Finding Text
Finding 2025-006: Inadequate Controls Over Allowable Costs and Supporting Documentation – Significant Deficiency and Instance of Noncompliance Federal Program: Health Center Program (Assistance Listing 93.224) Criteria: Uniform Guidance requires non-Federal entities to maintain effective internal control over federal awards and maintain records sufficient to support that costs charged to a federal award are allowable, adequately documented, and properly charged to the federal program. Expenditures included in reimbursement requests must be supported by source documentation, including invoices, payroll records, contracts, or other documentation demonstrating the nature and amount of the expenditure. Condition: Management represented that expenditures included in federal reimbursement requests are supported by invoices and other source documentation and are reviewed prior to submission for reimbursement. During the testing of expenditures charged to the Health Center Program, we identified the following exceptions: • Three transactions charged to the federal program did not have supporting invoice documentation available for examination. • One expenditure included in a reimbursement request was based on an invoice totaling $8,221.92. However, a revised invoice was subsequently issued, reducing the amount due to $7,284.96. The reimbursement request was not adjusted to reflect the revised invoice amount, resulting in questioned costs of $936.96. These exceptions indicate expenditures were included in reimbursement requests without adequate supporting documentation or without ensuring the amounts requested agreed to the final supporting documentation. Cause: As noted in Finding 2025-00X, management has not established an effective review and approval process over federal reimbursement requests and the underlying supporting documentation. Reimbursement requests are prepared and reviewed using summarized expenditure information, and supporting documentation is not consistently reviewed to verify that expenditures are adequately supported and accurately reflected in reimbursement requests prior to submission. Effect: Because expenditures are not consistently supported by adequate documentation and reimbursement requests are not subject to an effective review of underlying support, there is an increased risk that unsupported, inaccurate, or unallowable costs may be charged to the federal program and included in reimbursement requests. Questioned Costs: $1,180.06. Context: During testing of expenditures charged to the Health Center Program, we identified three transactions for which supporting invoice documentation could not be provided. In addition, one reimbursement request included an expenditure amount that exceeded the amount supported by the final vendor invoice. These exceptions indicate deficiencies in controls over the retention, review, and verification of supporting documentation for costs charged to the federal program and are consistent with the control deficiencies identified in Finding 2025-00X related to the review and approval of reimbursement requests. Repeat Finding: This is not a repeat finding. Recommendation: We recommend management implement procedures to ensure all expenditures charged to federal programs are supported by adequate source documentation and that reimbursement requests are reconciled to final invoices, payroll records, and other accounting records prior to submission. Management should also implement an independent review process requiring examination of supporting documentation to verify that expenditures are allowable, adequately supported, and accurately included in reimbursement requests. Management Response: Management concurs with the finding. The Organization recognizes that documentation supporting certain expenditures charged to federal programs was not adequately maintained and that review procedures over reimbursement requests were not sufficient to ensure expenditures were fully supported and accurately reflected. Management is implementing enhanced procedures requiring all expenditures included in reimbursement requests to be supported by source documentation and reconciled to accounting records prior to submission. The Accounting Department will collect original invoices, receipts, payroll registers, and other source documents when costs are incurred, and will prepare reconciliations using final invoices rather than estimates, quotes, or purchase orders. In limited circumstances where an estimate must be used for anticipated expenses, the basis for the estimate will be documented and approved prior to submission, and the estimated amount will be reconciled to actual expenditures in a timely manner, no later than the subsequent reimbursement request, with any differences promptly adjusted and supporting documentation retained. In addition, independent review procedures will be performed to verify allowability, accuracy, and completeness before federal reimbursement requests are submitted. Each reimbursement request will then be reviewed and approved by the Chief Financial Officer (CFO) or the Chief Executive Officer (CEO) before submission, consistent with the approval process described in the response to Finding 2025-003. The Organization will organize supporting documentation by grant and reimbursement period and retain it in accordance with the record retention requirements of the Uniform Guidance (2 CFR 200.334). Additionally, the Chief Financial Officer (CFO) will perform periodic sample-based reviews of expenditures charged to federal awards to verify that documentation standards are consistently followed, and any exceptions identified will be promptly corrected, including adjustment of amounts previously requested where necessary.