Finding Text
Finding No. 2024-006 – Purchases and disbursement cycle Federal Program ALN 93.498 Provider Relief Fund - CARES Act Name of Federal Agency U.S. Department of Health and Human Services Category Non-compliance / Material Weakness in internal controls over compliance Compliance Requirement Activities Allowed/Cost Principl Criteria The Purchasing Procedures Manual or “Reglamento de compras” of the Corporation, in its articles 14 “Inicio de las gestiones de compra” and 15 “Subastas informales”, establishes the parameters and process to begin a purchase, that includes the issuance of a purchase requisition as well as of the requirement of a quotation for determined purchases. In addition, 2 CFR §200.302 – Financial Management, states that management must maintain records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. Also, 2 CFR §200.334 – Retention Requirements for Records, states that the recipient and subrecipient must retain all Federal award records for three years from the date of submission of their final financial report. Records to be retained include but are not limited to, financial records, supporting documentation, and statistical records. Finally, 2 CFR §200.303 – Internal Controls state that the recipient and subrecipient must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition During testing of internal control procedures over purchases and cash disbursements of Provider Relief Funds, we examined processed invoices and payments that lacked properly approved purchase requisitions and quotations. The documents could not be located by management and thus, were not made available for examination. Cause This deficiency is the result of lack of knowledge from the employees and overall absence of implementation, monitoring and proper compliance with internal controls of the Corporation’s procedures. Effect The Corporation did not comply with its purchasing procedures manual. This condition increases the risk of improper or fraudulent purchases, the selection of higher-cost vendors, and other procurement irregularities. Because these transactions were funded with federal awards, this condition also increases the risk of noncompliance with federal requirements and the potential for questioned costs. Questioned cost None. Context During the audit of substantive tests of compliance related to Provider Relief Fund disbursements, from a sample of twenty-five (25) disbursements, we examined twenty-five (25) invoices, in which, six (6) of them lacked an approved requisition, and proper documentation of quotations. Identification of a repeat finding A similar condition was found in the previous audit on Finding 2023-003 which was an Internal Control over Financial Reporting finding. Recommendation We recommend that the Corporation strengthen its internal controls over the purchasing and disbursement processes to ensure compliance with its established policies and procedures. Specifically, all supporting documentation for purchases and cash disbursements should be reviewed for completeness, accuracy, and compliance with procurement requirements prior to the approval and signing of checks. Any exceptions or unusual items should be resolved and documented before payment is processed. In addition, management should implement supervisory review and monitoring procedures to ensure that procurement activities are performed in accordance with the Corporation’s policies and applicable federal requirements. All supporting documentation should be properly maintained to support transactions and facilitate audit and internal review purposes. Views of responsible officials and planned corrective actions The Corporation’s management and responsible officers agree with this finding. Please refer to the corrective action plan section for the Corporation’s response on pages 85 to 90.