Finding 969369 (2022-001)

Finding 2022-001: Type of Finding: Financial Statement Finding, Significant Deficiency Criteria: To receive federal awards, non-federal entities must agree to comply with laws, regulations, and the provisions of grant agreements and contracts, and to maintain internal control to provide reasonable assurance of compliance within these requirements. Condition and Context: Management represented that control activities were established to ensure compliance with the federal programs, and the Organization was able to provide support for food distribution being provided to individuals who were eligible for the major program tested. However, for one quarter selected during 2023, these individual distribution records were not in agreement with the summarized weekly distribution records that were used to generate reporting submitted to the City of San Jose. We noted that for another 2023 quarter selected, we could only verify the report was submitted to the City of San Jose with an email chain PDF which did not store the actual report submitted. The Organization was able to provide other internal reports as evidence that federal reporting compliance requirements were met, and actual expenditures incurred during the grant period substantially exceeded the amounts claimed for federal reimbursement. Cause: The Organization did not properly document evidence of an effective control environment to provide reasonable assurance of federal compliance and experienced turnover that resulted in a loss of both first-hand knowledge and data. Effect or Potential Effect: The Organization may not be able to detect or prevent errors or fraud from occurring in a timely manner. Recommendation: The governing body and management of the Organization should ensure that internal controls are in place upon signing contracts involving federal funds and ensure that these internal controls are being followed throughout the grant period. Responsible Official’s Response: In August 2023, the Organization engaged with Jane Sanchez, CPA to implement a system of internal control for accounting procedures in general, and specifically for procedures related to compliance with grant terms.