Finding Text
U.S. Department of Justice
Pass-through Entity: Michigan Department of Health and Human Services
Assistance Listing Number: 16.575
Award Numbers: E20232575-00, E20233017-00, E20233431-00
Award Year End: September 30, 2023
Specific Requirement: (B.) Allowable Costs/Cost Principles, (C.) Cash Management, (L.) Reporting
Criteria: Section 200.303 of the Cost Principles of the Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) requires a non-federal entity to establish and maintain effective internal control over the federal award that provides a 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. These internal controls should be in compliance with the specified guidance that requires proper segregation of duties by dividing key responsibilities among different people to reduce the risk of error or fraud. This should include separating the responsibilities for authorizing transactions, processing and recording them, reviewing the transactions, and handling any related assets. No one individual should control all key aspects of a transaction or event. In addition, this guidance also requires transactions and internal controls to be clearly documented, and the records should be properly maintained and readily available for examination.
Questioned Costs: None.
Condition: During our detailed testing of the areas of indirect costs, cash management, and reporting for the Crime Victim Assistance program, we noted that the indirect cost calculations, requests for funds, and reports were missing documented approval by an appropriate individual with adequate skills, knowledge, and experience.
Context: Of the three months selected for testing indirect cost calculations and requests for funds, none of the calculations or requests were reviewed and approved by an appropriate individual. Additionally, of the three monthly activity reports and the two quarterly reports tested, none of the reports were reviewed and approved by an appropriate individual. The sample was not a statistically valid sample, and the matter appears to be a systemic condition.
Effect: Failure to properly prepare and review indirect cost calculations and requests for funds could allow funds to be over requested and potentially overstate federal revenue, resulting in excess funds paid to the Organization. Similarly, there could also be missed opportunities for reimbursement. In addition, failure to properly review reports before they are submitted could result in inaccurate information being transmitted, resulting in a compliance finding.
Cause: The Organization was unaware of the requirement to have a documented review and approval over the areas of indirect costs, cash management, and reporting.
Repeat Finding: This is not a repeat finding.
Recommendation: The Organization should establish procedures to require the documented review and approval of all indirect cost calculations, cash management requests for funds, and reports by an individual with adequate skills, knowledge, and experience prior to submission.
Views of Responsible Officials: The Organization agrees with this finding.