Finding Text
Finding 2022-007 Lack of Internal Control over Activities Allowed or Unallowed and Allowable Costs/Cost Principles
Federal Agency: U.S. Department of Housing and Urban Development and U.S. Department of the Interior
Federal Program: Indian Housing Block Grant (IHBG) and Aid to Tribal Governments (ATG), respectively
ALN: 14.867 (IHBG) and 15.020 (ATG), respectively
Award Numbers: 55IT0212790 and 21AH0212790 (IHBG) and A19AV00203 (ATG), respectively
Award Year: 2021 and 2022 (IHBG) and 2019 (ATG), respectively
Type of Finding: Material weakness in internal control over compliance and material noncompliance
Criteria: Adequate internal controls procedures require that all cash disbursements be reviewed and approved to ensure accuracy. Additionally, each cash disbursement should be accompanied by supporting documentation to substantiate the disbursement.
Condition and context: During our testing of cash disbursements charged to the Indian Housing Block Grant program, we noted that out of a sample of fifteen (15) transactions reviewed, one (1) lacked supporting documentation and documentation of adequate approval. During our testing of cash disbursements charged to the Aid to Tribal Governments program, we noted that out of a sample of six (6) transactions reviewed, two (2) lacked supporting documentation and documentation of adequate approval.
Cause: Lack of internal control and proper retention of support for cash disbursements
Effect: Lack of internal controls may foster an environment allowing for the potential for misstatement of the financial statements, as well as increase the risk of misappropriation of assets within the organization.
Questioned Costs: Known or likely questioned costs are below the $25,000 reporting threshold.
Repeat finding: No, this is not a repeat finding. However, even though it is not a repeat finding, we believe it is a systemic issue due to the number of errors noted.
Recommendation: We recommend the Village adhere to their internal control policies to ensure all cash disbursements are accompanied by properly approved, supporting documentation. Expenditures should be reviewed by an authorized individual who does not request the cash disbursements to ensure each transaction is allowable and properly recorded in the general ledger.
Management’s Response: Management concurs with the finding. See Corrective Action Plan.