Finding 1072847 (2023-002)

Federal Agencies: U.S. Department of Treasury U.S. Department of Health and Human Services Federal Program Names: Emergency Rental Assistance HIV Prevention Block Grants for Prevention and Treatment of Substance Abuse Assistance Listing Numbers: 21.023 93.914 93.959 Pass-Through Agencies: City of Philadelphia, Office of Addiction Services City if Philadelphia, Division of HIV Health Philadelphia Housing Development Corporation Pass-Through Number(s): 22-20624-01 and 21-20003-02 Award Period: July 1, 2022 through June 30, 2023 Type of Finding: • Material Weakness in Internal Control over Compliance Criteria: 3 CFR Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Award requires compliance with the provisions of allowable costs and allowable activities. The Coalition should have procedures and controls in place to ensure federal funds are only expended on allowable costs and allowable activities as dictated in the contract and budget of the program. Proper documentation should be maintained, reconciled, reviewed, and retained to support all transactions. Condition: As part of the audit management was to provide us with a complete final trial balance where balances agree to the supporting schedules, reconciliations and documentation provided by management. We noted that the trial balance and general ledger detail reports originally provided by management were (a) delayed, (b) included unreconciled material account balances, (c) multiple journal entries (material and not material), (c) transactions missing from the trial balance, and (d) some reconciliations that either did not agree with the trial balance or individual transactions could not be traced back from the documentation provided to the general ledger. This had caused delays in the completion of the audit, preparation of financial statements, and associated disclosures and the timely arrival of our audit and single audit conclusion. Questioned costs: None Context: The results of our testing concluded that there were no instances of material noncompliance as described 3 CFR Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. The finding identified impacted the Coalition’s internal control over compliance as it relates to the Coalition's financial reporting and close process. Cause: The Coalition had implemented a new financial accounting software packge for the purpose of integrating the Coalition and its program partners into one complete financial reporting package, in the previous fiscal year. Due to the uniqueness of the Coalition and its mission management had faced many challenges in managing its financial account software package from the aspect of how the scripts within the system to processing of transactions between the Coalition and its program partners. These challenges have limited management’s ability to provide accurate financial reports and reconciliations where audit procedures could be performed. Additionally, the Coalition had seen some turnover within its finance department which has put a burden on management to handle the challenges within the new financial accounting software package and the ability to timely and accurately reconcile account balances between the trial balance and supporting documentation or schedules. The combination of these two circumstances had caused management to be delayed in providing a final trial balance along with the significant number of journal entries added to agree the supplemental documentation to the trial balance. Effect: Controls over financial reporting and close processes are not adequate to determine that costs have been properly included and reported. This could lead to a funding agency requesting a return of funds. Recommendation: We recommend that management implement policies and procedures as it relates to the reconciliation of accounts, tracking of transactions, and regular review to ensure that calculations of general ledge account balances are accurate and complete. In addition, we continue to recommend that management revisit its financial closing and reporting policies to include updates to its procedures for year-end closes and the timing of when final journal entries and analysis are performed. Views of Responsible Officers and Corrective Action Plan: Please refer to Urban Affairs Coalition’s Corrective Action Plan