Finding Text
Finding Number: 2024-003 Allowable Costs; Cash Management (Material Weakness) Information on Federal Program: U.S. Department of Health and Human Services ALN Number: 93.676 ALN Name: Unaccompanied Children Program Contract Period: July 1, 2023 through June 30, 2024 Criteria: In accordance with the Uniform Guidance §200.405, if costs benefit multiple programs, the costs should be allocated to the programs based on the proportional benefit. Per the Uniform Guidance §200.413, direct costs are those costs that can be identified specifically or directly assigned to such activities relatively easily with a high degree of accuracy. Additionally, Uniform Guidance §200.302 states that the non-federal entity’s financial management systems, including records documenting compliance with federal statutes, regulations, and the terms and conditions of the federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracking of expenditures to establish that such funds have been used in accordance to the federal statutes, regulations, and the terms and conditions of the federal award. Condition: During our audit, we noted that certain payroll expenses and other than personnel service expenses are not being charged directly or allocated to the correct cost center in the accounting system monthly. Therefore, the amounts being drawn down during any given month may not be fully supported until the year-end when a reallocation of costs by function occurs. Questioned Costs: None noted. Context: This is a condition identified per review of Lincoln Hall’s compliance with allowable costs and cash management. Effect or Potential Effect: We observed that Lincoln Hall did not have formal cost allocation processes in place to properly allocate certain expenses throughout the year. As a result, these expenses were manually adjusted by the Finance team at year-end. As a result, we were unable to obtain sufficient evidence to verify that certain costs were properly allocated to the program throughout the year to properly support drawdowns during any given month. Furthermore, as awards for this program are funded under the cost reimbursement method, this finding also impacts the cash management requirement to properly support any drawdowns that occur throughout the year. Repeat Finding: This is a repeated finding from prior year. See Finding No. 2023-003 on the Summary Schedule of Prior Audit Findings. Cause: There is no effectively established periodic review or assessment process to ensure the accuracy of employee assignments within ADP throughout the year. Recommendation: The lack of proper monthly federal and state cost allocation prevents Lincoln Hall from presenting functionally accurate interim financial statements. We recommend implementing a process to ensure these costs are allocated correctly within Lincoln Hall’s general ledger monthly. Regular cost allocation will enable Lincoln Hall to submit accurate and substantiated interim financial data to its funding sources. Additionally, proper tracking and allocation of costs monthly will help prevent significant year-end cost reallocations by function. Views of Responsible Officials: Lincoln Hall agrees with the finding. Lincoln Hall continues to take steps to improve this process. See Lincoln Hall’s further response to this finding as described in the accompanying management’s planned corrective actions, Appendix A.