Finding Text
Finding 2023-001 – Material Weakness – Unallowable Costs Previously Allocated to Federal
Program not Identified Timely
Material Weakness in Internal Control Over Financial Reporting
Material Weakness Over Compliance
Federal Award Information:
ALN 93.829, Certified Community Behavioral Health Clinic Expansion Grants Direct award from US
Department of Health and Human Services, Substance Abuse and Mental Health Services
Administration
Condition – During its fiscal year 2023, Lifeline determined that certain expenses in the amount of
$960,942 were submitted for reimbursement against the federal program 93.829 Certified Community
Behavioral Health Clinic Expansion Grants in the prior year. Although they were included in the
budget approved by SAMSHA, Lifeline also did not correctly identify these costs as unallowable. The
delay in identifying these 2022 unallowable costs resulted in these unallowable costs being included
in the FY 2022 Schedule of Expenditures of Federal Awards (SEFA) and improper revenue
recognition in the FY 2022 financial statements. In 2023, Lifeline proactively identified this error and
made the financial statement revision as described in Note 2 to the financial statements, and is
currently evaluating the options available to correct its fiscal year 2022 SEFA.
Criteria –The OMB Compliance Supplement requires that non-federal entities receiving federal
awards establish and maintain internal controls designed to reasonably ensure compliance with
federal laws, regulations, and program compliance requirements. The program requires that
reimbursable funds applied against the grant need to be submitted in accordance with the approved
budget submitted to SAMHSA. Furthermore, under generally accepted accounting principles, revenue
should not be recognized for good or services for which an entity is not entitled to consideration in
exchange.
Context and Cause – While appropriate expenses for Lifeline, these expenses were applied to the
program based on the inclusion of these expenditures in the original program budget approved by
SAMSHA. These were recorded as a receivable and revenue for items that were later determined to
not be allowable. Additionally, Lifeline experienced turnover in key leadership positions (CEO/CFO)
during the 2022 and 2023 fiscal years. This turnover resulted in a lack of oversight of controls.
Effect of Condition – This resulted in a material adjustment to the prior year financial statements (as
of and for the year ended June 30, 2022) by decreasing revenue and change in net assets for the
year ended June 30, 2022 by $960,942, and decreasing net assets as of June 30, 2022 by $960,942.
The SEFA submitted to the Federal Audit Clearinghouse for the year-ended June 30, 2022, was not
updated and resubmitted. Leadership is evaluating the options available to correct Lifeline's fiscal
year 2022 SEFA submission.
Questioned Costs – There are no reported questioned costs for the year ended June 30, 2023.
However, in the prior year, $960,942 of unallowable costs were submitted for reimbursement. This
amount was calculated as the excess of costs submitted for reimbursement in FY 2022 over the
approved program budget. This represents 57% of the expenditures of the federal award 93.829 and
24% of the total expenditures of federal awards reported on the SEFA for the year ended June 30,
2022.
Recommendation – We recommend Lifeline assign a knowledgeable individual with proper training,
skill, and time allocated to oversee the administrative and financial reporting aspects of the federal
program, and ensure segregation of duties when assigning internal control operational
responsibilities. Finally, we recommend Lifeline evaluate options available to them to correct the fiscal
year 2022 SEFA submittal to the Federal Audit Clearinghouse, and if necessary, evaluate the
consequences of not revising its SEFA for the year ended June 30, 2022.
Views of Responsible Officials and Planned Corrective Actions – Upon discovery of certain expenses
that are no longer allowed for the CCBHC grant, Lifeline communicated the issue to SAMHSA.
Lifeline immediately and proactively repaid to SAMHSA the full amount received for unallowable
expenses, on October 17, 2023.
Policies, procedures and controls for treatment and accounting for grants were in place by
October 31, 2023. All expenses charged to grants are reviewed by authorized personnel to ensure
the expenses are allowable, appropriate, and reasonable. Lifeline will continue to strengthen internal
controls with an appropriate level of qualified staff and oversight from authorized personnel.