Finding Text
Internal Control Material Weakness – Grant Oversight
Program: All
Criteria: According to 2 CFR Part 200 - Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, non-federal entities are required to establish and maintain effective internal control over the federal award that provides reasonable assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. This includes having written policies and procedures in place.
Condition: During 2023, an audit by the Michigan Department of Health and Human Services identified multiple compliance and internal control issues related to fiscal year 2022. As a result of the audit, the Agency is required to repay $84,505 in previously provided grant funds. The majority of which related to unsupported payroll and fringe benefit charges for the Agency’s prior Executive Director and Finance Director. Additionally, the Agency did not have adequate written policies covering key areas such as procurement, equipment management, and allowable costs.
Cause: The Agency has experienced significant turnover the last few years in key administrative roles (Executive Director and Finance Director). As a result of the turnover, federal policies and procedures have not been updated since 2019 and therefore sufficient written policies and procedures were not in place to help ensure compliance with grant requirements.
Effect: As a result of inadequate policies and procedures, the Agency did not properly follow all requirements of 2 CFR Part 200 - Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, which resulted in the payback of $84,505 in previously provided grant funding.
Recommendation: We recommend that the Agency 1) develop and implement comprehensive written policies and procedures that address all relevant federal requirements, including, procurement, equipment management, and allowable costs; 2) conduct regular training sessions for all staff involved in federal grant management to ensure they understand and adhere to these policies and procedures and; 3) perform periodic internal audits to assess compliance with federal requirements and the effectiveness of internal controls.
Views of Responsible Officials: Management agrees with this finding.
Corrective Action Plan: See corrective action plan on page 26 detailing the steps management has taken to resolve this finding.