Finding Text
Finding 2023-005 Misallocation of Grant Funds
Type of Finding:
Noncompliance and Material Weakness in Internal Control over Compliance.
Criteria:
The Uniform Guidance establishes criteria for allowable costs and the proper use of federal funds. According to Uniform Guidance, costs must be necessary and reasonable for the performance of the federal award and allocated correctly. Additionally, costs must be charged to the federal award based on the benefits received.
Condition:
The Organization claimed purchases under a reimbursement-based federal grant but then used these supplies for a different grant. This improper use of grant-funded supplies is a violation of the grant’s terms and conditions.
Cause:
The root cause of the noncompliance is the Organization’s failure to implement effective internal controls to ensure proper communication between departments. While the Organization was aware of the grant terms prohibiting such actions, the lack of controls and processes to coordinate the use of grant-funded supplies resulted in their misallocation.
Possible or Known Effect:
The misuse of resources risks undermining the programmatic impact intended by the grant. By not using the supplies as specified in the grant agreement, the Organization may fail to achieve the grant’s objectives and intended outcomes, ultimately diminishing the effectiveness of the funded program.
Questioned Costs:
The total questioned costs amount to $85,178, reflecting the value of supplies used improperly.
Repeat Finding:
This finding is not a repeat finding from the prior year.
Recommendation:
To address the identified issue, it is crucial the Organization implement and enhance internal controls and communication processes between departments to ensure compliance with grant requirements. The Organization should implement enhancements in the tracking of supplies by grant. Additionally, the Organization should establish effective oversight mechanisms and provide training to staff on proper grant management practices. A review and revision of grant management policies are necessary to prevent similar issues in the future.
Views of Responsible Officials:
The Organizations’ Board and Executive Team consisting of the Chief Executive Officer (CEO) and the Chief Operating Officer (COO) and key Overdose Lifeline (ODL) Staff to include the independent bookkeeper and Grant and Finance Manager recognize the need to further significantly improve on the oversight and reconciliation of supply ordering and inventory. This is already underway with the QB inventory process described previously and an improved process for backup documentation. Additionally key staff will complete of a formal course that covers performing a single audit and engage in consultation with the Independent Public Accounting Firm (Pile CPAs).