Finding 524710 (2022-001)

Federal Program Information: Funding agency: U.S Department of Health and Human Services Title: Urban Indian Health Services AL number: 93.193 Award year and number: 2022 Criteria or Specific Requirement: Internal controls over allowable cost and allowable activities should be properly designed to provide assurance of meeting compliance requirements and should operate effectively. Supporting documentation for allocated expenditures should be maintained to demonstrate compliance with allowable costs and allowable activities. Condition: Costs were allocated between multiple projects throughout the year based on effort of employees. We were able to review some of the basis for the allocations, however, not all the documentation was available for review. Cause: Due to staff turnover, all the allocation documentation could not be located. Effect: Unallowed costs and activities could be incurred without proper documentation available for review and approval by the Company. Questioned Costs: $29,310. Context: We selected forty-five items in our sample, of those we were not provided all of the supporting documentation for sixteen items related to costs allocations. As allowed under auditing standards, we did not quantify sampling risk, resulting in our sample being not statistically valid, but acceptable under auditing standards. Repeat: No Auditor's Recommendations: While we were not able to review all allocation documentation for the year under audit, we did review subsequent allocation documentation that appeared reasonable. Therefore, management should continue to maintain the allocation documentation for subsequent years. View of Responsible Officials: Butte Native Wellness Center acknowledges the finding and recognizes the need for strengthened internal controls to ensure compliance with allowable costs and allowable activities. The allocation of costs between multiple projects was based on employee effort, however, due to key staff turnover and transitions and gaps in record retention and oversight, some supporting documentation could not be located for review. Specifically, the Business and Finance Manager was employed from January 3, 2022 – April 11, 2022. The Executive Director resigned effective July 15, 2022. The last day she physically worked in the office was June 16, 2022. The Operations Manager, who was hired on May 25, 2022, assumed the oversight of office functions along with supervision of staff until a new Executive Director was hired on September 12, 2022. This Executive Director’s employment terminated on November 4, 2022. A new Executive Director was hired on December 12, 2022 and remains in the position. An outside accounting firm provided accounting and bookkeeping services until February 2022 when Butte Native Wellness Center entered into a contract with an individual to provide accounting services. That contract was not renewed when it expired in February 2023. In 2023, contracts were secured with two accounting professionals to provide key finance and accounting operations and the contracts are still in place. These contracts have allowed for proper segregation of duties, strengthened internal control structure, and enhanced accounting and financial policies, including the creation of the proper documentation and support for the agency. Corrective Action Plan: 1. Strengthening Documentation Procedures: • Management has implemented enhanced procedures to ensure all cost allocation documentation is properly maintained. • A centralized filing system, both physical and digital, has been established to ensure accessibility and retention of documentation, mitigating the risk of information loss during staff transitions 2. Training and Accountability: • All relevant personnel, including finance and program staff, will receive training on proper documentation and record-keeping practices to ensure compliance. • A designated employee will be responsible for overseeing cost allocation documentation, ensuring continuity regardless of staff changes. 3. Regular Internal Review: • Management will conduct periodic internal reviews of cost allocations to verify that all required documentation is complete and accurate. • Any missing documentation will be identified and addressed before submission for external audits. 4. Leadership Stability and Oversight: • With the Executive Director and contract accountants now acclimated to the organization and a more stable leadership structure in place, management has reinforced internal controls and oversight to prevent similar issues in the future. • Additional cross-training initiatives are being implemented to ensure institutional knowledge is retained despite staff turnover. 5. Future Compliance Commitment: • While some documentation for the year under audit was unavailable, management has reviewed subsequent allocation documentation, which was found to be reasonable. • Moving forward, all allocation documentation will be retained in accordance with compliance requirements. Management is committed to ensuring compliance with internal control standards and appreciates the auditor’s recommendations. With leadership transitions stabilizing, including a fully engaged Executive Director and improved oversight, we are confident in our ability to maintain proper documentation and strengthen financial controls.