2024-004 - Material Weakness in Internal Controls over All Compliance Requirements Federal Agency: U.S. Department of Health and Human Services Federal Programs: Refugee and Entrant Assistance State/Replacement Designee Administered Programs, Refugee and Entrant Assistance Discretionary Grants Federal Assistance Listing Numbers: 93.566; 93.576 Pass-Through Entity Name: Wisconsin Department of Children and Families Pass-Through Grantor's Numbers: 7056, 7060, 7062A, 7065, 7068, 7071, 7072 This is a new finding in 2024 Criteria: Management is required to establish and maintain effective internal controls that provide reasonable assurance they are managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Internal controls should be designed and implemented to ensure compliance with each applicable compliance requirement. Statement of Condition: The Organization did not adequately implement or maintain internal controls to ensure compliance with applicable federal award requirements. Specifically, controls over activities allowed or unallowed, allowable costs/cost principles, cash management, eligibility, period of performance, and reporting areas were either not established, not consistently performed, or not adequately documented. Cause: There was no evidence that reviews occurred by an appropriate member of management related to the Organization's compliance with direct and material compliance requirements. Effect: As a result of these deficiencies, the Organization was exposed to increased risk of noncompliance with federal statutes, regulations, and award terms. Federal funds may be expended for unallowable costs, and financial and program reports may be incomplete, inaccurate, or untimely. The Organization is also at an increased risk of questioned costs, repayment of federal funds, or other administrative actions by the awarding agency. Context: During our audit procedures, we found numerous instances where there was no evidence that controls had been designed and implemented to address compliance with activities allowed or unallowed, allowable costs/cost principles, cash management, eligibility, period of performance, and reporting requirements. Questioned Costs: None. Recommendation: We recommend that management strengthen its internal controls over compliance with federal awards by implementing documented supervisory reviews over activities allowed/allowable costs, cash management, eligibility, period of performance, and reporting. The Organization should also periodically evaluate the effectiveness of the internal controls over all compliance requirements and make improvements where deficiencies are identified. Management Response: The Organization acknowledges that enhancements were necessary to strengthen and document internal controls over compliance with applicable federal award requirements. During fiscal year 2024, the Organization continued working with granting agencies through technical assistance, monitoring, and programmatic training to improve compliance practices. These improvements continued throughout fiscal year 2024. Management recognizes that responsibility for the design, implementation, and maintenance of effective internal controls over federal award compliance remains with the Organization. Corrective actions implemented and ongoing include: • Strengthen documented internal controls over applicable federal compliance requirements. • Maintain documented supervisory reviews over activities allowed or unallowed, allowable costs, cash management, eligibility, period of performance, and reporting. • Periodically evaluate the effectiveness of compliance controls and address identified deficiencies. • Continue utilizing grantor technical assistance and monitoring, as appropriate, while maintaining management responsibility for the Organization’s internal control environment. • Continue training appropriate financial and program personnel regarding federal award requirements and documentation expectations.