Horizon OutreachNon-Profit

Section III ? Major Federal Award Programs Audit Significant Deficiency in Internal Controls over a Major Federal Program: 2020-001 ? Cash Management Condition: Single audit testing of the Healthy Marriage Promotion and Responsible Fatherhood Grants program revealed the following for the 40 transactions reviewed: for 6 of the transactions reviewed, the expenditures were paid after the three-day timeframe permitted by the grant; for 2 of the transactions reviewed, there was no documentation of the request for reimbursement of the expenditures. Furthermore, testing of compliance and the internal controls related to cash management revealed the following: for 1 of the transactions reviewed, the grant funds requested for the tested expenditure were withdrawn from the bank in the form of four cashier?s checks made payable to Horizon Outreach (the Organization) and held for several months until the expenditure was incurred and the invoice was received. Criteria: The grant contract specifies expenditures must be incurred and/or paid prior to requesting reimbursement, or expended within three days if funds are requested and received in advance. Additionally, per 2 CFR 200.302(b)(3), records of a non-federal entity must provide adequate documentation of the source and application of funds for federally-funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. Effect: Funds received from the grantor for grant-related expenditures were held in the form of cashier?s checks or held in the bank account and not expended timely according to grant requirements. Additionally, as noted above, 2 expenditures selected for single audit testing that were recorded for the grant did not have documentation of payment or requests for payment, creating a risk that expense reimbursement requests could be duplicated. Cause of Condition: There was inadequate oversight of the individual responsible for grant management, which includes review of grant expenditures and reimbursement requests. Recommendation: An individual outside of executive management should be designated to oversee grant expenditures and reimbursement requests to ensure expenditures are properly recorded and reported for reimbursement according to the requirements of the grant. Designating an individual independent of management to oversee the grant will also ensure that proper separation of duties is in place to prevent override of internal controls. Additionally, management should cease the practice of paying vendors with cashier?s checks. Payment should be made with regular bank checks that are signed in accordance with the Organization?s payment authorization/approval policy. Furthermore, an individual designated within the Organization (such as a CFO), as well as a member of the Board of Directors, should review disbursements routinely to ensure they are properly supported and approved. Management Response: Horizon Outreach acknowledges the recommendation and will implement a corrective action plan. It is not COMMON PRACTICE for Horizon Outreach to use cashier?s checks to pay for the Annual Audit Fees. This audit finding was not the result of inadequate oversight of the Grants Administrator but extenuating circumstances due to the global COVID-19 Pandemic. All of the cashier?s checks were accounted for and subsequently used to pay for the CURRENT 2020 financial & single audit for which they were earmarked. Actions taken by Horizon Outreach, including converting cash to cashier?s checks to prevent utilizing federal funds for unallowable purposes other than paying for the CURRENT 2020 Audit Fees, were brought about by constraints imposed on the organization by the COVID-19 Pandemic lockdowns in 2020 that prevented Horizon Outreach from identifying an auditor in a timely manner due to office closures of Horizon Outreach and the Audit firm that was normally engaged. In addition, there was an absolute misunderstanding that Horizon Outreach could make multiple drawdowns during the 90-day grant closeout liquidation period as opposed to the one drawdown that was made for the audit. The Grants Management Specialist for the Horizon Eagle Program was contacted and reviewed the history for Horizon Outreach which was consistent in making one drawdown during the closeout period. The current single audit does not reflect the level of consistency & compliance of Horizon Outreach in managing federal funds over the past 11 years nor is it reflective of the company?s single audit record over the past 4 years.

Deficiency in Internal Controls over a Major Federal Program: 2020-002 ? Allowable Costs/Cost Principles Condition: Single audit testing of the Healthy Marriage Promotion and Responsible Fatherhood Grants program revealed the following: for 4 of 40 transactions reviewed, proper documentation of the expenditures (such as canceled check, payment request, and invoice) was not provided. Criteria: Per 2 CFR 200.302(b)(3), records of a non-federal entity must provide adequate documentation of the source and application of funds for federally funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. Effect: The Schedule of Expenditures of Federal Awards includes potential unallowable costs. Cause of Condition: There was inadequate oversight of the individual responsible for grant management, which includes review of grant expenditures and reimbursement requests. Recommendation: An individual outside of executive management should be designated to oversee grant expenditures and reimbursement requests to ensure expenditures are properly recorded and reported for reimbursement according to the requirements of the grant. Designating an individual independent of management to oversee the grant will also ensure that proper separation of duties is in place to prevent override of internal controls. Furthermore, an individual designated within the Organization (such as a CFO), as well as a member of the Board of Directors, should review disbursements routinely to ensure they are properly supported and approved. Management Response: Horizon Outreach acknowledges the recommendation and will implement a corrective action plan. It is not COMMON PRACTICE for Horizon Outreach to have missing invoices or support for expenditures. Due to Constraints imposed on the organization by the COVID-19 Pandemic, including office closure and staff working remotely from home, these 4 supporting documents (i.e. invoices) were not properly filed but were accurately accounted for in general ledger via QuickBooks. Horizon Outreach currently has a Grants Administrator/Authorizing Official; a CPA who is designated to oversee the grant and ensure proper separation of duties to prevent override of internal controls. This position has been grant funded and in place for the past 11 years. The use of an independent CPA to record transactions in the general ledger, record journal entries, reconcile the bank accounts monthly and prepare monthly financial statements adds internal controls. The sole responsibility of the Grants Administrator/Authorizing Official is to provide financial oversight of all accounting functions/processing and to serve as the Administrator for QuickBooks (i.e. access to General Ledger functions). In addition, Horizon Outreach has established policies and procedures as well as compensating controls in place to ensure proper oversight of grant funds and to prevent override of internal controls. The Board of Directors for Horizon Outreach reviews and approves financial statements and bank reconciliations periodically ensuring proper oversight of grant funds as well as review/approval of expenditures that require higher level review.