FAC Explorer

Finding 1158083 (2023-006)

Material Weakness Repeat Finding
Requirement
C
Questioned Costs
$1
Year
2023
Accepted
2025-09-30
Audit: 370022
Organization: Native Village of Point Hope (AK)
Auditor: Altman Rogers & CO

AI Summary

  • Core Issue: There is a significant lack of internal control over cash management, leading to misuse of federal grant funds.
  • Impacted Requirements: Compliance with 2 CFR 200.305, which mandates that advanced cash payments be used solely for designated grant programs.
  • Recommended Follow-up: The Village should closely monitor grant budgets and cash drawdowns to prevent unearned revenue from exceeding available cash, ensuring proper fund allocation.

Finding Text

Finding 2023-006 Lack of Internal Control over Cash Management Federal Agency: U.S. Department of the Interior and U.S. Department of the Treasury Federal Program: Aid to Tribal Governments (ATG); Consolidated Tribal Government (CTG); and Coronavirus State and Local Fiscal Recovery Funds (CSLFRF), respectively ALN: 15.020 (ATG); 15.021 (CTG); and 21.027 (CSLFRF), respectively Award Numbers: A19AV00203 (ATG); A19AV00203 and A22AV00218 (CTG); and SLFRP4178/4850 (CSLFRF), respectively Award Year: 2021 (ATG); 2021 and 2022 (CTG); and 2021 (CSLFRF), respectively Type of Finding: Material weakness in internal control over compliance and material noncompliance. Criteria: The requirement for cash management as contained in 2 CFR 200.305, states advanced cash payments must be used only for applicable grant programs. Condition and Context: Procedures related to cash management were inadequate to ensure that grant funds drawn down were used for grant expenditures in the applicable program. We compared the unearned revenue balances of the grant funds with the available cash balances at year end. The Village’s cash balances for all governmental funds amounted to $7,546,844 at December 31, 2023. The unearned revenues were $8,138,199 which resulted in a shortfall of $591,355. The ATG and CTG programs had unearned revenue balances of $552,928, and the CSLFRF program had an unearned revenue balance of $6,624,359 as of December 31, 2023. Cause: Lack of internal control over cash management. Effect: The Village requested and received advances for various federal programs to cover expenditures. Cash advances were used to fund other unrelated programs of the Village. Questioned Costs: $591,355, which is the shortfall between cash and cash equivalents and the unearned revenue balances. Repeat Finding: This is a repeat of Finding 2022-003, and since it is a repeat finding we believe this to be a systemic issue. Recommendation: We recommend that the Village monitor grant budgets and drawdowns throughout the year and ensure that program funds are not being lent or borrowed between programs to ensure that unearned revenue balances do not exceed total cash and cash equivalents. Management’s Response: Management concurs with this finding. See corrective action plan.

Corrective Action Plan

Finding 2023-006 Lack of Internal Control over Cash Management Type of Finding: Material Weaknesses Name of Contact: Adela Lane, Executive Director Corrective Action Plan: 1. Strengthen the payment review process: • Action: Enforce and document a stricter segregation of duties in the payment process. This will ensure the individual requesting a payment is not the same person who authorizes the payment. • Details: All payment requests must be cross-referenced with a corresponding invoice or receipt and reviewed and approved by an authorized department head. This Department Head must not be the one who submitted the initial request. 2. Implement a two-tiered review for cash receipts: • Action: Establish a formal two-tiered cash receipts process to enhance accountability and accuracy. • Details: o Tier 1: The individual receiving and logging cash receipts will immediately perform a preliminary count and documentation. o Tier 2: A separate, authorized staff member will perform a second, independent review of the cash receipt records and verify the funds against the deposit slip before the funds are deposited. 3. Standardize training and onboarding for all staff: • Action: Develop a standardized training curriculum on financial management policies and procedures, including a dedicated section on cash management best practices. • Details: o All new permanent and staff members will undergo mandatory training on the updated policies. o Training will cover the importance of internal controls, specifically emphasizing segregation of duties in cash handling. o The Executive Director will meet with all new finance and administrative staff within their first two weeks to review proper protocols and emphasize the organization's commitment to financial controls. 4. Introduce periodic, surprise cash audits: • Action: Conduct unannounced cash counts and reconciliations to ensure compliance with procedures. • Details: An authorized, independent party will perform these surprise audits quarterly to check cash on hand and compare records against financial systems. 5. Enhance oversight and reporting: • Action: The Executive Director will provide regular updates on the implementation of these corrective actions to the Native Village of Point Hope Tribal Council. • Details: A formal report will be presented quarterly, outlining the progress of the corrective actions and any findings from the new oversight procedures. This provides a clear accountability mechanism. Proposed Completion Date: Ongoing, starting in early 2026.

Categories

Questioned Costs Cash Management Material Weakness

Other Findings in this Audit

  • 1158073 2023-004
    Material Weakness Repeat
  • 1158074 2023-005
    Material Weakness Repeat
  • 1158075 2023-006
    Material Weakness Repeat
  • 1158076 2023-007
    Material Weakness Repeat
  • 1158077 2023-004
    Material Weakness Repeat
  • 1158078 2023-005
    Material Weakness Repeat
  • 1158079 2023-006
    Material Weakness Repeat
  • 1158080 2023-007
    Material Weakness Repeat
  • 1158081 2023-004
    Material Weakness Repeat
  • 1158082 2023-005
    Material Weakness Repeat

Programs in Audit

ALN Program Name Expenditures
14.867 Indian Housing Block Grants $375,302
15.020 Aid to Tribal Governments $374,218
21.027 Coronavirus State and Local Fiscal Recovery Funds $360,593
15.021 Consolidated Tribal Government $245,868
20.205 Highway Planning and Construction $178,417
15.141 Indian Housing Assistance $96,639
93.047 Special Programs for the Aging, Title Vi, Part A, Grants to Indian Tribes, Part B, Grants to Native Hawaiians $67,149
15.144 Indian Child Welfare Act Title II Grants $65,737
21.032 Local Assistance and Tribal Consistency Fund $56,261
15.040 Real Estate Programs Indian Lands $30,076
15.024 Indian Self-Determination Contract Support $24,849
15.130 Indian Education Assistance to Schools $8,520
15.029 Tribal Courts $1,896