Finding Text
2024-002
Federal Agencies: U.S. Department of Treasury, U.S. Department of Health and Human Services
Federal Program Names: Emergency Rental Assistance, HIV Prevention, Block Grants for Prevention and Treatment of Substance Abuse
Assistance Listing Numbers: 21.023, 93,940, 93,959
Pass-Through Agencies: City of Philadelphia, Office of Addiction Services, City of Philadelphia, Division of HIV Health, Philadelphia Housing Development Corporation
Pass-Through Number(s): 21-20469, 21-20003-03, 22-20537-02, 22-20537-01
Award Period: July 1, 2023 through June 30, 2024
Type of Finding: Material Weakness in Internal Control over Compliance
Criteria:
3 CFR Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Award requires compliance with the provisions of allowable costs and allowable activities. The Coalition should have procedures and controls in place to ensure federal funds are only expended on allowable costs and allowable activities as dictated in the contract and budget of the program. Proper documentation should be maintained, reconciled, reviewed, and retained to support all transactions.
Condition:
As part of the audit management was to provide us with a complete final trial balance where balances agree to the supporting schedules, reconciliations and documentation provided by management. We noted that the trial balance and general ledger detail reports originally provided by management were (a) delayed, (b) included unreconciled material account balances, (c) multiple journal entries (material and not material), (d) transactions missing from the trial balance, and (e) some reconciliations that either did not agree with the trial balance or individual transactions could not be traced back from the documentation provided to the general ledger. This had caused delays in the completion of the audit, preparation of financial statements, and associated disclosures and the timely arrival of our audit and single audit conclusion.
Questioned costs:
None
Context:
The results of our testing concluded that there were no instances of material noncompliance as described 3 CFR Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. The finding identified impacted the Coalition’s internal control over compliance as it relates to the Coalition's financial reporting and close process.
Cause:
The Coalition's finance department has encountered several challenges this fiscal year, including the medical leave of the financial department leader, staff turnover, and ongoing issues with the financial reporting and accounting software package. Management continues to address significant efforts required to reconcile accounts and generate accurate financial reports where the ending balances align with the final trial balance that can be audited. These factors have affected management’s ability to reconcile account balances between the trial balance and supporting documentation or schedules in a timely and accurate manner. Consequently, there have been delays in providing a final trial balance and a considerable number of journal entries were needed to match the supplemental documentation to the trial balance.
Effect:
Controls over financial reporting and close processes are not adequate to determine that costs have been properly included and reported. This could lead to a funding agency requesting a return of funds.
Recommendation:
We recommend that management implement policies and procedures as it relates to the reconciliation of accounts, tracking of transactions, and regular review to ensure that calculations of general ledge account balances are accurate and complete. In addition, we continue to recommend that management revisit its financial closing and reporting policies to include updates to its procedures for year-end closes and the timing of when final journal entries and analysis are performed.
Repeat Finding: Yes
Views of Responsible Officers and Corrective Action Plan: Please refer to Urban Affairs Coalition’s Corrective Action Plan