Finding Text
Finding 2025-001: Cash Management (Material Weakness) Federal Program: Grants to Provide Outpatient Early Intervention Services with Respect to HIV Disease (Ryan White Part C). [93.918] Federal Agency: U.S. Department of Health and Human Services (HHS) Criteria: Effective internal controls require an entity to have a financial management system that provides accurate, current, and complete disclosure of the financial results of a federally assisted project (2 CFR § 200.302). Drawdown requests must be based on actual incurred expenditures and be properly reviewed for accuracy before submission to minimize the time between draw and disbursement (2 CFR § 200.305). Additionally, the entity must maintain records that adequately identify the source and application of funds for all federally assisted activities (2 CFR § 200.333). Condition: During our audit of the financial management system and cash management practices for the Ryan White Federal Program, we identified the following deficiencies: Transposed Drawdown Amount: A drawdown request submitted to the PMS system for the Ryan White Program had the requested amount transposed with the amount of another federal program. This resulted in an over-request of a material amount on the Ryan White Program. Duplicate Invoice Reimbursement: An invoice was requested and received for reimbursement on a prior drawdown and was subsequently included again in a draw after year-end, resulting in a duplicate reimbursement. Incomplete Expenditure Tracking: The entity did not have a complete system for tracking all expenditures eligible for reimbursement. The drawdown process was limited to cash disbursement and payroll transactions and excluded expenditures incurred and recorded by journal entries. This resulted in the entity having unreimbursed expenditures that could have offset the over-requests noted above. Questioned Costs: $252,567 The questioned costs consist of the material amount over-requested in the transposed drawdown and the duplicate reimbursement of the previously paid invoice. A detailed breakdown is as follows: Over-requested amount due to transposed data: $150,516 Duplicate reimbursement for invoice submitted twice: $102,051 Cause: The organization's internal controls over the cash management and drawdown request process were inadequate. Specifically, there was a lack of a formal review and approval process to verify the accuracy and completeness of drawdown requests before they were submitted. Effect: The deficiencies in internal control led to material noncompliance with federal regulations related to financial management and cash management. This resulted in the entity holding federal funds in excess of immediate needs, which is a violation of the terms and conditions of the federal award. The inadequate financial management system also prevented the entity from accurately tracking and requesting all eligible expenditures, which could have helped offset the over-draws. Context: This is a systemic finding. Repeat Finding: No. This is the first time this specific finding has been identified. Recommendation: The entity should implement robust internal controls to ensure all drawdown requests are reviewed and approved by a second person with authority. A reconciliation of expenditures to the general ledger should be performed before each drawdown to ensure all eligible costs are included and that no duplicate requests are made. The entity’s cash management policies and procedures should be updated to address these deficiencies and ensure compliance with federal requirements. Management Response: The organization acknowledges and we are committed to remediation. To correct the deficiency, we are implementing a plan focused on establishing a review and approval process for all drawdown requests and revising our policies to ensure that all eligible incurred expenditures are properly captured and reconciled, thereby assuring strict compliance with federal cash management regulations and preventing federal funds from exceeding our immediate needs.