Finding Text
Finding 2025-003: Cash Management – Material Noncompliance and Material Weakness in Internal Control over Compliance Federal Program: Health Center Program (Assistance Listing 93.224) and Grants to Provide Outpatient Early Intervention Services with Respect to HIV Disease (Assistance Listing 93.918) Criteria: In accordance with 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. Further, federal cash drawdowns must be limited to the minimum amounts needed and timed as closely as administratively feasible to the organization’s actual and immediate cash requirements. Uniform Guidance also requires recipients to maintain effective internal control over federal awards and to adequately support costs charged to federal programs. Controls over reimbursement requests should provide reasonable assurance that amounts requested are based on actual allowable, allocable, and properly documented expenditures incurred under the federal award. Condition: The CFO prepares the reimbursement amount and provides the CEO with an email summarizing the expenditures included in the draw request. The CEO then submits the reimbursement request through PMS. During testing, we noted that reimbursement amounts were not consistently supported by a reconciliation to actual payroll records, invoices, or other accounting records. Management indicated that because program expenditures routinely exceed the reimbursement amounts requested, draw amounts are sometimes based on estimated or rounded amounts rather than actual expenditures recorded in the accounting records. Additionally, the CEO's review is limited to the expenditure summary provided by the CFO and does not include review of the underlying supporting documentation. Cause: Management has not established a formal review process requiring reimbursement requests to be reconciled to supporting payroll records, invoices, and accounting records prior to submission. The CEO’s review is performed using summary information prepared by the CFO rather than independently reviewing supporting documentation. Effect: Because reimbursement requests are not consistently supported by actual expenditure documentation and are not subject to an effective independent review, federal funds were received before expenditures were incurred, resulting in federal cash being drawn in excess of the Organization's immediate cash requirements. This constitutes noncompliance with federal cash management requirements and increases the risk of improper use and monitoring of federal funds. Questioned Costs: $437,575 for the Health Center Program and $190,918 for Grants to Provide Early Intervention Services with Respect to HIV Disease. Context: During our testing of reimbursement requests, we noted that reimbursement amounts were prepared based on summarized expenditure information and were not consistently reconciled to underlying payroll records, invoices, or other accounting records prior to submission. In addition, the review performed by the CEO was limited to summary information prepared by the CFO and did not include examination of supporting documentation. These conditions affected the reimbursement request process for both federal programs and indicate a systemic deficiency in controls over the preparation, support, and review of federal draw requests. Repeat Finding: This is a repeat finding. Recommendation: Management should implement procedures requiring all reimbursement requests to be supported by actual expenditures incurred prior to submission. Reimbursement requests should be reconciled to supporting invoices, payroll records, and accounting records, and evidence of supervisory review should be retained. Federal funds should not be requested until the related expenditures have been incurred and are supported by appropriate documentation. Management Response: Management concurs with the finding. The Organization acknowledges that reimbursement requests were not consistently supported by reconciliations to actual expenditures and that existing review procedures did not provide sufficient assurance that draw requests complied with federal cash management requirements. Management is implementing revised procedures requiring all draw requests to be supported by detailed expenditure reconciliations, payroll reports, invoices, and other supporting documentation prior to submission. In addition, management has formally instituted a policy requiring all reimbursement requests to be submitted on an official Request for Reimbursement form, accompanied by a written statement describing the purpose of the reimbursement and the related expenditures, and supported by appropriate source documentation. The Organization will also establish an enhanced review process requiring independent verification of supporting documentation before reimbursement requests are submitted. Each completed Request for Reimbursement form, together with the related expenditure reconciliation and supporting documentation, must be reviewed and approved by the Chief Executive Officer (CEO) before any drawdown or reimbursement request is submitted. Evidence of the CEO’s review and approval will be retained with each request to demonstrate compliance with federal cash management requirements under the Uniform Guidance (2 CFR 200.305). Management is committed to ensuring future draw-down requests (including those already submitted during the subsequent year) are based solely on actual allowable expenditures incurred and are submitted in compliance with federal cash management requirements.