FEDERAL PROGRAM ALL FEDERAL PROGRAMS ON THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AWARD NUMBERS ALL AWARDS COMPLIANCE REQUIREMENT ACTIVITIES ALLOWED OR UNALLOWED TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR 200 §200.302, Financial Management, establishes that: “(a) Each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient 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 the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. (See § 200.450). (b) The recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (1) Identification of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number, year the Federal award was issued, and name of the Federal agency or pass-through entity. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. When a Federal agency or pass-through entity requires reporting on an accrual basis from a recipient or subrecipient that maintains its records other than on an accrual basis, the recipient or subrecipient must not be required to establish an accrual accounting system. This recipient or subrecipient may develop accrual data for its reports based on an analysis of the documentation on hand. (3) Maintaining 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. … (6) Written procedures to implement the requirements of § 200.305. (7) Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award.” STATEMENT OF CONDITION As part of our understanding of internal controls and compliance testing regarding activities allowed or unallowed, we obtained a procedures manual. We found the following deficiencies: • The Center provided written internal control procedures over federal funds management. We observed that the policy didn’t include any detail of procedures, just a general requirement. In addition, the policy does not identify the personnel responsible for the processes to establish segregation of duties. • We selected a sample of 10 (number of disbursements selected) federal funds disbursed and noted that invoices are not marked as they are paid. • From the sample of federal funds disbursed, no evidence was found of approval or verification of allowability of the disbursement, proper segregation of duties, or accountability. • The Center lacks an adequate process to provide regular training to staff on Generally Accepted Government Auditing Standards, general documentation, acquisitions levels, formal agreements with vendors, vendor selections guidelines and best practices, required documentation regarding grant requirements and other internal best practices. QUESTIONED COSTS No questioned costs identified. PERSPECTIVE INFORMATION This is a systematic deficiency. After conducting personnel interviews, we were able to identify procedures for validating the payments. The person told us that after a need to purchase goods or services is identified by the centers, the entity Administrator requests authorization from the President. The President validates with the external accounting firm that the expense category is included in the approved budget and that funds are available before approving the payment. Procedures and internal controls manuals should provide for and ensure the segregation of duties. STATEMENT OF CAUSE The Center didn't have adequate internal controls in place, or documentation that presented adequate segregation of duties and compliance with applicable laws and regulations. In addition, no internal controls were documented that supported proper accountability of funds. POSSIBLE ASSERTED EFFECT The Center could incur in unallowable costs or activities and not be able to prevent or detect a transaction that doesn't comply with the Federal regulation. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that management establish an adequate internal controls process that identifies documentation, personnel responsible and authorizations. In addition, we recommend management to update established written procedures and internal controls manuals to provide and document the segregation of duties related to the activities allowed or unallowed compliance requirement.