FINDING REFERENCE NUMBER 2023-051 (See Finding Reference Number 2023-021)
FEDERAL PROGRAM (ALN – 93.568) LOW-INCOME HOME ENERGY ASSISTANCE
U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES
AWARD NUMBERS 2101PRLIEA (Federal Award Years: 2021 through 2023)
ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM)
COMPLIANCE REQUIREMENT REPORTING
TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS
CRITERIA Uniform Guidance at 2 CFR § 200.302, Financial Management, establishes that:
(a)
Each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. (See § 200.450.)
(b)
The recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337):
(1)
Identification of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number, year the Federal award was issued, and name of the Federal agency or pass-through entity.
(2)
Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. When a Federal agency or pass-through entity requires reporting on an accrual basis from a recipient or subrecipient that maintains its records other than on an accrual basis, the recipient or subrecipient must not be required to establish an accrual accounting system. This recipient or subrecipient may develop accrual data for its reports based on an analysis of the documentation on hand.
(3)
Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation.
(4)
Effective control over and accountability for all funds, property, and assets. The recipient or subrecipient must safeguard all assets and ensure they are used solely for authorized purposes. See § 200.303.
…
(6)
Written procedures to implement the requirements of § 200.305 and
(7)
Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award.
STATEMENT OF CONDITION As part of our audit procedures over the reporting requirement for LIHEAP program, we selected two reports submitted during our fiscal year. We noted that the administrative expenditures do not reconcile with the accounting information from PRIFAS. In addition, for the amount of encumbrances of $11,032,784.51, the amount of $9,943,769.52 was not supported by a detail.
QUESTIONED COSTS No questioned costs identified.
PERSPECTIVE INFORMATION This is a systematic deficiency. Procedures and internal controls manuals should provide for and ensure the segregation of duties, and the reconciliation of financial information reported to federal agencies against the accounting records used to prepare financial statements and SEFA.
ADSEF failure to support reported amounts with verifiable documentation and the absence of independent review increases the risk of inaccurate or misstated financial data being reported to the Federal awarding agency.
STATEMENT OF CAUSE During our interviews and understanding of the internal controls over financial reporting, we noted that only one person prepares, submits and certifies the SF– 425 reports. No proper segregation of duties exists, that allows for validation of all accounting data before submitting the reports. In addition, the procedures manual for preparing reports does not establish a clear process for obtaining information, validating it, recording it, preparing it, and reporting it, as well as the responsibilities and segregation of duties to ensure that the reported information is consistent with ADSEF's accounting records.
ADSEF lacks internal controls that allow for the timely validation and reconciliation of financial information. Furthermore, they lack a written procedures manual detailing the processes to follow in obtaining accounting data and reporting it to the Federal government, ensuring that the responsibility does not fall on a single individual.
POSSIBLE ASSERTED EFFECT ADSEF does not ensure that the reports are accurate and traceable to the accounting database used to prepare their financial reports to the Federal Agencies and their financial statement.
IDENTIFICATION OF
REPEAT FINDING No reported as prior audit finding.
RECOMMENDATIONS We recommend ADSEF to establish written procedures and internal controls manuals to provide and document the segregation of duties related to the reporting compliance requirement.