Finding Text
Criteria: Uniform Guidance (2 CFR 200.302(b)(7) and 2 CFR 200.430) requires entities to establish and maintain effective internal control over federal awards, including ensuring that expenditures are properly authorized and supported by adequate documentation. Condition: During testing, the Organization was unable to provide documented evidence of disbursement approvals, as approvals are frequently communicated verbally or via text message and are not retained. In addition, the Organization was unable to provide employment agreements or other documentation supporting employee pay rates for individuals whose compensation was charged to the federal program. Cause: The condition appears to result from inadequate policies and procedures over documenting and retaining evidence of approval for expenditures, including both disbursement authorization and employee compensation arrangements, as well as a lack of formal controls requiring retention of such documentation. Effect: As a result, there is an increased risk that expenditures charged to federal programs may be unauthorized, improperly approved, unsupported, or not allowable under Uniform Guidance. The lack of documentation also limits the effectiveness of audit procedures and increases the likelihood that noncompliance could occur and not be detected. No questioned costs were identified as a result of this finding. Recommendation: We recommend that the Organization establish formal procedures requiring documented authorization for all disbursements and ensure that such approvals are retained in an organized and accessible manner. Additionally, the Organization should implement procedures requiring formal documentation of employee compensation arrangements, including established pay rates, and ensure that this documentation is consistently maintained and readily available for audit and compliance purposes. Management’s Response: Management agrees with the finding and indicates that it will implement formal approval procedures requiring documented authorization for all disbursements and will retain such documentation within its accounting records. Management also plans to implement standardized employment agreements and compensation authorization documentation for all employees and strengthen document retention practices to ensure compliance with federal requirements.