Finding number: 2023-004 – Material Weakness in Internal Control Over Preparation,
Reconciliation, and Retention of the Schedule of Expenditures of Federal
Awards (SEFA)
Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number: 93.914
Federal Program #2 HIV Care Formula Grants): CFDA Number: 93.917
Federal Program #3: HIV Prevention Activities: CFDA Number: 93.941
Name of federal
agency:
U.S. Department of Health and Human Services (HHS)
Name of pass-through
entity:
Multiple
Repeat finding: No
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Criteria: Under 2 CFR §200.510(b), recipients of federal funds are required to prepare a
Schedule of Expenditures of Federal Awards (SEFA) that fairly presents federal
expenditures for each grant program and is derived from and supported by the
entity's accounting records. Additionally, 2 CFR §200.302 requires that financial
management systems adequately identify and account for federal awards to
ensure accuracy and compliance with applicable federal requirements. Best
practices dictate that federal expenditures should be reconciled regularly to the
general ledger, and supporting documentation should be maintained to
substantiate amounts reported on the SEFA.
Condition: The Organization lacked adequate controls over the preparation, reconciliation,
and retention of records related to the SEFA. Specifically:
The SEFA incorrectly reported certain federal awards as non-federal awards.
The SEFA is prepared based on amounts requested for reimbursement
instead of directly based on expenditures incurred.
Reconciliation schedules that tied SEFA expenditures directly back to the
expenses recorded in the general ledger could not be located.
Expenses recorded in the general ledger represent expenses incurred to
operate the program in addition to direct grant expenditures; the
Organization only requests reimbursement for direct program expenditures
allowable under the program.
Documentation of Excel-based reconciliations did not agree to reported
monthly expenditures, indicating manual reclassification entries between
program codes that were not clearly supported.
Cause: The deficiencies noted were primarily due to:
Lack of system controls to ensure that state and federal expenditures were
separately tracked from non-grant funds spent within the same source codes.
Turnover in grants management personnel, which resulted in missing,
incomplete, or inaccurate reconciling records.
Possible effect: Without a complete and accurate SEFA, the Organization risks noncompliance
with Uniform Guidance reporting requirements, which could impact its ability to
receive and administer federal funds in the future. Additionally, inaccurate
SEFA reporting increases the risk of errors in administering funds, questioned
costs, and over or under expenditure of grants.
Questioned cost: None identified at this time.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Recommendation: We recommend that the Organization implement the following measures to
improve SEFA preparation and record retention:
1. Develop a Standardized SEFA Reconciliation Process – Implement formal
policies and procedures requiring that SEFA expenditures be reconciled to
the general ledger on a monthly basis, with documentation maintained for
audit purposes.
2. Enhance System Controls for Grant Expenditures – Modify the financial
system to allow for the proper segregation of state and federal expenditures
from non-grant funds, ensuring that expenditures are properly classified at
the time of entry.
3. Require Monthly Documentation Reviews – Establish a control requiring
management to review and approve SEFA reconciliation schedules on a
monthly or quarterly basis to ensure accuracy and completeness.
4. Implement a Centralized Documentation Retention Policy – Require that all
SEFA-related reconciliation records, including general ledger tie-outs and
manual adjustments, be retained in a centralized, accessible location.
5. Provide Grants Management Training – Conduct training for grants
management and accounting personnel on SEFA preparation requirements,
including Uniform Guidance compliance and best practices for
documentation and reconciliation.
6. By implementing these measures, the Organization can improve its internal
controls over SEFA preparation, ensure compliance with Uniform Guidance,
and reduce the risk of reporting inaccuracies.
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
Views of responsible
officials:
Management partially agrees with the finding. While we acknowledge that
documentation supporting SEFA reconciliation was incomplete, we believe that
federal expenditures were properly accounted for. We would like to address
some of the auditors' points individually:
"The SEFA is prepared based on amounts requested for reimbursement instead
of directly based on expenditures incurred." Most grant awards do not fully fund
the programs they support, most grant awards do not run concurrently with Prism
Health North Texas' fiscal year (i.e., with the Calendar Year), and most grant
awards are not spent in equal monthly amounts. It is correct that the 2023 SEFA
was based on grant-appropriate expenditures that occurred during Calendar Year
2023 and were submitted to those grant sponsors for reimbursement. This will
not necessarily reach the full cost to Prism for each grant-supported program, nor
is it likely to exactly match any annual grant award amount.
"Expenses recorded in the general ledger represent expenses incurred to operate
the program in addition to direct grant expenditures; the Organization only
requests reimbursement for direct program expenditures allowable under the
program." As we confirmed verbally with the audit partner on April 25, 2025,
this statement is intended to provide information and context and is not a
criticism or intended to point out any problem. As stated above, most grant
awards do not fully fund the programs they support; therefore, the general ledger
necessarily includes both expenses the sponsor will reimburse and expenses the
sponsor will not reimburse.
Nonetheless, we are enhancing our reconciliation procedures and documentation
practices to fully meet audit requirements. Finding 2023-004 refers to the
auditors' assessment of the SEFA preparation and reconciliation processes that
occurred in Calendar Year 2023. As of this writing, Prism Health North Texas
has already changed its SEFA preparation and reconciliation processes and
meets many of the recommendations above.
Action Taken:
Documentation Retention – On April 25, 2025, management created a structured
and easily accessible system for storing all relevant information for all grants
management personnel.
A logical naming system for files identifying the SEFA period, the
funding agency and identified general ledger expenditures claimed on
the SEFA.
We are now documenting the difference between all GL transactions and
those submitted for sponsor reimbursement (i.e., SEFA
components) in a single document per fund code, arranged by
fiscal year. Previously this documentation was kept by invoice and
arranged by grant year.
Management will continue to ensure all expenditure-related support,
such as invoices and purchase orders, is saved electronically to all
AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary
Schedule of Findings and Questioned Costs
For the Year Ended December 31, 2023
SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued)
financial transactions.
SEFA Reconciliation – Management has decided to move from an annual to
quarterly SEFA reconciliation process to enhance the frequency of management
oversight in SEFA draft preparation. VP of Finance will prepare the SEFA for
independent review by the CFO. This will be put into a written
policy/procedure.
System Enhancements – Prism's current accounting system does not
accommodate this. However, Prism is already in the later stages of selecting a
new Enterprise Resource Planning (ERP) solution, with this as one of our key
selection criteria. Our new ERP should allow for expenditures within the same
cost center to be identified as grant-reimbursable or non-grant-reimbursable at
the time of entry. We have identified opportunities in new financial
management software solutions that we are scheduled to demo May 12th and the
16th of 2025. Opportunities such as:
The ability to tag grant-reimbursable transactions, to segment our award
cost center into two important categories.
The full cost to manage a specific program.
Identified cost claimed on the SEFA.
Dedicated grant modules that will allow us to establish business rules
and workflows to streamline and digitize critical aspects of grant
management.
Staff Engagement – Cross department coordination meetings occur monthly
between the Finance organization and the Grants Management team to continue
to foster alignment and collaboration in our grant cycles. A general overview of
SEFA, including how to prepare and organize the monthly reconciliations, has
already occurred with some of the grants accountants.
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