Finding Text
Material Weakness Finding No. 2023-005: Allowable Costs/Cost Principles U.S. Department of Housing and Urban Development Passed Through the State of Hawaii Department of Human Services Emergency Solutions Grant Program Coronavirus Federal Assistance Listing Number 14.231 Criteria Pursuant to the Uniform Guidance, 2 CFR 200.403, Allowable Costs, costs must be necessary, reasonable, and adequately documented to be allowable under federal awards. Futhermore, 2 CFR, 200.303 states that the non-federal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the entity is managing the award in compliance with federal statutes and regulations. Condition We noted that during 2023, KMNH’s chief executive officer performed accounting functions including recording cash disbursement transactions and reconciliation of the monthly bank statement balances to the cash balances in the general ledger. In addition, there was no evidence of a supervisory review of supporting documentation for expenditures. Cause Due to the limited number of employees, there is not only a lack of consistent supervisory review of supporting documentation of expenditures, but also a lack of segregation of duties to ensure that disbursement transactions are accurately recorded and are compliant with the Uniform Guidance allowable costs/cost principles. Effect Without proper segregation of duties and supervisory review of supporting documentation of expenditures, there is a reasonable possibility that a material misstatement of KMNH’s expenditures of federal awards will not be prevented or detected and corrected on a timely basis. Recommendation We recommend that KMNH engage an accountant to provide relevant services and to implement a supervisory review process of supporting documentation of expenditures and to develop appropriate policies and procedures to ensure proper segregation of duties. Views of Responsible Officials and Planned Corrective Action KMNH agrees with the finding and recommendation and will continue its efforts to hire a bookkeeper.