Finding Text
Criteria: 2 CFR section 200.303 states in part: “The non-Federal entity must: (b) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards 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). . .” Additionally, 31 CFR section 205.33 states in part: (b) “…the timing and amount of funds transfers must be as close as is administratively feasible. . .” Condition: An effective internal control system was not in place to ensure the Corporation’s compliance with requirements related to the grant agreement and the Cash Management compliance requirements. There was no formal review or approval of claim reimbursements by someone other than the individual who prepared them. Additionally, claim reimbursements were not drawn in a timely or consistent manner. Cause: The Corporation's management has not developed a system of internal controls to ensure compliance with the compliance requirements listed above. Specifically, controls were not in place to ensure reimbursement claims were prepared timely, reviewed and approved prior to submission, compared to supporting documentation, and drawn in amounts and at times that were as close as administratively feasible to the related expenditures.Effect: The failure to establish an effective internal control system places the Corporation at risk of noncompliance with the grant agreement and the Cash Management compliance requirements. A lack of effective review and timely claim submission could have resulted in inaccurate reimbursement requests, improper period recognition of federal funds, delayed cash flow, misuse or mismanagement of federal funds and assets, and failure to fully expend the grant within the period of performance. Recommendation: We recommend that the Corporation establish policies and procedures to ensure that reimbursement claims are prepared timely, reviewed and approved by someone other than the preparer, and compared to supporting documentation to ensure accuracy and completeness. Reimbursement claims should also be prepared and submitted timely to help ensure compliance with Cash Management requirements, proper period recognition, and adequate reimbursement. Views of Responsible Officials and Corrective Actions: In early 2026, Hamilton County Area Neighborhood Development, Inc. (HAND) hired an experienced controller to prepare the parent company and subsidiaries financials. HAND will establish effective internal control systems to ensure compliance with the requirements for grant agreements and cash management compliance requirements.