Finding Text
Finding 2022-001
Criteria: As stated in the U.S. Department of Health and Human Services (HHS) Grants Policy Statement, grant recipients are required to meet the standards and requirements for financial management systems set forth or referenced in 45 CFR 74.21 or 92.20, as applicable. Further, financial systems must enable grant recipients to do the following:
• Provide accurate, current, and complete financial information about Federal awards.
• Maintain records that adequately identify the sources of funds for federally assisted activities and the purposes for which the award was used.
• Maintain effective control over and accountability for all cash, real and personal property, and other assets under the award.
• Compare actual expenditures or outlays with the approved budget for the award.
• Determine the allowability of costs in accordance with the applicable federal cost principles, program regulations, and other regulations cited in the Notice of Award.
• Minimize the time elapsing between any advance payment under the award(s) and disbursement of the funds for direct program costs and the proportionate share of any allowable indirect or facilities and administrative costs.
Condition: The Association’s controls were not effective to ensure the financial systems migration from Intuit QuickBooks Enterprise to MIP Fund Accounting satisfied the requirements for financial reporting as stipulated by federal regulations and HHS. The initial financial reports provided by the Association did not provide accurate or complete information about the federal awards under its management. Further, initial bank reconciliation reports did not provide proof of effective control over and accountability for cash assets held under the award.
This internal control deficiency is considered to be a material weakness.
Context: Procedures included examining bank reconciliation reports, general ledger detail reports, and budget vs. actual reports by program and tracing to supporting documentation for a sample of transactions in each operations cycle (cash receipts, cash disbursements, payroll disbursements, journal entries).
Cause: The Association changed the software used for maintaining its financial systems from Intuit QuickBooks Enterprise to MIP Fund Accounting in July 2020, beginning with their payroll processing. Full implementation of all other operating cycles occurred effective in January 2021. The system migration did not include adequate vendor support for building a chart of accounts or custom reporting tools to allow for a level of reporting required to produce timely and accurate financial statements for federal reporting needs. Further, the beginning subledgers for accounts receivable and accounts payable, and beginning outstanding reconciling items for cash accounts, were not properly built into the MIP Fund Accounting system during the early implementation process, resulting in the Association having difficulties reconciling their cash accounts. Effect: By not successfully implementing a financial system as required under federal and HHS agency regulations, the Association cannot demonstrate compliance with grantor’s requirements that require accurate, current, and complete financial information regarding the federal awards under its management.
Repeat finding: This finding is a repeat finding in the immediately prior year. Prior year finding number was 2021-001.
Recommendation: The Association continue to work internally and with the software vendor and outside consultants as needed to implement a chart of accounts and custom reporting tools that will assist them in complying with federal regulations regarding its financial system.
View of Responsible Officials: There is no disagreement with this audit finding.