Finding Text
#2025-003: Grant Program: Department of Health and Human Services – Assistance Listing #93.696 – Certified Community Behavioral Health Clinic Expansion – Internal Controls Over Expenditures, Financial Reporting, and Tracking of Program Income Condition: As a result of our audit procedures, we identified multiple deficiencies in internal control over compliance related primarily to documentation, review, and monitoring controls across key compliance areas. Specifically, we noted instances where evidence of review was not maintained for expenditures and payroll, lack of documented review over federal financial reports, and insufficient processes for tracking and monitoring program income. Collectively, these deficiencies indicate that internal controls were not consistently designed or operating effectively to ensure compliance with federal requirements. Certain compliance areas affected by these control deficiencies, including procurement and suspension and debarment, are addressed in a separate finding. Criteria: In accordance with 2 CFR 200 (Uniform Guidance), the Center is required to establish and maintain effective internal control over federal awards that provides reasonable assurance of compliance with federal statutes, regulations, and the terms and conditions of the award. This includes maintaining adequate documentation, performing timely and evidenced reviews, and implementing monitoring controls over compliance activities. Context: The deficiencies were identified through testing across multiple compliance areas and transaction types within the major program. Exceptions included missing evidence of review on expenditures and payroll, lack of documentation supporting review of federal financial reports, and insufficient tracking and documentation of program income. These issues were not isolated, but were observed across multiple samples and processes. Cause: The deficiencies appear to be the result of insufficiently formalized policies and procedures, lack of consistent enforcement of documentation and review requirements, and ineffective monitoring of compliance-related activities. Effect: The lack of effective internal controls over compliance increases the risk that noncompliance with federal program requirements could occur and not be prevented, or detected and corrected, on a timely basis. This may result in: • Unallowable or unsupported costs being charged to federal programs • Errors or omissions in federal financial reporting • Improper monitoring or application of program income Continued noncompliance could result in increased oversight, questioned costs, or potential loss of federal funding. No known or likely questioned costs were identified as a result of the control deficiencies noted above. Recommendation: We recommend that management strengthen internal controls over compliance by: • Implementing consistent documentation standards requiring evidence of review for all key compliance activities, including expenditures, payroll, and reporting • Establishing and enforcing formal review procedures over federal financial reports • Enhancing tracking and monitoring of program income to ensure proper documentation and application • Performing periodic internal reviews to ensure compliance controls are operating effectively • Providing training to personnel responsible for compliance to reinforce documentation and review expectations Management Response: See Corrective Action Plan.