Finding 12302 (2022-003)

2022-003 - Cash Management and Reporting Material Noncompliance Material Weakness in Internal Controls Over Compliance Finding Reference: 2022-003 Federal Agency: United States Department of Health and Human Services Pass-Through Agency: California Department of Public Health Federal Program Title: Epidemiology and Laboratory Capacity for Infectious Diseases Federal Catalog Number: 93.323 Federal Grant Numbers: 6 NU50CK000539-02-10 / COVID-19ELC59 Award Names: COVID-19 ELC Enhancing Detection Expansion Funding ? Coronavirus Response and Relief Supplemental Appropriations Act 2021 Criteria U.S. Code of Federal Regulations, Title 45, Part 75, section 75.303 Internal Controls, require the non-federal entity to: a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government,? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework,? issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). b) Comply with Federal statutes, regulations, and the terms and conditions of the Federal awards. c) Evaluate and monitor the non-Federal entity's compliance with statutes, regulations and the terms and conditions of Federal awards. The County manages the following grant with the California Department of Public Health (CDPH) under the Epidemiology and Laboratory Capacity for Infectious Diseases program under Assistance Listing Number 93.323: ? CDC - Epidemiology and Laboratory Capacity (ELC) Enhanced Detection Expansion Coronavirus Response and Relief Supplemental Appropriations Act, 2021; (ELC3) This grant is managed through the Alameda County Health Care Services Agency (HCSA). The County is required to submit a detailed budget in the Spend Plan and monthly expenditure reports that measure expenditures against the budget. Condition The HCSA used an internal tracking spreadsheet as the basis for the monthly expenditure reports and claims for reimbursement submitted to CDPH to track actual expenditures since the inception of the grants, and erroneously included encumbered costs in its tracking. Cumulative expenditures through June 30, 2022 amounted to $45.8 million, which included encumbrances. The spreadsheet was the basis for the monthly expenditure reports and claims for reimbursement submitted to CDPH. Accordingly, reported expenditures and claimed expenditures on a cumulative basis were both overstated by $12.6 million as of June 30, 2022. Cause The HCSA interpreted the monthly expenditure reporting requirements to include encumbered costs in the fiscal period of encumbrance. Reimbursement requests were prepared based on information from the monthly expenditure reports, and thus were also overstated. Effect Monthly expenditures reports and claims for reimbursements were cumulatively overstated by $12.6 million as of June 30, 2022. Questioned Costs Questioned costs of $12,583,345 represent the amount claimed above actual expenditures as of June 30, 2022. Recommendation We recommend that the HCSA take measures to adjust its monthly expenditure reports within the Spend Plan and the reimbursement claims to report actual expenditures, and revisit grant award provisions pertaining to reporting requirements to ensure that both the reports and the claims are prepared using the appropriate basis of accounting. View of Responsible Officials Management?s response is reported in a separate section at the end of this report.