Finding Text
FINDING REFERENCE NUMBER 2023-053 (See Finding Reference Number 2023-022)
FEDERAL PROGRAM (ALN – 93.667) SOCIAL SERVICES BLOCK GRANT
U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES
AWARD NUMBER 2211PRSOSR (Federal Award Year: 2022)
ADMINISTRATION ADMINISTRATION FOR FAMILIES AND CHILDREN (ADFAN, BY ITS SPANISH ACRONYM)
COMPLIANCE REQUIREMENT REPORTING – PERFORMANCE
TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS
CRITERIA In accordance with 42 U.S. Code §1397e and the requirements of the Post-Expenditure Report (OMB #0970-0234), states and territories must submit an annual Post-Expenditure Report to the Office of Community Services no later than six months following the end of the fiscal year. The report must include, among other elements, clearly defined eligibility criteria for program beneficiaries and an accurate accounting of expenditures, including the amount of Temporary Assistance for Needy Families (TANF) funds transferred to the Social Services Block Grant (SSBG).
The 2 CFR §200.303 (a) establishes that the recipient and subrecipient must: 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).
STATEMENT OF CONDITION During our review of the submitted Post-Expenditure Report and supporting documentation, we identified the following deficiencies:
(1)
The eligibility criteria for beneficiaries were not established or documented within the report and,
(2)
The reported amounts of TANF funds transferred to SSBG do not reconcile with the data provided in the PRDF’s internal database. Although the report specifies that expenditure should be based on current balances rather than budgeted amounts, the transfer in question was based on the approved budget.
(3)
In the database used to prepare the financial statement and SEFA, the expense related to the transfer of funds from TANF to SSBG reflected an expense of $136,958.70. This database includes credits that eliminate the program expense in the expense account identified as E9050. Subsequently, the ADFAN Finance Director included other transactions in the database that adjusted the expense, reflecting a total balance of $6,798,836.38 (see Finding 2023-016).
(4)
In addition, internal control interviews revealed that there is no designated individual responsible for reviewing the information entered to the report by the preparer, increasing the risk of reporting errors.
QUESTIONED COSTS No questioned costs identified.
PERSPECTIVE INFORMATION This deficiency is a systemic problem that is related to lack of proper training and segregation of duties when reporting (preparer and reviewer not being the same person).
STATEMENT OF CAUSE ADFAN does not have internal controls to effectively review the process and comply with the reporting requirements. The absence of effective internal controls at ADFAN to review processes and ensure compliance with reporting requirements can be attributed to inadequate organizational structure and insufficiently defined roles and responsibilities. There is no designated individual or team responsible for overseeing the accuracy and completeness of financial data entered in the Post-Expenditure Report.
POSSIBLE ASSERTED EFFECT Failure to meet the reporting requirements may lead to noncompliance with Federal regulations, reduced transparency and accountability in the use of Federal funds, and potential implications for future funding or audit findings.
IDENTIFICATION OF
REPEAT FINDING No reported as prior audit finding.
RECOMMENDATIONS We recommend ADFAN to establish and document eligibility criteria in accordance with Federal reporting requirements. Reconcile TANF transfers with internal records to ensure accurate reporting and ensure that all expenditures reported are based on actual balances rather than budgeted projections. ADFAN should establish and implement internal control procedures that include formal review process to verify the accuracy and completeness of the reported information and designate responsible personnel for the review and approval of reports prior to submission to ensure compliance with federal reporting requirements.