Finding 404039 (2023-002)

Section III – Federal Award Findings and Questioned Costs Finding 2023-002: Overdrawn Federal Funding Compliance Requirement: Allowable Costs/Costs Principles and Cash Management Type: Material Noncompliance and Material Weakness over Internal Control Federal Agency: U.S. Department of Health and Human Services AL Numbers and Titles: 93.809 – National Center for Chronic Disease Prevention and Health Promotion Federal Award Number: NU58DP006510 Questioned Costs: $380,644 Repeat Finding: No Criteria: NACDD requests funds from the U.S. Department of Health and Human Services under the advance payment method. In accordance with 45 CFR 74.22, cash advances to a recipient organization shall be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the recipient organization in carrying out the purpose of the approved program or project. The timing and amount of cash advances shall be as close as is administratively feasible to the actual disbursements by the recipient organization for direct program or project costs and the proportionate share of any allowable indirect costs. According to 2 CFR §200.403 - §200.405 (Allowable Costs/Cost Principles), costs must be necessary, reasonable, and allocable to the federal award. Additionally, Section 200.303 of the Uniform Guidance indicates that the nonfederal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. The Uniform Guidance also indicates that these internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” (Green Book) issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by COSO. The Office of Management and Budget (OMB) has clarified that the references to the Green Book and COSO were only provided as best practices and not requirements. Condition: During our testing, we identified duplicated federal award expenditures amounting to $380,644, resulting in overdrawn federal funds by $380,644. The excess cash on hand was not returned to the funding source in a timely manner. Cause: This issue occurred due to inadequate controls over the recording of expenses and the drawdown of federal funds. 28 ASSOCIATION OF STATE AND TERRITORIAL CHRONIC DISEASE PROGRAM DIRECTORS D/B/A THE NATIONAL ASSOCIATION OF CHRONIC DISEASE DIRECTORS SCHEDULE OF FINDINGS AND QUESTIONED COSTS - Continued Section III – Federal Award Findings and Questioned Costs – continued Finding 2023-002: Overdrawn Federal Funding - continued Effect: NACDD is not in compliance with federal regulations concerning allowable costs, disbursement of federal funds and excess cash. In addition, a lack of adequate controls over allowable costs and cash management could result in a reasonable possibility that NACDD would not detect errors in the normal course of performing duties and correct them in a timely manner. Recommendation: We recommend that management conduct regular reconciliations of grant expenses to identify and correct duplicate entries promptly and review cash management practices to prevent overdraws on federal funds. Views of Responsible Officials Corrective Actions: Management agrees with this finding. Please refer to the Corrective Action Plan.