Finding 1118445 (2024-001)

Finding Reference: 2024-001 – A. Activities Allowed or Unallowed; B. Allowable Costs/Cost Principles Federal Program Information Federal Agencies: Department of Health and Human Services Awards: Assistance Listing 93.959 – Block Grants for Substance Use Prevention, Treatment, and Recovery Services Award Periods: June 1, 2023 – June 30, 2024 Description: Review and Approval of Purchase Orders Type of Finding: Material Weakness in Internal Control Over Compliance Criteria In accordance with Title 2 U.S. Code of Federal Regulations, Part 200.303, Internal controls, “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.” Condition The Corporation did not have appropriately designed internal controls in place over the grant subaward related to review and approval of the purchase orders that were included in the Behavioral Health System Baltimore, Inc. (BHSB) submissions. Cause The Corporation did not obtain sufficient evidence of the review and approval of purchase orders reported to BHSB in the required submissions.   Effect or potential effect The expenditures included in the BHSB submissions could be unallowed costs. Questioned costs None. Identification of a repeat finding No. This is not a repeat finding. Context In order to evidence review and approval of individual expenditures, management reviews and approves expenditures as part of the purchasing and payables business process, specifically the review and approval purchase orders. In conjunction with our testing related to the submissions and allowability, we selected a sample of expenditures to test management’s review and approval of expenditures as part of the purchasing and payables business process. In accordance with the Corporation’s purchasing and payables business process, vendor specific purchase orders must be reviewed and approved prior to the payment of the invoices. There were six purchase orders totaling $18,052, or approximately 5% of our population, that did not have approval. These purchase orders were isolated to one vendor for purchases that is set up under the Corporation’s group purchasing process, which did not always require a segregation between the requisitioner and approver during the grant period. The purchases from our testing that did not have an approval, all occurred subsequent to March 2024, which is when the employee turnover occurred, and a new approver was not designated yet. As a result, the respective orders did not route for approval as the purchase order was submitted by the previous approver. Based on review of the purchase order and invoice for the sample selected, no expenditures were identified as unallowable based on the terms and conditions of the grant agreement and federal program.   Recommendation Management should obtain documentation that evidences the review and approval of expenditures submitted to BHSB. View of responsible officials There is no disagreement with the audit finding.