Finding 1153398 (2022-001)

Material Weakness Repeat Finding
Requirement
L
Questioned Costs
-
Year
2022
Accepted
2025-09-18

AI Summary

  • Core Issue: The Organization struggles to complete financial audits and compliance reports on time, impacting oversight and accountability.
  • Impacted Requirements: Compliance with State and Federal regulations mandates audits within nine months of the fiscal year-end.
  • Recommended Follow-Up: Ensure clarity on reporting responsibilities among subcontractors to meet timely audit requirements.

Finding Text

Statement of condition: The Organization has been challenged in recent years to provide for a timely financial statement audit and major Federal program compliance reporting in accordance with the Federal Single Audit Act. Timely external financial reporting is a critical internal control feature for the Board and management to provide for prudent oversight of program operations. Further, many of the Organization's grants and contracts have accountability to provide its audited financial statement and Federal major program compliance audit. Criteria: The State of Rhode Island, Department of Behavioral Healthcare, Developmental Disabilities, and Hospitals as well as the Federal 45 CFR 75 Subpart F, require financial and programmatic compliance reporting via an external audit within nine (9) months of the fiscal year-end. Cause of condition: There was a lack of clarity among the subcontractors regarding the reporting responsibilities for grant activities for the funding agencies. Effect of condition and context: Non-compliance with the State of Rhode Island, Department of Behavioral Healthcare, Developmental Disabilities, and Hospitals and the Federal 45 CFR 75 Subpart F reporting requirements. Recommendation: We recommend the Organization provide for timely audited financial and program compliance reporting consistent with the State of Rhode Island, Department of Behavioral Healthcare, Developmental Disabilities, and Hospitals as well as the Federal 45 CFR 75 Subpart F.

Corrective Action Plan

We agree with the recommendation and understand the required compliance responsibility to provide audited financial statements and major Federal program compliance reporting timely each fiscal year, in accordance with the Federal Single Audit Act. Because of past misunderstandings and incorrect assumptions about major Federal program compliance requirements for fiscal 2019, 2020, 2021, and 2022, management failed to provide for timely audits. One critical assumption was that the Organization’s subrecipient, responsible for over ninety percent (90%) of grant distributions, fulfilled the audit requirement for the required Federal grant reporting under the Single Audit Act. However, upon recognizing this error, the Organization promptly engaged for the financial statement and major Federal program compliance audits spanning multiple years including up to last fiscal year and is on track to provide for timely filing with the current year. With this understanding and the expectation of financial statement and major Federal program compliance audits, the Organization replaced its contracted accountants by hiring its first Chief Financial Officer (CFO) in January of 2021 and a number of additional support accountants beginning in November of 2021 through January of 2024. Upon hire, and with the growth of the programming, the CFO and the accounting team focused extensively on enhancing the Organization’s financial reporting framework and data management systems to ensure continued compliance with federal and state guidelines and reporting requirements. This effort has been crucial in expediting the more recent audits and improving overall efficiencies in the day-to-day and monthly financial reporting and budgeting requirements. Further, the Organization must acknowledge the challenges posed by the transition of multiple Chief Executive Officers in a 2-year period as well as the impact of the pandemic on operations and reporting. These two factors affected operations and time lines as well as access to data files as many were in paper form. Despite these difficulties, management’s commitment to timely financial reporting and program compliance remains steadfast and are working diligently to get its timing back on track going forward.

Categories

Internal Control / Segregation of Duties Reporting

Programs in Audit

ALN Program Name Expenditures
93.788 Opioid Str $1.64M
93.959 Block Grants for Prevention and Treatment of Substance Abuse $1.34M
93.958 Block Grants for Community Mental Health Services $745,859