Finding 392094 (2022-002)

Significant Deficiency
Requirement
L
Questioned Costs
$1
Year
2022
Accepted
2024-04-02
Audit: 302227
Organization: Diakonia, Inc. (MD)

AI Summary

  • Core Issue: Monthly invoices for the Emergency Rental Assistance Program did not match actual expenditures, indicating a significant deficiency in financial reporting controls.
  • Impacted Requirements: Compliance with program requirements for accurate reporting of subgrantee expenditures was not met, leading to potential repayment of $10,420 in questioned costs.
  • Recommended Follow-Up: New management should enhance internal control procedures to ensure accurate invoice totals and effective oversight of financial reporting.

Finding Text

Information on the Federal Program – Assistance Listing Number 21.023 – Emergency Rental Assistance Program, U.S. Department of the Treasury. Pass-Through Entity - Commissioners of Worchester County, Maryland. Compliance Requirements: Reporting. Type of Finding: Significant deficiency. Criteria: Program requirements include submission of regular monthly subgrantee invoices to the County reporting amounts expended in the report month. Condition: For the year ended June 30, 2022, expenditures reported on the several monthly invoices did not agree to actual expenditures in the financial records. Although the Organization has controls in place to review the monthly invoices and reconcile the amounts with the financial records, the controls are not operating effectively.The Organization during the fiscal year supported a weak control environment of organizational oversight that promoted an environment that does not have the proper design or operation of controls over financial reporting to prevent, and detect and correct, misstatements on a timely basis. Cause: Errors on the monthly invoices were due to amounts not being totaled correctly on the worksheet used to prepare the invoices. Effect or potential effect: As a result, the Organization overstated expenditures for the fiscal year and may be required to repay the grantor for the overages. Questioned costs: Known questioned costs are $10,420. Recommendation: The Board of Directors and new management should review its internal control procedures to ensure they are operating as described. Procedures should be put in place to verify worksheet totals are correct. Views of responsible officials and planned corrective actions: Management agrees with the finding. There has been a change in management since these findings occurred. New management has already began assessing its internal control systems. New policies and procedures have been approved and enforced to promote a strong system of internal controls, including an improved control environment.

Corrective Action Plan

Since the ERAP grant was a new COVID-related grant that was fast-tracked by the Government to provide immediate assistance in the midst of the pandemic, neither the Grantor, nor the Grantee, provided clear templates for reporting to the Organization as a Subgrantee. This forced the organization to create its own templates, in which the unprotected spreadsheet formulas became corrupt, and were not consistent from month to month--largely due to changing interpretations of requirements for what could be claimed as a reimbursement. It is noted, that neither the organization, nor the primary Grantee caught the spreadsheet miscalculations -- in order to reconcile the accounts in a timely manner. The Organization made a change in Executive Directors a month after the Grant closed (April 2022), and a week before the fiscal year end (June 28, 2022). As part of understanding the process of grant reimbursements in the past, the current Executive Director created a Financial Reimbursement Policy for submitting grant reimbursements going forward into FY23. With this change, the Organization has stronger controls in place to catch any errors in financial reporting. This policy was reviewed by the Board of Directors in October 2022, to ensure procedures are in place in which non-protected spreadsheet formulas are double checked for accuracy, all receipts are reviewed and entered by at least two persons, and reimbursements are reconciled with corresponding requests in cooperation with a third-party accountant. In addition, due to work slowdowns that occurred during the COVID crisis, it created a long time lapse in waiting for reimbursement deposits from requests through the Grantee and Grantor. In many cases, reimbursements were not deposited until months after the request. Unfortunately, at the time, there was no mechanism in place to track these expenses for reconciliation. This too has been corrected in the new Reimbursement Policy change that includes a new grant reimbursement tracker in place going forward. While current Management recognizes the above failure to reconcile these discrepancies at the time, in review, the miscalculations on the submitted spreadsheets actually underestimate the expenses incurred compared to what was requested for reimbursement. Over the course of the grant the Organization actually under invoiced for its expenses. Since the grant was closed, the new Director, did not find these discrepancies until the audit and the organization understands this loss cannot be recouped.

Categories

Questioned Costs Internal Control / Segregation of Duties Reporting Significant Deficiency Subrecipient Monitoring

Other Findings in this Audit

  • 968536 2022-002
    Significant Deficiency

Programs in Audit

ALN Program Name Expenditures
21.023 Emergency Rental Assistance Program $2.32M
14.231 Emergency Solutions Grant Program $192,848
64.033 Va Supportive Services for Veteran Families Program $50,573
14.218 Community Development Block Grants/entitlement Grants $18,202