Finding Text
Finding 2025-008: Activities Allowed/Unallowed and Allowable Costs – Significant Deficiency 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: Pursuant to 2 CFR 200.303, the Organization is required to establish and maintain effective internal control over federal awards to provide reasonable assurance that the award is managed in compliance with federal statutes, regulations, and the terms and conditions of the award. In addition, 2 CFR 200.403(g) requires costs charged to a federal award to be adequately documented. Effective controls should include documented review and approval of expenditures and reimbursement requests to ensure costs charged to the federal award are allowable, allocable, reasonable, and adequately supported. Condition: The Organization represented that expenditures charged to Federal Programs were reviewed and approved by the Chief Executive Officer prior to reimbursement requests being submitted. During testing, the auditors noted no evidence of review or approval by the Chief Executive Officer for expenditures selected for testing. In addition, reimbursement requests prepared by the Chief Financial Officer were not supported by documentation demonstrating that the amounts requested were reconciled to specific expenditures incurred under the grant at the time the requests were prepared. Cause: Management did not maintain documented procedures requiring retention of evidence of review and approval over expenditures charged to the grant. In addition, reimbursement requests were prepared and submitted without a formal reconciliation package demonstrating that the requested amounts were supported by documented expenditures. Effect: The lack of documented review and approval increases the risk that expenditures charged to the federal award may not be allowable, allocable, reasonable, or adequately documented and that errors or noncompliance may not be detected in a timely manner. Questioned Costs: None. Context: Of the items tested, the auditors noted the review control described by management was not operating as designed. Specifically, documentation evidencing Chief Executive Officer review and approval of expenditures was not maintained and support for reimbursement requests was not consistently retained. Repeat Finding: This is not a repeat finding. Recommendation: Management should establish and document a formal review process over expenditures charged to Federal Programs. Documentation supporting reimbursement requests should be maintained and should include a reconciliation of amounts requested to actual allowable expenditures incurred under the grant. Evidence of reviewer approval should be retained. Management Response: Management concurs with the finding. The Organization acknowledges that evidence of review and approval was not consistently retained and that documentation supporting reimbursement requests was not maintained at a level sufficient to demonstrate compliance with federal requirements. To address this deficiency, management is implementing formal documentation standards requiring each reimbursement request to be supported by a reconciliation of amounts requested to actual allowable expenditures recorded in the general ledger, together with documented evidence of reviewer approval. Each reconciliation will be prepared by grant and budget category and will compare cumulative expenditures recorded in the general ledger to cumulative amounts previously drawn through the Payment Management System, with any differences investigated and resolved before the request is submitted. The Chief Financial Officer (CFO) or the Chief Executive Officer (CEO) will then review and approve each Request for Reimbursement form and related reconciliation before submission, consistent with the approval process described in the responses to Findings 2025-003 and 2025-006. Evidence of this review will include the approver’s handwritten or electronic signature and the approval date on both the Request for Reimbursement form and the supporting reconciliation. In addition, all expenditures will require documented preapproval by the respective department director or other designated personnel before costs are incurred. Original receipts, invoices, and other supporting documentation will be submitted to the Accounting Department, which will review each expenditure to verify that it is properly authorized, adequately supported, accurately coded, and incurred for a legitimate business purpose of the Organization. Prior to the submission of any reimbursement request, expenditures charged to federal awards will be reviewed for allowability, allocability, reasonableness, and adequate documentation in accordance with the cost principles of the Uniform Guidance (2 CFR Part 200, Subpart E). All reconciliations, approvals, and supporting documentation will be retained in accordance with federal record retention requirements and made readily available for review. Supporting documentation will be maintained in a centralized location, organized by grant and reimbursement period, and retained in accordance with the Uniform Guidance record retention requirements (2 CFR 200.334). The Organization will incorporate these review and approval procedures into its written financial policies and procedures, and finance staff involved in preparing reimbursement requests will receive training on them. In addition, management will periodically perform a secondary review of a sample of completed reimbursement requests to verify that reconciliations, approvals, and supporting documentation are complete, and any exceptions identified will be promptly corrected and documented.