Finding 1213862 (2023-005)

Allowable Costs/Cost Principles / Period of Performance Federal Agency: U.S. Department of Health & Human Services Federal Program Name: Community Services Block Grant Federal Award Identification Number and Year: 2201TNCOSR, 2001TNCSC3, 2301TNCOSR - 2023 Pass-Through Agency: Tennessee Department of Human Services Pass-Through Number: Z-20-49109, Z-21-49109, Z-22-49209COV, Z22-49209 Assistance Listing Number: 93.569 Award Period: July 1, 2022 – June 30, 2023 Type of Finding: • Material Weakness in Internal Control over Compliance • Material Noncompliance (Modified Opinion) Criteria or specific requirement: Uniform Guidance requires that costs charged to federal awards be allowable, reasonable, necessary, and adequately controlled. In addition, CSBG program guidanceissued by HHS and state CSBG administering agencies generally requires that assistance toindividuals be restricted to eligible supportive services that further CSBG purposes and that safeguardsexist to prevent misuse of federal funds. Additionally liabilities associated with a grant must be liquidated within 90 days of the end of the grants period of performance. Condition: During our audit we identified that CAC purchased and distributed gift cards totaling $120,000 to program participants. The gift cards were unrestricted at the vendor level, meaning they could be used to purchase any goods or services and were not limited to allowable CSBG purposes (e.g., food or other eligible supportive services). Other than having the recipient sign a form stating they would utilize the gift card for allowable purposes under the CSBG program, CAC did not implement controls to restrict or monitor the use of these gift cards to ensure expenditures aligned with allowable CSBG activities. Additionally, the liability for the gift cards was not liquidated within 90 days of the end of the grant period of performance. Questioned costs: $120,000 Context: Gift cards were purchased and distributed during the audit period as part of participant assistance activities under ALN 93.569. CAC distributed gift cards to multiple program participants without vendor-based restrictions on allowable use. No compensating monitoring controls or postdistribution verification procedures were implemented. Payment of liabilities associated with a grant are required to be paid within a 90 day period of the end of the grant period of performance unless a waiver is obtained. Cause: Management interpreted participant assistance under CSBG as allowable without sufficiently evaluating whether the form of assistance complied with Uniform Guidance allowability standards. Additionally, internal control procedures were not designed to assess or mitigate the risk that unrestricted gift cards could be used for non-CSBG purposes. Controls were not in place appropriately to identify that the payment of liabilities associated with the grant were made within a 90 day period after the end of the grants period of performance. Effect: As a result of the lack of vendor or programmatic restrictions on gift card usage and noncompliance with liability liquidation provisions under Uniform Guidance, Federal funds may have been used for unallowable purposes not consistent with CSBG objectives. The CSBG program is exposed to potential disallowance or repayment of questioned costs. Repeat Finding: This is not a repeat finding Recommendation: We recommend that CAC Discontinue the use of unrestricted gift cards for CSBG funded participant assistance. Implement policies requiring that any gift cards or vouchers be restricted at the vendor level to allowable CSBG purposes or replaced with alternative assistance mechanisms that provide adequate safeguards. Consult state CSBG administering agency guidance prior to implementing participant assistance methods to ensure costs are allowable and properly controlled. Also management should implement controls that allow for the identification of liabilities at the end of a grant to allow for payment within the 90 day liquidation period in accordance with Uniform Guidance. Views of responsible officials: There is no disagreement with the audit finding.