Finding Text
Finding 2025-005: Inadequate Controls Over Federal Reimbursement Draw Requests - Significant Deficiency Federal Program: Substance Abuse and Mental Health Services Projects of Regional and National Significance Assistance Listing Number: 93.243 Federal Agency: U.S. Department of Health and Human Services Federal Award Identification Numbers: 5H79TI084239-03, 5H79TI084239-04, 5H79TI084739-02, 5H79TI084739-03, 5H79TI082707-05 Award Year: 2024 and 2025 Criteria: Per 2 CFR § 200.305(b), payment methods must minimize the time elapsing between the transfer of federal funds and the disbursement of those funds by the recipient. For reimbursement payment methods, draw requests should be based solely on allowable, allocable, and paid expenditures. Effective internal controls, as required by 2 CFR § 200.303, include supervisory review of supporting documentation to verify the accuracy, completeness, and allowability of expenditures prior to submitting reimbursement requests. Condition: For 10 of 10 reimbursement draw requests tested, Mending Hearts’ did not maintain controls to ensure draw requests were supported by a review of actual expenditures paid prior to submission. Specifically, reimbursement requests were not tied directly to actual expenditures incurred and paid by Mending Hearts. In addition, there was no documented review of supporting invoices, payment documentation, schedules, or other reports to verify that expenditures had been paid with Mending Hearts’ funds before reimbursement was requested. Cause: Management has not established or implemented formal procedures requiring reimbursement requests to be reconciled to paid expenditures and independently reviewed prior to submission. Effect: Without adequate review procedures, Mending Hearts is at increased risk of requesting reimbursement for expenditures that have not yet been paid, are unsupported, or are otherwise unallowable. This increases the risk of noncompliance with federal cash management requirements and may result in questioned costs, repayment of federal funds, or other administrative action. Questioned Costs: None noted. Context: This condition was identified through testing of 10 reimbursement draw requests selected from the population of federal reimbursement requests submitted during the audit period. Exceptions were noted in all 10 items tested. The transactions tested were selected using a nonstatistical sampling approach and were not intended to be statistically representative of the population. Recommendation: We recommend that management implement formal cash management procedures requiring all reimbursement draw requests to be supported by detailed expenditure schedules and documentation demonstrating that expenditures have been paid with Organization funds. Prior to submitting reimbursement requests, an independent review should be performed and documented to verify that all requested amounts are accurate, supported, allowable, and based on actual paid expenditures. Views of Responsible Officials: Management acknowledges this finding and will address remediation in management's corrective action plan.