Finding Text
Criteria: CFR Part 200.508 Auditee Responsibilities state that the auditee must prepare the schedule of expenditures of federal awards. The information contained in the schedule of expenditures of federal awards should be reconciled to the underlying accounting and other records used to prepare financial statements, such that it is a fairly stated representation of federal awards expended by their respective federal agency and CFDA number. Condition: The amount of expenditures reported for the HS/EHS program on the schedule of expenditures of federal awards had various offsetting variances, netting to total misstatement that was not considered material to the overall financial statements or to the major federal program. Individually, improper expenditures included were depreciation, expenditures covered by program income, and allocation of a workers compensation refund received to offset workers compensation expenditures. Expenditures improperly excluded were current program capital expenditures and a payroll for a pay period in which the payroll was voided and re-issued, but the re-issued payroll was excluded from the final payroll expenditures reported for the major program. Cause: The Organization does not have effective internal control processes or procedures over the preparation of the schedule of expenditures of federal awards. The Organization did not reconcile the expenditures reported on the schedule to the relevant and complete costs and grant amounts drawn down as reported on the general ledger. Effect or Potential Effect: Potential understatement or overstatement of expenditures could exist in the schedule of expenditures of federal awards and not be detected and corrected. Questioned Cost: None. Repeat of a Prior-Year Finding: No. Recommendation: The Organization should establish policies and procedures to reconcile amounts reported in the financial statements and on the schedule of expenditures of federal awards in a timely manner after the period-end. Accounting personnel should take relevant training in the preparation of financial statements and the schedule of expenditures of federal awards, with particular focus on costs to be included and documentation to be retained in processing grant drawdowns and in preparing reconciliations of significant accounts and grants, grant financial reporting, and the reporting of amounts on the schedule of expenditures of federal awards. The Organization should also consider contracting with an external accounting firm to help oversee the year-end close, audit preparedness, as well as grant financial reporting. Organization's Response 2022 and Corrective Action Plan: The Organization concurs with the recommendation and had already released updated financial policies and procedures as of September 2022. Further revisions will be made in 2023 and include specific instructions for particular grants including federal and state. Additional training is needed for all levels of the fiscal team as well as for program managers to better understand the fiscal requirements of each grant. It is acknowledged that the fiscal team must be expanded and restructured and we have already started the process of recruiting a new CFO. The new CFO will be expected to consistently maintain a comprehensive matrix including all grant requirements. During this time we are seeking a consultant to help us establish better processes, controls and systems and assist until a permanent CFO is established. Other consultants may be obtained for supportive services as needed/recommended in the future. All applicable staff (fiscal and management) will be trained regarding procedures to review grant expenditures for compliance with terms of the grant, and to maintain sufficient records that reconcile to amounts reported as grant expenditures. Further, a new accounting system, Blackbaud, with enhanced cost recording, reporting and budgeting capabilities, has been approved by our Board of Directors to be implemented at the start of the next fiscal year. This implementation includes extensive training for fiscal and program staff. The fiscal committee and the Board will receive monthly updates on the progress being made in these areas. (Current responsible party: Renee Hungerford, Executive Director/CEO) Auditor's Response to Organization's Response 2022 and Corrective Plan: We have noted the Organization's response which appears sufficient and appropriate in the circumstances, and we further note the certain referenced steps already taken in discussion with management.