Finding 29602 (2022-003)

Material Weakness Repeat Finding
Requirement
B
Questioned Costs
-
Year
2022
Accepted
2023-09-27

AI Summary

  • Core Issue: The Center lacks formal purchasing policies and procedures, leading to inadequate documentation and tracking of expenditures related to federal and state awards.
  • Impacted Requirements: Compliance with Uniform Guidance is compromised, as 98 out of 105 tested expenditures lacked proper documentation and coding to the correct general ledger accounts.
  • Recommended Follow-Up: Implement robust purchasing controls, revise the chart of accounts to segregate expenses by funding source, and ensure all contracts have separate general ledger accounts for better tracking and accountability.

Finding Text

Section III - Federal and State Award Findings and Questioned Costs U.S. Department of Health and Human Services, Grants for Capital Development in Health Centers (Assistance Listing Number 93.526); COVID-19 - Activities to Support State, Tribal, Local and Territorial (STLT) Health Department Response to Public Health or Healthcare Crises (Assistance Listing Number 93.391), Federal Communications Commission, COVID-19 - COVID-19 Telehealth Program (Assistance Listing Number 32.006), U.S. Department of Homeland Security, COVID-19 - Disaster Grants - Public Assistance (Presidentially Declared Disasters) (Assistance Listing Number 97.036) Item 2022-003 - Allowable costs Criteria In accordance with Uniform Guidance, 2 C.F.R. Part 200, Subpart E, adequate documentation must be available to support costs charged to federal awards. Purchasing processes set clear guidance, standards and procedures that must be followed by employees who have been granted the authority to make purchases per the Center's policies. Strong internal purchasing controls and processes should be developed, documented and consistent across all departments. The Center's employees should follow the established processes and policies when purchasing goods and services for and on behalf of the Center. In addition, policies and procedures for invoice processing activities and transactions should be followed to ensure that expenditures are properly tracked by coding the expenditures to the correct general ledger account and funding source. Statement of Condition The Center does not have robust policies and procedures relating to the purchasing process; thus, there is no formal and approved purchasing system being followed. In addition, general ledger account distributions and funding sources were not properly shown on the invoice package in accordance with the Center's policies and procedures. The Center receives funding from various governmental agencies. Each grant/contract requires the submission of expenditure reports containing information as to how the grant/contract was spent. These reports cover different periods. The chart of accounts currently used by the Center does not identify expenses by funding source. Documentation supporting the expenses charged to each grant/contract are maintained outside the general ledger on spreadsheets. Furthermore, the Center is recording all the activities for grants and contracts into one revenue and receivable account. This process makes it difficult to determine the status of individual grants or contracts revenues as well as the receivables. Questioned Costs None Context General ledger account distributions and funding sources were not properly shown on the invoice package. During the test of disbursements for our audit, it was noted that 98 samples tested out of 105 (of which 49 are related to the compliance test) were lacking the appropriate documentation to support that the expenditures were reviewed and properly coded to the correct general ledger account and funding source. The expenses tested appeared to be reasonable expenditures in accordance with the terms of the contract. Cause The Center does not have adequate policies and procedures relating to the purchasing process; thus, there is no formal and approved purchasing system for employees to adhere to. In addition, the Center does not have a system in place to track the grants and contracts by funding source in the general ledger. Lastly, the Center has formal policies and procedures for invoice processing and approval; however, the procedures were not followed. Effect Without proper purchasing policies and procedures in place, employees do not have any guidance to follow. This allows the opportunity for unauthorized expenditures to be made. In addition, without proper inclusion of general ledger account distributions and funding sources on the invoice package, there is no documented evidence that in those instances the expenditures were properly coded to the correct general ledger account and funding source. This can result in inaccurate vouchering and reporting. Lastly, the time and effort required to prepare the expenses on spreadsheets is labor intensive and time consuming. Identification as a Repeat Finding Condition is a repeat finding. See prior year finding 2021-003. Recommendation We recommend that the Center implement strong internal purchasing controls policies and procedures. An effective purchasing process can help prevent theft, fraud or irregular spending since it requires documenting all business transactions. Furthermore, we recommend the Center document the general ledger account distributions and funding sources on either the purchase request or invoice. This will ensure that expenditures are being coded and charged to the proper accounts/sources of funding. The Center should revise its chart of accounts to segregate expenses by funding source. In addition, accounting procedures will need to be implemented to separate expenses by funding source at the time of the posting to the general ledger. Once implemented, revenue and expense reports by grant/contract may be generated covering the periods required to be reported to the funding agency. This will improve the Center's accountability for grant/contract funds and ease the preparation of the required expenditure reports. Lastly, we recommend that all contracts and grants have a separate general ledger account for their respective revenues and receivables. This will allow the Center to easily monitor the status of each grant or contract service provided and properly manage its receivables. Views of Responsible Official The Center has already updated the policies in 2023 to include strong internal purchasing controls and procedures, and has fully implemented the policy going forward. In addition, the Center has already implemented a new invoice processing software to ensure that expenditures are properly tracked by coding the expenditures to the correct general ledger account and funding source.

Corrective Action Plan

CORRECTIVE ACTION PLAN SEPTEMBER 26, 2023 Health Resources and Services Administration Lakewood Resource and Referral Center, Inc. D/B/A Center for Health Education, Medicine and Dentistry respectfully submits the following corrective action plan for the year ended December 31, 2022. ____________________________________________________________________________________ CohnReznick LLP 1301 Avenue of the Americas New York, NY 10019 Audit Period: December 31, 2022 The findings from the December 31, 2022 schedule of findings and questioned costs are discussed below. The findings are numbered consistently with the number assigned in the schedule. FINDINGS ? FINANCIAL STATEMENT FINDINGS Finding 2022-001 ? Account Analyses MATERIAL WEAKNESS Recommendation We recommend that the Center ensure that all accounting records are analyzed and reconciled on a monthly basis. We also recommend that necessary procedures be enhanced whereby an employee of the Center consistently reviews and follows up on receivables and adjusts the reserves for those receivables appropriately. This will help accurately reflect the cash realizable value of receivables. This will provide the Center with a stronger accounting of patient services receivable with which to better manage cash collections. We also recommend that the Center perform the patient services revenue reconciliation by payor source on a monthly basis. This would help the Center determine whether patient services revenue is being properly recorded by payor source. Action Taken The Center concurs with the recommendation and will ensure that all accounting records are analyzed and reconciled on a monthly basis. The Center will also place an employee in charge of reviewing and following up on receivables and adjusting receivables appropriately as needed. In addition, the Center will also perform the patient services revenue reconciliation by payor source on a monthly basis. The Center is in the process of migrating their current General Ledger to Sage Intacct, a more robust accounting package that will make recording and reconciling on a monthly basis much more seamless. This finding will be corrected by December 31, 2023. Finding 2022-002 ? Allowable Costs MATERIAL WEAKNESS See Item 2022-003 below for recommendation and corrective action taken. FINDINGS ? FEDERAL AWARDS PROGRAM AUDIT U.S. Department of Health and Human Services, Grants for Capital Development in Health Centers (Assistance Listing Number 93.526); COVID-19 - Activities to Support State, Tribal, Local and Territorial (STLT) Health Department Response to Public Health or Healthcare Crises (Assistance Listing Number 93.391), Federal Communications Commission, COVID-19 - COVID-19 Telehealth Program (Assistance Listing Number 32.006), U.S. Department of Homeland Security, COVID-19 - Disaster Grants - Public Assistance (Presidentially Declared Disasters) (Assistance Listing Number 97.036) Finding 2022-03 ? Allowable Costs MATERIAL WEAKNESS Recommendation We recommend that the Center implement strong internal purchasing controls policies and procedures. An effective purchasing process can help prevent theft, fraud or irregular spending since it requires documenting all business transactions. Furthermore, we recommend the Center document the general ledger account distributions and funding sources on either the purchase request or invoice. This will ensure that expenditures are being coded and charged to the proper accounts/sources of funding. The Center should revise its chart of accounts to segregate expenses by funding source. In addition, accounting procedures will need to be implemented to separate expenses by funding source at the time of the posting to the general ledger. Once implemented, revenue and expense reports by grant/contract may be generated covering the periods required to be reported to the funding agency. This will improve the Center's accountability for grant/contract funds and ease the preparation of the required expenditure reports. Lastly, we recommend that all contracts and grants have a separate general ledger account for their respective revenues and receivables. This will allow the Center to easily monitor the status of each grant or contract service provided and properly manage its receivables. Action Taken The Center concurs with the recommendations and has already implemented steps to correct moving forward. In early 2023, the Center implemented new purchasing policies and procedures to ensure additional documentation and approval processes. Additionally, the Center purchased a new Accounts Payable software that codes general ledger accounts to each payable/invoice. This will allow for a more accurate reporting process. And finally, the Center is in the process of migrating their current General Ledger to Sage Intacct, a more robust accounting package that will make reporting and tracking of grants, contracts and funding sources much more seamless. This finding will be corrected by December 31, 2023. If the Health Resources and Services Administration has questions regarding this plan, please call Scott Jackson, Chief Financial Officer at (732) 364-2144 x6138. Sincerely yours, Scott Jackson, CFO

Categories

Procurement, Suspension & Debarment Allowable Costs / Cost Principles Reporting

Other Findings in this Audit

  • 29603 2022-003
    Material Weakness Repeat
  • 29604 2022-003
    Material Weakness Repeat
  • 29605 2022-003
    Material Weakness Repeat
  • 606044 2022-003
    Material Weakness Repeat
  • 606045 2022-003
    Material Weakness Repeat
  • 606046 2022-003
    Material Weakness Repeat
  • 606047 2022-003
    Material Weakness Repeat

Programs in Audit

ALN Program Name Expenditures
93.224 Consolidated Health Centers (community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) $3.94M
21.027 Coronavirus State and Local Fiscal Recovery Funds $3.60M
97.036 Disaster Grants - Public Assistance (presidentially Declared Disasters) $2.31M
93.527 Affordable Care Act (aca) Grants for New and Expanded Services Under the Health Center Program $1.89M
93.526 Grants for Capital Development in Health Centers $1.00M
32.006 Covid-19 Telehealth Program $995,230
93.391 Activities to Support State, Tribal, Local and Territorial (stlt) Health Department Response to Public Health Or Healthcare Crises $890,146
93.011 Community-Based Workforce to Build Covid-19 Vaccine Confidence $625,196
93.461 Hrsa Covid-19 Claims Reimbursement for the Uninsured Program and the Covid-19 Coverage Assistance Fund $263,452
14.218 Community Development Block Grants/entitlement Grants $190,000
93.268 Immunization Cooperative Agreements $105,408
59.077 Community Navigator Pilot Program $46,000
93.426 Improving the Health of Americans Through Prevention and Management of Diabetes and Heart Disease and Stroke $35,919
10.557 Special Supplemental Nutrition Program for Women, Infants, and Children $20,000
93.236 Grants to States to Support Oral Health Workforce Activities $9,990
93.991 Preventive Health and Health Services Block Grant $3,510