Finding 965901 (2023-001)

Significant Deficiency
Requirement
ABL
Questioned Costs
-
Year
2023
Accepted
2024-03-29
Audit: 300422
Organization: Baptist Homes Society (PA)
Auditor: Baker Tilly US

AI Summary

  • Core Issue: The Corporation lacks proper segregation of duties in calculating lost revenue, increasing the risk of errors or fraud.
  • Impacted Requirements: Non-compliance with 2 CFR 200.303(a) and PRF reporting requirements due to inadequate internal controls.
  • Recommended Follow-Up: Establish a review process involving multiple personnel to ensure accuracy before submitting financial reports.

Finding Text

Finding 2023-001 - Significant Deficiency in Internal Control Federal Program: COVID-19 Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution Assistance Listing Number: 93.498 Federal Agency: U.S. Department of Health and Human Services Pass-Through Agency: N/A Award Number: N/A Award Year: 2022 Compliance Requirement: Activities Allowed/Unallowed, Allowable Costs/Cost principles, and Reporting Questioned Costs: Not Determinable Criteria: Non-federal entities in receipt of federal funds must comply with the requirements of 2 CFR 200.303(a), which require an entity to establish and maintain effective internal control over the Federal award to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Recipients of Provider Relief Funds and American Resue Plan (ARP) Rural Distribution (PRF) payments must also comply with the reporting requirements described in the PRF terms and conditions and specified in directions issued by the U.S. Department of Health and Human Services. Segregation of duties is an integral component of internal controls intended to prevent or decrease the occurrence of noncompliance due to error or fraud. Proper segregation of duties should be evident in order to ensure that no single employee has control over all phases of a transaction. Condition and Context: The Corporation lacks proper segregation of duties with respect to the calculation of lost revenue. Proper segregation of duties is necessary to prevent a situation where one individual handles a transaction from beginning to end in order to reduce the potential for noncompliance due to error or fraud. During the audit of the lost revenue calculation, six months out of fifty-six were input incorrectly into the calculation from the source documents in error. Using the correct revenue amounts for those six months results in a higher total of lost revenue for the period. Effect: As a result of the lack of proper segregation of duties, noncompliance due to error or fraud could occur without being detected and corrected, timely. Cause: The lack of segregation of duties is due to the CFO taking sole responsibility for calculating both lost revenue and incremental agency costs without a separate review process. Recommendation: Management should implement a review process for these calculations. View of Responsible Officials: The Corporation will have more than one person review the reporting for covid funds. After the information is gathered and reported by the Chief Financial Officer (CFO) but before the information is submitted, the Controller will be asked to review the data. After review and documentation that there has been a review, the reporting will be submitted.

Categories

Allowable Costs / Cost Principles Internal Control / Segregation of Duties HUD Housing Programs Reporting Significant Deficiency Matching / Level of Effort / Earmarking

Other Findings in this Audit

  • 389459 2023-001
    Significant Deficiency

Programs in Audit

ALN Program Name Expenditures
93.498 Provider Relief Fund $1.05M
14.182 Section 8 New Construction and Substantial Rehabilitation $438,080