Finding Text
2023-008 – LACK OF DOCUMENTED APPROVAL FOR FEDERAL EXPENSE DISBURSEMENTS
Type of Finding: (F) – Significant Deficiency in Internal Control Over Compliance of Federal Awards
Funding Agency: U.S. Department of the Treasury
Title: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds
AL #: 21.027
Award #: 202300279, 202300281, 202300280, 202300455
Award Period: July 1, 2022 – June 30, 2023
Questioned Costs: None
Statement of Condition
During testing of federal expense disbursements, it was noted that non-payroll transactions did not contain proper documentation of approvals.
Context
During our testing of internal controls over compliance, it was noted that 11 out of all 11 sampled non-payroll transactions did not include documentation of approval from an appropriate official. No non-compliance was noted.
Criteria
According to the organization's internal control policy and federal grant management standards 2 CFR § 200.303 Internal Controls during testing of Allowable Activities/Unallowable Activities, “The recipient and subrecipient must (a) Establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).”
Cause
High turnover in the accounting department and an increase in transaction volume negatively impacted the documentation of approvals by an appropriate official.
Effect
Failure to maintain documented approvals for federal disbursements increases the risk of unauthorized or improper expenditures, which could lead to questioned costs, potential disallowance of federal funding, and reputational harm. It also represents a breakdown in internal control over financial reporting and compliance.
Recommendation
We recommend that management reinforce existing policies requiring documented approval by appropriate officials for all disbursements. Departments should be retrained on the approval requirements, and periodic reviews should be implemented to ensure compliance. Additionally, the finance department should implement a checklist or automated control to verify that documented approval is present before processing payments.
View of Responsible Official and Corrective Action Plan
Heading Home management is in agreement with this finding. Management has reviewed the existing policies and procedures found in Section II Policy #201 of Heading Homes fiscal policies and procedures with appropriate staff and will enforce the policies and procedures to ensure all invoices and funds requests are properly reviewed and approved prior to processing.
All invoices and requests for funds for fiscal year 2024 will be reviewed to ensure the payment request is reasonable and necessary. The invoice or funds request will be signed and dated by the preparer, as well as by the reviewer as evidence of approval for processing the payment. All invoices and funds requests will be maintained in the cloud server in a manner that allows them to be easily retrieved when needed.
The disbursements in question were reviewed and found to be to vendors regularly used by Heading Home and Heading Home firmly believes that documentation of approval existed at one point in time. However, with the complete turnover in executive personnel during 2023, and the fact that the prior administration utilized an online system for document storage that the current administration has very little access to, we were unable to locate the approvals for these payments.
Management anticipates the above corrective action plan to be fully implemented by June 30, 2024. Personnel responsible for ensuring implementation include Connie Chavez, Chief Executive Officer, Debbie Brickman, Chief Financial Officer, and Armando Sanchez, contract accountants team lead.