Finding Text
Finding #2023-003 – Significant Deficiency – Activities Allowed or Unallowed, Allowable Cost Principles
93.558 Temporary Assistance for Needy Families – Out of School Time Program
93.600 Head Start
Lack of Supporting Documentation for Disbursements
Criteria
Costs charged to federal grants must meet the provisions of the standards for documentation of expenses contained in 2 CFR 200.430(i)(1) which requires that charges to federal awards for disbursements must be based on records that accurately reflect actual costs incurred. These records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated. This would include supporting invoices to be maintained and reviewed prior to payment.
Condition
During the audit, it was identified that supporting invoices could not be provided for three nonpayroll related
disbursements. The population sampled was all nonpayroll related disbursements. Total number of selections
tested was sixty-five, which comprised 2% of the total population.
Cause
This significant deficiency may have resulted from inadequate procedures for the retention of supporting
documentation or a lack of oversight and reconciliation processes in the disbursement cycle. The failure to
accurately reconcile recorded amounts to the supporting invoices further indicates a breakdown in internal controls.
Effects
The absence of supporting invoices and discrepancies between recorded amounts and invoice amounts create a
risk of unauthorized or unsupported disbursements. This weakens the Organization’s ability to demonstrate
compliance with federal grant requirements and increases the likelihood of disallowed costs or questioned costs in future audits. Failure to adequately control disbursements may also expose the client to potential financial
misstatements or fraud.
Questions Costs
In total, $141 of expenses could not be supported.
Perspective
This audit finding is systematic.
Statistical Sample
The sample was a statistically valid sample.
Repeat Finding
This audit finding is not a repeat finding.
Recommendation
We recommend that the Organization strengthen its internal control procedures to ensure that all disbursement
transactions are properly supported by invoices or other appropriate documentation before they are recorded and paid. The client should implement a regular reconciliation process to ensure that recorded amounts agree with supporting documentation. Additionally, management should establish policies for the retention of documentation to ensure it is readily available for audit and compliance purposes.
Views of Responsible Officials
Management agrees with the finding. The Organization is in the process of updating its procedures to ensure that all disbursements are supported by invoices and that recorded amounts are regularly reconciled with supporting documentation. Additionally, the Organization will implement a formal policy for document retention to ensure audit readiness.