Finding 1222660 (2024-005)

Assistance Listing Number: 93.558 Name of Federal Program or Cluster: Temporary Assistance for Needy Families (TANF) Name of Federal Agency: Department of Health and Human Services Name of Pass-Through Entity: Virginia Department of Social Services Pass-Through Entity Identifying Number: BEN-21-029 Award Period: July 1, 2023 through June 30, 2024 Criteria or Specific Requirement: Title 2 CFR §200.302(b) requires non-federal entities to maintain effective control and accountability over all funds and to provide accurate, current, and complete disclosure of the financial results of each federally sponsored project or program. In addition, 2 CFR §200.328 requires financial reports to be supported by the entity’s accounting records and to be accurate and complete. Condition: The organization prepared various required financial reporting line items using budgeted amounts rather than actual expenditures recorded in the underlying accounting records. As a result, reported amounts did not agree to the general ledger and supporting accounting documentation. The variances were identified across multiple reporting line items and were not supported by reconciliations to actual expenditures. Cause: The condition occurred due to deficiencies in internal controls over financial reporting. Specifically, UCM relied on budgeted amounts rather than actual expenditures recorded in the accounting system when preparing required financial reports. In addition, formal written procedures do not clearly require that reported amounts be reconciled to the underlying accounting records prior to submission, and there was insufficient review and oversight to ensure that financial reports were prepared using actual data from the general ledger. Effect or Potential Effect: Because financial reports were not prepared using actual expenditures recorded in the accounting records, reported amounts may be inaccurate or incomplete. The use of budgeted amounts rather than actual financial data increases the risk that expenditures reported to the federal awarding agency or pass-through entity are misstated and not supported by the organization’s accounting records. As a result, UCM may be out of compliance with federal reporting requirements and federal agencies may rely on inaccurate financial information for monitoring and funding decisions. Recommendation: UCM should strengthen its internal controls over federal financial reporting by establishing and documenting procedures requiring that all reports submitted to federal awarding agencies or pass-through entities be prepared using actual expenditures recorded in the accounting system. These procedures should include a reconciliation of reported amounts to the general ledger and supporting documentation prior to submission, as well as an independent review process to ensure reported information is accurate, complete, and compliant with Uniform Guidance requirements. Views of Responsible Officials: Management acknowledges the finding and will work to implement appropriate corrective actions to address the deficiency and improve compliance going forward.