Finding Text
Finding Number: 2024-004 Material Weakness – Compliance and Internal Control over Compliance Finding over Schedule of Expenditures of Federal Awards Federal Award: No. 93.778 U.S. Department of Health and Human Services – Grants to States for Medicaid Federal Agency: U.S. Department of Health and Human Services Pass-Through Entity: County of Monterey, California Repeat Finding: No Criteria or Specific Requirement: Under 2 CFR §200.501, Audit Requirements, a Non-Federal entity that expends $750,000 or more in federal awards during its fiscal year (June 30, 2024) is required to obtain a Single Audit. Management is responsible for establishing and maintaining internal controls to identify, track, and monitor federal expenditure throughout the fiscal year to ensure compliance with federal requirements, including determining whether a Single Audit is required. Condition: The Organization did not maintain a process to track cumulative federal expenditures during the fiscal year. As a result, management was unaware that federal expenditures exceeded the Single Audit threshold and did not timely identify the requirements to undergo a Single Audit. The Organization was unable to accurately monitor federal expenditures throughout the year and did not compile the complete Schedule of Expenditures of Federal Awards (SEFA) until after year-end. Cause: Management had not implemented adequate internal controls or procedures to identify, accumulate, and monitor federal expenditures from all federal funding sources. Additionally, personnel responsible for financial reporting were not sufficiently familiar with federal audit requirements under Uniform Guidance, including the annual assessment of Single Audit applicability. Effect: The Organization did not timely comply with federal audit requirements and may be at increased risk of noncompliance with other federal requirements due to inadequate monitoring of the federal awards. Failure to identify federal expenditures throughout the year also increased the risk of incomplete or inaccurate reporting of federal awards and delayed the completion of the required Single Audit. Questioned Costs: None Context: The Organization was not able to retain or replace personnel with the appropriate skills and knowledge to implement appropriate procedures and controls. Recommendation: We recommend that management establish formal policies and procedures to identify, track, and monitor federal awards and expenditures on an ongoing basis. These procedures should include recording and tracking expenditures, Assistance Listing Numbers and federal programs. A periodic review of cumulative federal expenditure should be performed during the fiscal year. Providing training to accounting and financial personnel regarding Uniform Guidance requirements, including Single Audit thresholds and reporting obligations. View of Responsible Officials: Valley Health Associates management understands the severity of this finding and will work to correct as per the recommendation. Management will work with knowledgeable staff to ensure the SEFA report is updated in a timely manner and deadlines are not missed.