Finding 478297 (2022-001)

Material Weakness Repeat Finding
Requirement
P
Questioned Costs
-
Year
2022
Accepted
2024-07-11

AI Summary

  • Core Issue: Significant adjustments were needed for financial statements due to inadequate internal controls, resulting in material misstatements.
  • Impacted Requirements: Compliance with financial reporting standards and Uniform Guidance Part 200 was not met, particularly in payroll, disbursements, and account reconciliations.
  • Recommended Follow-up: Management should enhance documentation and approval processes, ensure accurate reconciliations, and strengthen oversight in financial reporting.

Finding Text

Internal Control over Financial Reporting, United States Department of Health and Human Services, Native Hawaiian Health Care 93.932 Criteria: Auditees are responsible for accurate recording and reporting on financial statements. Auditees are also responsible for major program compliance to Uniform Guidance Part 200 requirements. To ensure accuracy and compliance of financials and major program compliance, management is responsible to design sufficient internal control over financials recording and reporting. Condition: As a result of the auditing procedures over the financial statements, significant adjusting journal entries were required that resulted in a material change to the financial statements. Specifically, 11 adjustments were needed to fairly state the financial statements in all material respects. In addition, we had the following comments relating to internal controls— Internal control over payroll and disbursements We noted instances where employees’ pay rate approval forms are not available to substantiate and document approved pay rates with employees. We noted instances where check and credit card disbursements did not have authorization approval forms to document approval or did not have receipts or invoices to substantiate the expenditure. Internal control over account balances We noted instances where subsidiary schedules and reconciliations did not agree to balances in the general ledger. Medical billings We are able to agree total medical billing revenue from the billing systems to the General Ledger; however, management was unable to provide us participant listing for the Intergy billing system. Cause: Key personnel of the Organization, including the Executive Director and Chief Finance Director, and several key accounting and operation employees are no longer employed in the Organization during fiscal year 2022. Although the Organization hired an interim Executive Director and outsourced accounting function to a third party professional, fiscal year 2022’s financials was not properly stated. Due to the personnel change in operation and accounting departments, there was a lack of oversight to ensure accurate accounting preparation for the fiscal year. Potential Effect: Lack of sufficient internal controls and monitoring processes increases the likelihood of misstatement and/or fraud. Questioned Costs: None. 2022-001 – Internal Control over Financial Reporting, United States Department of Health and Human Services, Native Hawaiian Health Care 93.932 (Continued) Recommendation: It is management’s responsibility to review financial statements for accuracy and ensure proper accounting is being performed. The accounting personnel and third party hired by the management to account for and prepare the financial statements should have adequate technical knowledge of Generally Accepted Accounting Standards and how to apply them to the internal procedures for preparing financial statements. Here are our recommendations relate to the comments above— Internal control over payroll and disbursements We recommend the Organization takes an extra effort to ensure required documentation and approvals were obtained on employee’s pay rate forms and timesheets. We recommend the Organization obtain proper approvals on disbursements based on the Organization’s internal control procedure. Internal control over account balances We recommend the Organization maintain accurate accounts payable, accounts receivable and bank reconciliation schedules to ensure all year end records were properly maintained. Medical billings For internal control purpose, we recommend the Organization have sufficient review procedure on billing to ensure sufficient documentation and proper determining on insurance scale payment determination. Repeat Finding: Yes. See Summary Schedule of Prior Audit Finding, Finding 2021-001 Views of Responsible Officials of the Auditee: The Organization concurs with the finding and recommendation. See Management Responses and Corrective Action Plans.

Corrective Action Plan

Internal Control over Financial Reporting, Health Resources and Services Administration, Native Hawaiian Health Care 93.932  Internal control over payroll and disbursements As of January 18, 2023, corrective action has been taken as follows. When pay rates are changed, the Operations Manager/HR Coordinator will submit a personnel action form to indicate changes made to the employee’s rate of pay, status, or position change. The Executive Director will review and approve any changes. The form will be uploaded to the employee file and ProService will make the necessary changes to the employee’s record. Employees and managers have been informed to approve their timesheets in a timely manner as of May 2024. Previously, staff was unaware of internal control procedures for payroll processing. Corrective action on all disbursements has been taken as of August 1, 2023. All disbursements require a purchase requisition or payment request to be approved by the Executive Director. Either of the forms are completed by the program manager, and submitted for approval before the purchase or reimbursement is made. Internal control over accounts payable, accounts receivable, and cash Due to the lack of financial oversight, staff were unaware of how to reconcile the subledgers. Corrective action has been taken as of January 2023 to review all balance sheet accounts and verify balances on each subledger. All bank reconciliations have been completed as of May 31, 2024. Medical billings As of January 18, 2023, the Data & Compliance Specialist reviews the sliding fee discount applications received and calculates the discount based on income support and family members. If a discount is determined, the Data & Compliance Specialist will apply the discount to all qualified visits. The application is uploaded to the clients file for future reference.

Categories

Internal Control / Segregation of Duties Subrecipient Monitoring Reporting

Other Findings in this Audit

  • 478298 2022-002
    Material Weakness Repeat
  • 478299 2022-003
    Material Weakness Repeat
  • 478300 2022-001
    Material Weakness Repeat
  • 478301 2022-002
    Material Weakness Repeat
  • 478302 2022-003
    Material Weakness Repeat
  • 478303 2022-001
    Material Weakness Repeat
  • 478304 2022-002
    Material Weakness Repeat
  • 478305 2022-003
    Material Weakness Repeat
  • 1054739 2022-001
    Material Weakness Repeat
  • 1054740 2022-002
    Material Weakness Repeat
  • 1054741 2022-003
    Material Weakness Repeat
  • 1054742 2022-001
    Material Weakness Repeat
  • 1054743 2022-002
    Material Weakness Repeat
  • 1054744 2022-003
    Material Weakness Repeat
  • 1054745 2022-001
    Material Weakness Repeat
  • 1054746 2022-002
    Material Weakness Repeat
  • 1054747 2022-003
    Material Weakness Repeat

Programs in Audit

ALN Program Name Expenditures
93.932 Native Hawaiian Health Care Systems $546,993
84.259A Native Hawaiian Career and Technical Education $368,448