Finding 1056097 (2023-002)

Condition: During the year ended September 30, 2023, HOPE did not reliably track federal grant expenditures by unique cost center in the accounting software. Criteria: 45 CFR Part 75 Uniform Administrative Requirements, Cost Principles and Audit Requirements for HHS Awards requires that the nonprofit entity’s financial management systems be sufficient to permit the preparation of reports. In addition, it must provide for the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Cause and effect: HOPE experienced significant turnover in the accounting department during the year. During the year under audit, HOPE reinstated its previous practice for how expenditures are recorded by program using “classes.” HOPE could not provide expenditure general ledger detail from the accounting system that tied to amounts billed to federal funding sources due to the previous methodology being used for part of the year. Audit testing on major program expenditures was conducted based on manual records in support of monthly billings.Recommendation: I recommend that HOPE continue to use “classes” consistently in the accounting software to capture program expenditures by funding source. Views of Responsible Officials: There was significant turnover in HOPE’s Finance Department and rapid organization growth in the specialized revenue streams. As a result of the rapid expansion and the addition of new revenue streams, the Department was unable to effectively track financial expenses as required. The original accounting structure was evaluated and determined to not be suitable for the new revenue streams and their requirements. Implementation of a new system of accounting for expenses was introduced using “class codes” and staff were required to adjust to changes fairly quickly months after the expansion had already occurred.