Finding Text
Internal Control over Compliance and Compliance with Activities Allowed or Unallowed and Allowable Costs and Cost Principles
See Schedule of Findings and Questioned Costs for chart/table.
Criteria or Specific Requirement: In accordance with §200.302 Financial Management, a non-federal entity's financial management systems, including records documenting compliance with federal statutes, regulations, and the terms and conditions of the federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions;
and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the federal statutes, regulations, and the terms and conditions of the federal award. The financial management system of each non-federal entity must provide for the following:
(1) Identification, in its accounts, of all federal awards received and expended and the federal programs under which they were received.
(2) Accurate, current, and complete disclosure of the financial results of each federal award or program in accordance with the reporting requirements set forth in §200.327 Financial Reporting and §200.328 Monitoring and Reporting Program Performance.
(3) Records that identify adequately the source and application of funds for federally-funded activities.
(4) Effective control over, and accountability for, all funds, property, and other assets.
Additionally, §200.303 Internal Controls states that a non-federal entity must (a) establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award.
Condition: PSI has documented expenditure policies and procedures. However, as identified below, the review and approval process did not operate as designed.
PSI’s policies are designed to ensure expenses are reviewed and approved timely to ensure proper recording in the books and records. The following errors were identified during our testing of payroll and non-payroll expenditures:
For AL# 12.350 and AL# 98.001, BDO tested 120 payroll and non-payroll expenditures for each major program. BDO also separately tested 40 transactions from the indirect cost pool. Based on that testing, BDO identified instances in which the expenditures were reported within the incorrect period on an accrual basis. These expenditures were valid expenditures within the overall award period.
o For AL# 98.001 we identified the following errors: See Schedule of Findings and Questioned Costs for chart/table.
o For AL# 12.350 we identified the following error: See Schedule of Findings and Questioned Costs for chart/table.
o For indirect cost pool testing, one of the 40 transactions tested totaling $9 was recorded in error as it related to a prior period (2022).
Questioned Costs: As all of the costs noted were within the award period of performance, there are no questioned costs to report.
Context: This is a condition identified per review of PSI’s compliance with allocability and allowability provisions of the Uniform Guidance. The prevalence of these findings is detailed in the condition section above. Samples were selected using a non-statistical method.
Cause: PSI has documented expenditure policies and procedures regarding the timely processing and approval of expenditures incurred. However, as identified above, the review and approval process for the samples identified above did not operate as designed.
Effect: The lack of adherence to established internal control policies and procedures can lead to noncompliance with federal statutes, regulations, and the provisions of award agreements which could ultimately lead to disallowed costs for the major programs.
Repeat Finding: This is a repeat finding from the previous year. This was reported as finding 2022-002 in the 2022 schedule of findings and questioned costs.
Recommendation: BDO recommends PSI adhere to its documented policies and procedures regarding authorization and timely approval and recording of expenditures.
Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and will provide additional training to staff members to ensure compliance with established policies and procedures. Refer to management’s corrective action plan for additional information.