Finding 619391 (2022-004)

Material Weakness
Requirement
A
Questioned Costs
$1
Year
2022
Accepted
2023-06-21
Audit: 38169
Organization: Progress House Inc. (CA)
Auditor: St Group

AI Summary

  • Core Issue: The organization had delinquent payroll taxes, paid late, due to inadequate controls.
  • Impacted Requirements: Timely payroll tax payments are mandated by IRS regulations, with potential penalties under IRC Sections 6656 and 6672.
  • Recommended Follow-Up: Implement effective controls for timely payments, designate responsible staff, and consider automated systems to enhance accuracy and efficiency.

Finding Text

Federal Awarding Agency: U.S. Department of Health and Human Services Pass-Through Entity: County of Yolo, Placer County, Advocates for Human Potential, Inc. Category of Finding: Allowable Cost/Cost Principles Federal-Pass through Grantor: 2020-2019-PHI01, HHS000025, 7438-CA-BHWD-PHI AL No: 93.959 Finding: The audit identified that the non-profit organization had delinquent payroll taxes, which were paid after the due date during the next fiscal year. Cause: The Organization did not have adequate controls in place to ensure timely payment of payroll taxes. This could be due to a lack of internal controls, poor communication among departments, or other factors that contributed to delays in processing payroll tax payments. Effect: The failure to pay payroll taxes on time could result in penalties and interest being assessed by the Internal Revenue Service (IRS), which could result in a significant financial impact on the organization. Additionally, this could damage the organization's reputation and relationships with employees, vendors, and other stakeholders. Criteria: In accordance with IRS regulations, the failure to pay payroll taxes on time can result in violations of Internal Revenue Code (IRC) Section 6656. This section imposes penalties and interest on late or delinquent payroll tax payments. IRC Section 6672: Commonly referred to as the Trust Fund Recovery Penalty (TFRP), this section imposes personal liability on individuals, such as corporate officers or responsible parties, for willful failure to collect, account for, and pay withheld payroll taxes to the IRS. It holds individuals personally responsible for unpaid payroll taxes and allows the IRS to assess penalties and pursue collection actions against them. Questioned costs - $32,605 Repeat finding - No Recommendation: The non-profit organization should establish and implement effective controls to ensure timely payment of payroll taxes, including regular monitoring and reconciliations to ensure that all payroll taxes are paid on time. This could include designating specific staff members responsible for payroll tax payments, implementing regular reviews of payroll tax processes, and providing training to staff members responsible for payroll tax payments to ensure that they are aware of the requirements for timely payment of payroll taxes. Additionally, the organization should consider implementing automated payroll tax payment systems to streamline the process and improve accuracy and efficiency. Finally, the organization should ensure that it has adequate reserves and resources to cover any penalties or interest assessed by the IRS for late payment of payroll taxes.

Categories

Questioned Costs Subrecipient Monitoring Allowable Costs / Cost Principles

Other Findings in this Audit

  • 42948 2022-005
    Significant Deficiency
  • 42949 2022-004
    Material Weakness
  • 42950 2022-003
    Material Weakness
  • 619390 2022-005
    Significant Deficiency
  • 619392 2022-003
    Material Weakness

Programs in Audit

ALN Program Name Expenditures
93.959 Block Grants for Prevention and Treatment of Substance Abuse $228,428