial position and results of operations as shown throughout the calendar year were inaccurately stated. However, it should be noted that the Community Development Department of the City and other City personnel maintain separate financial reporting for these federal funds, independent of the aforementioned ‘Fund’ general ledgers sufficient to ascertain the revenues and expenditures of the federal programs.CRITERIA: Prudent internal control procedures in the areas of general ledger management and financial reporting include the reconciliation of all general ledger account balances to underlying supporting documentation monthly with independent oversight and approval as part of the process. In specific as it relates to federal programs, Section 2 CFR 200.403(g) of the Uniform Guidance requires that federal costs must be adequately documented which would include the applicable general ledgers of the City.EFFECT: The lack of procedures in place for reconciling balance sheet accounts throughout the calendar year, with independent oversight, 1) reduces the City’s internal control over the financial reporting processes, 2) exposes the City to inaccurate financial reporting to management for decision-making purposes, and 3) increases the potential for irregularities that may result (unintentional or otherwise) that are not detected in a timely manner. Had these reconciliations been performed, issues such as non-postings, and inaccurate postings to the City’s various general ledgers could have been detected and corrected in a timely manner to enhance internal controls and financial reporting in this important area of financial management. As a result, the City is not incompliance with Section 2 CFR 200.403(g) of the Uniform Guidance which requires federal costs to be adequately documented in the applicable general ledgers of the City. CAUSE: City business office personnel perform a variety of duties such as accounting for deposits, invoice processing, reconciliation of cash (but not to the various general ledger accounts of the City), preparation of payroll, and posting of financial transactions to the City’s general ledgers. However, no one individual is responsible for managing and reconciling all of the aforementioned procedures to the various ‘Fund’ general ledgers at the City. RECOMMENDATION: I am recommending that the management of the City establish written procedures for all accounting functions, but most notably for recording the necessary adjustments to the City’s general ledgers throughout the calendar year (monthly) to ensure that all balance sheet account balances are supported by the underlying documentation available at the City. It is anticipated that additional training will be required for in-house personnel to perform this function, or the City may want to consider contracting these services to a third-party professional with the expertise to perform these functions for the City on a monthly or quarterly basis throughout the year. These procedures should significantly enhance the internal control over the financial accounting and reporting process relative to the City’s general ledgers for each Fund. VIEWS OF RESPONSIBLE OFFICIALS: The City concurs with the above noted finding and addresses this issue in the ‘Corrective Action Plan’ included within this report.
CONDITION: During the calendar year 2021, the City did not record the necessary adjustments to the various ‘Fund’ general ledgers of the City to properly reconcile the balance sheet accounts, such as cash, receivables, payables, and payroll-related liabilities to the underlying supporting documentation available at the City (which includes reconciliations of cash prepared independently by City personnel but do not agree to amounts reported in the various general ledgers). This included ‘Funds” containing significant federal funding such as the City’s Community Development Block Grant (CDBG) Program and American Rescue Plan Act (ARPA) funding known as the Coronavirus State and Local Fiscal Recovery Fund. As a result, the financial position and results of operations as shown throughout the calendar year were inaccurately stated. However, it should be noted that the Community Development Department of the City and other City personnel maintain separate financial reporting for these federal funds, independent of the aforementioned ‘Fund’ general ledgers sufficient to ascertain the revenues and expenditures of the federal programs.CRITERIA: Prudent internal control procedures in the areas of general ledger management and financial reporting include the reconciliation of all general ledger account balances to underlying supporting documentation monthly with independent oversight and approval as part of the process. In specific as it relates to federal programs, Section 2 CFR 200.403(g) of the Uniform Guidance requires that federal costs must be adequately documented which would include the applicable general ledgers of the City.EFFECT: The lack of procedures in place for reconciling balance sheet accounts throughout the calendar year, with independent oversight, 1) reduces the City’s internal control over the financial reporting processes, 2) exposes the City to inaccurate financial reporting to management for decision-making purposes, and 3) increases the potential for irregularities that may result (unintentional or otherwise) that are not detected in a timely manner. Had these reconciliations been performed, issues such as non-postings, and inaccurate postings to the City’s various general ledgers could have been detected and corrected in a timely manner to enhance internal controls and financial reporting in this important area of financial management. As a result, the City is not incompliance with Section 2 CFR 200.403(g) of the Uniform Guidance which requires federal costs to be adequately documented in the applicable general ledgers of the City. CAUSE: City business office personnel perform a variety of duties such as accounting for deposits, invoice processing, reconciliation of cash (but not to the various general ledger accounts of the City), preparation of payroll, and posting of financial transactions to the City’s general ledgers. However, no one individual is responsible for managing and reconciling all of the aforementioned procedures to the various ‘Fund’ general ledgers at the City. RECOMMENDATION: I am recommending that the management of the City establish written procedures for all accounting functions, but most notably for recording the necessary adjustments to the City’s general ledgers throughout the calendar year (monthly) to ensure that all balance sheet account balances are supported by the underlying documentation available at the City. It is anticipated that additional training will be required for in-house personnel to perform this function, or the City may want to consider contracting these services to a third-party professional with the expertise to perform these functions for the City on a monthly or quarterly basis throughout the year. These procedures should significantly enhance the internal control over the financial accounting and reporting process relative to the City’s general ledgers for each Fund. VIEWS OF RESPONSIBLE OFFICIALS: The City concurs with the above noted finding and addresses this issue in the ‘Corrective Action Plan’ included within this report.
CONDITION: During the calendar year 2021, the City did not record the necessary adjustments to the various ‘Fund’ general ledgers of the City to properly reconcile the balance sheet accounts, such as cash, receivables, payables, and payroll-related liabilities to the underlying supporting documentation available at the City (which includes reconciliations of cash prepared independently by City personnel but do not agree to amounts reported in the various general ledgers). This included ‘Funds” containing significant federal funding such as the City’s Community Development Block Grant (CDBG) Program and American Rescue Plan Act (ARPA) funding known as the Coronavirus State and Local Fiscal Recovery Fund. As a result, the financial position and results of operations as shown throughout the calendar year were inaccurately stated. However, it should be noted that the Community Development Department of the City and other City personnel maintain separate financial reporting for these federal funds, independent of the aforementioned ‘Fund’ general ledgers sufficient to ascertain the revenues and expenditures of the federal programs.CRITERIA: Prudent internal control procedures in the areas of general ledger management and financial reporting include the reconciliation of all general ledger account balances to underlying supporting documentation monthly with independent oversight and approval as part of the process. In specific as it relates to federal programs, Section 2 CFR 200.403(g) of the Uniform Guidance requires that federal costs must be adequately documented which would include the applicable general ledgers of the City.EFFECT: The lack of procedures in place for reconciling balance sheet accounts throughout the calendar year, with independent oversight, 1) reduces the City’s internal control over the financial reporting processes, 2) exposes the City to inaccurate financial reporting to management for decision-making purposes, and 3) increases the potential for irregularities that may result (unintentional or otherwise) that are not detected in a timely manner. Had these reconciliations been performed, issues such as non-postings, and inaccurate postings to the City’s various general ledgers could have been detected and corrected in a timely manner to enhance internal controls and financial reporting in this important area of financial management. As a result, the City is not incompliance with Section 2 CFR 200.403(g) of the Uniform Guidance which requires federal costs to be adequately documented in the applicable general ledgers of the City. CAUSE: City business office personnel perform a variety of duties such as accounting for deposits, invoice processing, reconciliation of cash (but not to the various general ledger accounts of the City), preparation of payroll, and posting of financial transactions to the City’s general ledgers. However, no one individual is responsible for managing and reconciling all of the aforementioned procedures to the various ‘Fund’ general ledgers at the City. RECOMMENDATION: I am recommending that the management of the City establish written procedures for all accounting functions, but most notably for recording the necessary adjustments to the City’s general ledgers throughout the calendar year (monthly) to ensure that all balance sheet account balances are supported by the underlying documentation available at the City. It is anticipated that additional training will be required for in-house personnel to perform this function, or the City may want to consider contracting these services to a third-party professional with the expertise to perform these functions for the City on a monthly or quarterly basis throughout the year. These procedures should significantly enhance the internal control over the financial accounting and reporting process relative to the City’s general ledgers for each Fund. VIEWS OF RESPONSIBLE OFFICIALS: The City concurs with the above noted finding and addresses this issue in the ‘Corrective Action Plan’ included within this report.
CONDITION: During the calendar year 2021, the City did not record the necessary adjustments to the various ‘Fund’ general ledgers of the City to properly reconcile the balance sheet accounts, such as cash, receivables, payables, and payroll-related liabilities to the underlying supporting documentation available at the City (which includes reconciliations of cash prepared independently by City personnel but do not agree to amounts reported in the various general ledgers). This included ‘Funds” containing significant federal funding such as the City’s Community Development Block Grant (CDBG) Program and American Rescue Plan Act (ARPA) funding known as the Coronavirus State and Local Fiscal Recovery Fund. As a result, the financial position and results of operations as shown throughout the calendar year were inaccurately stated. However, it should be noted that the Community Development Department of the City and other City personnel maintain separate financial reporting for these federal funds, independent of the aforementioned ‘Fund’ general ledgers sufficient to ascertain the revenues and expenditures of the federal programs.CRITERIA: Prudent internal control procedures in the areas of general ledger management and financial reporting include the reconciliation of all general ledger account balances to underlying supporting documentation monthly with independent oversight and approval as part of the process. In specific as it relates to federal programs, Section 2 CFR 200.403(g) of the Uniform Guidance requires that federal costs must be adequately documented which would include the applicable general ledgers of the City.EFFECT: The lack of procedures in place for reconciling balance sheet accounts throughout the calendar year, with independent oversight, 1) reduces the City’s internal control over the financial reporting processes, 2) exposes the City to inaccurate financial reporting to management for decision-making purposes, and 3) increases the potential for irregularities that may result (unintentional or otherwise) that are not detected in a timely manner. Had these reconciliations been performed, issues such as non-postings, and inaccurate postings to the City’s various general ledgers could have been detected and corrected in a timely manner to enhance internal controls and financial reporting in this important area of financial management. As a result, the City is not incompliance with Section 2 CFR 200.403(g) of the Uniform Guidance which requires federal costs to be adequately documented in the applicable general ledgers of the City. CAUSE: City business office personnel perform a variety of duties such as accounting for deposits, invoice processing, reconciliation of cash (but not to the various general ledger accounts of the City), preparation of payroll, and posting of financial transactions to the City’s general ledgers. However, no one individual is responsible for managing and reconciling all of the aforementioned procedures to the various ‘Fund’ general ledgers at the City. RECOMMENDATION: I am recommending that the management of the City establish written procedures for all accounting functions, but most notably for recording the necessary adjustments to the City’s general ledgers throughout the calendar year (monthly) to ensure that all balance sheet account balances are supported by the underlying documentation available at the City. It is anticipated that additional training will be required for in-house personnel to perform this function, or the City may want to consider contracting these services to a third-party professional with the expertise to perform these functions for the City on a monthly or quarterly basis throughout the year. These procedures should significantly enhance the internal control over the financial accounting and reporting process relative to the City’s general ledgers for each Fund. VIEWS OF RESPONSIBLE OFFICIALS: The City concurs with the above noted finding and addresses this issue in the ‘Corrective Action Plan’ included within this report.
CONDITION: During the calendar year 2021, the City did not record the necessary adjustments to the various ‘Fund’ general ledgers of the City to properly reconcile the balance sheet accounts, such as cash, receivables, payables, and payroll-related liabilities to the underlying supporting documentation available at the City (which includes reconciliations of cash prepared independently by City personnel but do not agree to amounts reported in the various general ledgers). This included ‘Funds” containing significant federal funding such as the City’s Community Development Block Grant (CDBG) Program and American Rescue Plan Act (ARPA) funding known as the Coronavirus State and Local Fiscal Recovery Fund. As a result, the financial position and results of operations as shown throughout the calendar year were inaccurately stated. However, it should be noted that the Community Development Department of the City and other City personnel maintain separate financial reporting for these federal funds, independent of the aforementioned ‘Fund’ general ledgers sufficient to ascertain the revenues and expenditures of the federal programs.CRITERIA: Prudent internal control procedures in the areas of general ledger management and financial reporting include the reconciliation of all general ledger account balances to underlying supporting documentation monthly with independent oversight and approval as part of the process. In specific as it relates to federal programs, Section 2 CFR 200.403(g) of the Uniform Guidance requires that federal costs must be adequately documented which would include the applicable general ledgers of the City.EFFECT: The lack of procedures in place for reconciling balance sheet accounts throughout the calendar year, with independent oversight, 1) reduces the City’s internal control over the financial reporting processes, 2) exposes the City to inaccurate financial reporting to management for decision-making purposes, and 3) increases the potential for irregularities that may result (unintentional or otherwise) that are not detected in a timely manner. Had these reconciliations been performed, issues such as non-postings, and inaccurate postings to the City’s various general ledgers could have been detected and corrected in a timely manner to enhance internal controls and financial reporting in this important area of financial management. As a result, the City is not incompliance with Section 2 CFR 200.403(g) of the Uniform Guidance which requires federal costs to be adequately documented in the applicable general ledgers of the City. CAUSE: City business office personnel perform a variety of duties such as accounting for deposits, invoice processing, reconciliation of cash (but not to the various general ledger accounts of the City), preparation of payroll, and posting of financial transactions to the City’s general ledgers. However, no one individual is responsible for managing and reconciling all of the aforementioned procedures to the various ‘Fund’ general ledgers at the City. RECOMMENDATION: I am recommending that the management of the City establish written procedures for all accounting functions, but most notably for recording the necessary adjustments to the City’s general ledgers throughout the calendar year (monthly) to ensure that all balance sheet account balances are supported by the underlying documentation available at the City. It is anticipated that additional training will be required for in-house personnel to perform this function, or the City may want to consider contracting these services to a third-party professional with the expertise to perform these functions for the City on a monthly or quarterly basis throughout the year. These procedures should significantly enhance the internal control over the financial accounting and reporting process relative to the City’s general ledgers for each Fund. VIEWS OF RESPONSIBLE OFFICIALS: The City concurs with the above noted finding and addresses this issue in the ‘Corrective Action Plan’ included within this report.
CONDITION: During the calendar year 2021, the City did not record the necessary adjustments to the various ‘Fund’ general ledgers of the City to properly reconcile the balance sheet accounts, such as cash, receivables, payables, and payroll-related liabilities to the underlying supporting documentation available at the City (which includes reconciliations of cash prepared independently by City personnel but do not agree to amounts reported in the various general ledgers). This included ‘Funds” containing significant federal funding such as the City’s Community Development Block Grant (CDBG) Program and American Rescue Plan Act (ARPA) funding known as the Coronavirus State and Local Fiscal Recovery Fund. As a result, the financial position and results of operations as shown throughout the calendar year were inaccurately stated. However, it should be noted that the Community Development Department of the City and other City personnel maintain separate financial reporting for these federal funds, independent of the aforementioned ‘Fund’ general ledgers sufficient to ascertain the revenues and expenditures of the federal programs.CRITERIA: Prudent internal control procedures in the areas of general ledger management and financial reporting include the reconciliation of all general ledger account balances to underlying supporting documentation monthly with independent oversight and approval as part of the process. In specific as it relates to federal programs, Section 2 CFR 200.403(g) of the Uniform Guidance requires that federal costs must be adequately documented which would include the applicable general ledgers of the City.EFFECT: The lack of procedures in place for reconciling balance sheet accounts throughout the calendar year, with independent oversight, 1) reduces the City’s internal control over the financial reporting processes, 2) exposes the City to inaccurate financial reporting to management for decision-making purposes, and 3) increases the potential for irregularities that may result (unintentional or otherwise) that are not detected in a timely manner. Had these reconciliations been performed, issues such as non-postings, and inaccurate postings to the City’s various general ledgers could have been detected and corrected in a timely manner to enhance internal controls and financial reporting in this important area of financial management. As a result, the City is not incompliance with Section 2 CFR 200.403(g) of the Uniform Guidance which requires federal costs to be adequately documented in the applicable general ledgers of the City. CAUSE: City business office personnel perform a variety of duties such as accounting for deposits, invoice processing, reconciliation of cash (but not to the various general ledger accounts of the City), preparation of payroll, and posting of financial transactions to the City’s general ledgers. However, no one individual is responsible for managing and reconciling all of the aforementioned procedures to the various ‘Fund’ general ledgers at the City. RECOMMENDATION: I am recommending that the management of the City establish written procedures for all accounting functions, but most notably for recording the necessary adjustments to the City’s general ledgers throughout the calendar year (monthly) to ensure that all balance sheet account balances are supported by the underlying documentation available at the City. It is anticipated that additional training will be required for in-house personnel to perform this function, or the City may want to consider contracting these services to a third-party professional with the expertise to perform these functions for the City on a monthly or quarterly basis throughout the year. These procedures should significantly enhance the internal control over the financial accounting and reporting process relative to the City’s general ledgers for each Fund. VIEWS OF RESPONSIBLE OFFICIALS: The City concurs with the above noted finding and addresses this issue in the ‘Corrective Action Plan’ included within this report.
• CONDITION: During the calendar year 2021, the City did not utilize a formal general ledger system of accounting to track the financial activity (financial position and results of operations) for several ‘Funds’ held at the City. The activity of these funds is either 1) maintained in spreadsheet fashion similar to a checkbook used in personal finances, 2) recorded partially (expenses only with no revenue), or 3) not tracked at all. As these funds are not maintained using the City’s accounting software package, management does not have the ability to efficiently generate financial reports necessary to provide management with the proper fiscal oversight. This condition included the American Rescue Plan Act (ARPA) funding known as the Coronavirus State and Local Fiscal Recovery Fund. However, it should be noted that City personnel were able to prepare spreadsheets to document which expenditures were utilized to prepare the necessary quarterly reporting requirements to the Department of Treasury. CRITERIA: Prudent internal control procedures in the areas of general ledger management and financial reporting include maintaining a formal general ledger system of accounting to track the activity of all ‘Funds’ maintained by the City. In specific as it relates to federal programs, Section 2 CFR 200.403(g) of the Uniform Guidance requires that federal costs must be adequately documented which would include the maintaining of a formal general ledger system of accounting for all ‘Funds’ of the City. EFFECT: The lack of procedures in place for maintaining a formal general ledger system of accounting for all ‘Funds’ of the City 1) reduces the City’s internal control over the financial reporting processes, 2) exposes the City to inaccurate financial reporting to management for decision-making purposes, and 3) increases the potential for irregularities that may result (unintentional or otherwise) that are not detected in a timely manner. As a result, the City is not incompliance with Section 2 CFR 200.403(g) of the Uniform Guidance which requires federal costs to be adequately documented in the applicable general ledgers of the City. CAUSE: The City began the process during calendar year 2019 of creating general ledgers on the computer accounting software system for all funds of the City, however due to changes in business office personnel, and other workload responsibilities, the City has not been able to fully complete this process. RECOMMENDATION: I am recommending that the City continue the process of making sure the financial activity for all funds individually is entered into the software accounting system. It is anticipated that additional training will be required for in-house personnel to perform this function, or the City may want to consider contracting these services to a third-party professional with the expertise to perform these functions for the City on a monthly or quarterly basis throughout the year. These procedures should significantly enhance the internal control over the financial accounting and reporting process relative to the City’s general ledgers for each Fund. VIEWS OF RESPONSIBLE OFFICIALS: The City concurs with the above noted finding and addresses this issue in the ‘Corrective Action Plan’ included within this report.
Finding 2021-003 – Allowable Costs/Cost Principles – Material Weakness in Internal Control Over Compliance and Instance of Material Noncompliance. See finding 2021-002 for the included table. Criteria: 2021 Compliance Supplement and 2 CFR 200.403(h) stated that a non-federal entity may charge only allowable costs incurred during the approved budget period of a federal award’s period of performance. In addition, the PRF terms and conditions noted that to be considered an allowable expense under PRF, the expense must be used to prevent, prepare for, and respond to COVID-19 and that those expenses were not reimbursed from other sources and other sources were not obligated to reimburse them. Condition/Context: The Organization decided that it was critical to keep Astria Toppenish Hospital (Toppenish) operating during the COVID-19 pandemic despite Toppenish experiencing losses. As a result, the Organization determined that all expenses of the Organization not explicitly unallowable per the related guidance and not reimbursed or obligated to be reimbursed by other sources qualified as allowable expenses that prevented, prepared for, and responded to COVID-19 during the period of availability that they were experiencing losses for Toppenish. Internal unaudited financial statements had losses in excess of the PRF funds used for expenses. Support was audited for expenses selected; however, because there were no financial statement audits performed from 2018 – 2020, we were unable to audit the Toppenish losses calculated by management. Repeat Findings from Prior Year(s): This is not a repeat finding. Cause/Effect: In addition to the challenges encountered while operating a health system during the COVID-19 pandemic, leading up to the audit period, the Organization was significantly impacted by bankruptcy and turnover of leadership. As a result, no financial statement audits were performed from 2018 – 2020. A financial statement audit was performed in 2021; however, the related Toppenish expenses were incurred prior to December 31, 2020. We were unable to obtain audit evidence supporting Toppenish’s losses for the year ended December 31, 2020. As a result of these matters, we were unable to determine whether the Organization complied with the allowable costs/cost principles requirements applicable to the major program. Questioned costs: Could not be determined. Recommendation: We recommend management implement policies and procedures to ensure that the Organization understands the terms and conditions of the Federal award and can meet the related compliance requirements. Views of Responsible Officials and Planned Corrective Action: Management agrees with the finding. The Organization will review and modify policies and procedures over the program to ensure management implements policies and procedures to ensure there is understanding of the terms and conditions of Federal awards.
Finding 2021-003 – Allowable Costs/Cost Principles – Material Weakness in Internal Control Over Compliance and Instance of Material Noncompliance. See finding 2021-002 for the included table. Criteria: 2021 Compliance Supplement and 2 CFR 200.403(h) stated that a non-federal entity may charge only allowable costs incurred during the approved budget period of a federal award’s period of performance. In addition, the PRF terms and conditions noted that to be considered an allowable expense under PRF, the expense must be used to prevent, prepare for, and respond to COVID-19 and that those expenses were not reimbursed from other sources and other sources were not obligated to reimburse them. Condition/Context: The Organization decided that it was critical to keep Astria Toppenish Hospital (Toppenish) operating during the COVID-19 pandemic despite Toppenish experiencing losses. As a result, the Organization determined that all expenses of the Organization not explicitly unallowable per the related guidance and not reimbursed or obligated to be reimbursed by other sources qualified as allowable expenses that prevented, prepared for, and responded to COVID-19 during the period of availability that they were experiencing losses for Toppenish. Internal unaudited financial statements had losses in excess of the PRF funds used for expenses. Support was audited for expenses selected; however, because there were no financial statement audits performed from 2018 – 2020, we were unable to audit the Toppenish losses calculated by management. Repeat Findings from Prior Year(s): This is not a repeat finding. Cause/Effect: In addition to the challenges encountered while operating a health system during the COVID-19 pandemic, leading up to the audit period, the Organization was significantly impacted by bankruptcy and turnover of leadership. As a result, no financial statement audits were performed from 2018 – 2020. A financial statement audit was performed in 2021; however, the related Toppenish expenses were incurred prior to December 31, 2020. We were unable to obtain audit evidence supporting Toppenish’s losses for the year ended December 31, 2020. As a result of these matters, we were unable to determine whether the Organization complied with the allowable costs/cost principles requirements applicable to the major program. Questioned costs: Could not be determined. Recommendation: We recommend management implement policies and procedures to ensure that the Organization understands the terms and conditions of the Federal award and can meet the related compliance requirements. Views of Responsible Officials and Planned Corrective Action: Management agrees with the finding. The Organization will review and modify policies and procedures over the program to ensure management implements policies and procedures to ensure there is understanding of the terms and conditions of Federal awards.