Finding Text
U.S. Department of Health and Human Services
Federal Financial Assistance Listing Number 93.829 Section 223 Demonstration
Programs to Improve Community Mental Health Services - 1H79SM088927-01
Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Period of
Performance
Material Weakness in Internal Control over Compliance
Criteria The OMB Compliance Supplement requires that non-federal entities receiving federal
awards establish and maintain internal controls designed to reasonably ensure
compliance with federal laws, regulations, and program compliance requirements.
Condition During our testing, some payroll expenditures were not fully supported by underlying
payroll information. In addition, there was no documentation of review and approval of
expenditures allocation to the federal program.
Cause The Organization did not have an adequate internal control policy to ensure review and
approval of expenditures and the allocation of expenditures to the federal program was
documented.
Effect The lack of adequate policies governing the recording of expenditures to the program
increases the risk that employees participating in the federal award administration may
not be able to detect and correct noncompliance in a timely manner.
Questioned Costs None reported.
Context/Sampling A nonstatistical sample of 21 direct expenditures and 2 indirect expenditures submitted
for reimbursement were selected for testing. Of these 23, 5 were not fully supported by
underlying payroll information and none showed evidence of proper review and
approval prior to being allocated to the federal program.
Repeat Finding from Prior Year(s) No
Recommendation We recommend that the Organization enhance internal control policies to ensure all
expenditures are reviewed and approved prior to payment to ensure that all payments
are necessary for the program and correct.
Views of Responsible Individuals Management agrees with the finding.