Finding Text
2023-008 – Internal Controls Over Compliance
Federal Program: Refugee and Entrant Assistance Program
Federal Agency: U.S. Department of Health and Human Services
Assistance Listing Number: 93.566
Repeat of Prior Finding: No
Type of Finding: Significant Deficiency in Internal Controls Over Compliance
Criteria
In accordance with 2 CFR § 200.302, the Organizations’ financial management systems, including records documenting compliance with federal statutes, regulations, and the terms and conditions of the federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the federal statues, regulations, and the terms and conditions of the federal award.
Additionally, as required by 2 CFR 200.302(b)(4), the non-federal entity must exercise effective control over, and accountability for, all federal funds. Per 2 CFR. 200.303(a), the non-federal entity should use the Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) as a guideline. The COSO guideline indicates that proper segregation of duties between initiating, recording, and authorizing is a best practice as well as retaining documentation of performance and authorization controls.
Condition and Context
During our audit it was noted that the Organization had inadequate segregation of duties over cash disbursements. Further, written policies concerning cash management practices were not followed and there are no written policies in place regarding written approval of expenses prior to submitting requests for reimbursement.
Cause
Lack of segregation of incompatible tasks and written policies were not consistently followed.
Effect or Potential Effect
Lack of internal controls around supervising and authorizing cash management and financial management systems could result in mismanagement of federal funds.
Questioned Costs
None noted.
Recommendations
Initiating, authorizing, and recording transaction should not be performed by the same individual. Segregation of incompatible tasks should be implemented so that authorization and review of cash draws of federal or state funds is done by someone other than the individual who initiates and records the transaction. Additionally, there should be written policies in place surrounding cash management.
Views of Responsible Officials and Planned Corrective Actions
Management agrees with the finding and recommendations. See the attached corrective action plan.