THE VERMONT ASSOCIATION FOR MENTAL HEALTH AND ADDICTION RECOVERY, INC.

Criteria: Organizations spending more than the minimum threshold in Federal awards must submit an audit reporting package to the Federal Audit Clearinghouse within nine months of the end of the fiscal year per the requirements of the Uniform Guidance. Condition: The Organization failed to submit their audit reporting package to the Federal Audit Clearinghouse for the years ended June 30, 2023 and 2024. Context: There was turnover in management during fiscal years 2023 or 2024. Cause: Management did not have the appropriate knowledge of the federal audit requirements. Effect: Failure to submit the required audit reporting package could jeopardize the Organization’s ability to secure federal funds in the future. Recommendation: We recommend the Organization improve internal controls over reporting to ensure compliance with the Uniform Guidance. Views of responsible officials: Now that we are aware of the federal audit requirements, we will ensure that our audit package is submitted to the clearinghouse in a timely manner. We will ensure that this happens by including it in our internal reporting calendar, and specific staff will be responsible for specific reports. Repeat finding: Repeat of finding 2023-001. Questioned costs: None.

Criteria: Organizations must have written procurement policies and procedures that include the elements required by the Uniform Guidance and the organizations must follow those policies and procedures for purchases under Federal awards. Condition: The Organization’s written procurement policies do not include the elements required by the Uniform Guidance and the Organization did not follow the federal procurement requirements in spending federal funds. Context: The Organization’s management was not adequately familiar with the federal procurement requirements. Cause: The Organization did not have appropriate written policies and procedures. Effect: Lack of appropriate written policies and procedures and failure to follow the federal regulations could result in unallowable costs charged to Federal awards. Repeat finding: Repeat of finding 2023-003. Questioned costs: None.

Criteria: All costs must be adequately documented and approved prior to payment. Condition: Certain purchases were not supported by adequate documentation and certain other expenses were not approved prior to payment. Context: In a sample of 22 disbursements selected at random, there was a lack of documentation for 5 items and lack of documentation of approval for nearly all of the items. Cause: Management did not have appropriate financial policies and procedures. Effect: Lack of appropriate internal controls could jeopardize the Organization’s ability to secure federal funds in the future. Recommendation: We recommend the Organization improve internal controls over purchases and other costs to ensure there is adequate documentation and approval prior to payment. Views of responsible officials: We started working with an accountant in fiscal year 2024 who required that all invoices be approved prior to payment. The process aligned with our board-approved purchase amounts, which required one approval for purchases under $10,000 and two approvals for purchases equal to $10,000 or more. Approvals were recorded by changing the document’s file name when gathering the documentation for the audit, file names were changed in order to streamline the auditor’s ability to locate the supporting documentation. We now recognize that the auditors must see the approvals, and we will no longer update the file names during the preparation for the audit. Although we have a consistent approval process, we will explore other ways to document the approvals to satisfy the auditor’s requirements. Repeat finding: Repeat of finding 2023-004. Questioned costs: None.

Criteria: All costs must be adequately documented and approved prior to payment. Condition: Certain payroll costs were not supported by adequate documentation and there was a lack of supervisor approval on employee time reports. Context: Per our tests of a random sample of 29 payroll transactions, there was a lack of approval on 15 employee time records and lack of wage rate documentation for a majority of the items. Cause: Management did not have appropriate financial policies and procedures. Effect: Lack of appropriate internal controls could jeopardize the Organization’s ability to secure federal funds in the future. Recommendation: We recommend the Organization improve internal controls over payroll and other costs to ensure there is adequate documentation and approval prior to payment. Views of responsible officials: Under VAMHAR’s current management and financial oversight, we now have clear documentation on all payroll transactions and employee timesheets. Supervisor approval is now recorded on each timesheet prior to the payroll processing. Repeat finding: Repeat of finding 2023-003. Questioned costs: None.

Views of responsible officials: As a result of the fiscal year 2022 findings and leadership changes, VAMHAR experienced significant delays in contracting with an auditing firm to be able to do the audits for the years ended June 30, 2023, 2024 and 2025, and to get current with its filings. However, through changes in the board, staff and leadership, including contracting with an accountant since these recommendations were issued, VAMHAR has put into effect policies and internal controls to allow it to submit filings on time and in compliance going forward once the previous audits are filed.

Views of responsible officials: We have created internal controls to ensure all grant reports are submitted on time.

Views of responsible officials: VAMHAR is updating their procurement policy and internal controls to comply with the Uniform Guidance standards.

Views of responsible officials: VAMHAR now has a time tracking procedure and approval process for payroll costs. Time tracking records are now kept digitally in a limited access shared drive. VAMHAR now has an invoice approval policy in place for documentation and approval of all invoices prior to payment.

Views of responsible officials: VAMHAR has put internal controls and a process in place for approvals of journal entries and bank reconciliations as of fiscal year 2024.

Criteria: Journal entries should have the proper documentation and supporting backup Condition: Journal entries did not have proper documentation to support the entry. Journal entries were not approved by management or board. Cause: Unknown Effect: Without proper backup for adjustments made to the trial balance, it would be easy for material amounts of improper recognition to occur. Recommendation: The Company should implement a system for recording journal entries and the necessary backup for those journal entries. Management Response: The Company is working on developing a system of documenting journal entries, with proper back-up and support. They have hired a CPA to handle their bookkeeping going forward.

The Company does not have the experience and training needed to – ‐ Prepare all its year end reconciliations and journal entries and prepare financial statements, complete with notes, in accordance with accounting principles generally accepted in the United States of America. Accordingly, the Town is unable to, and has not established internal controls over the preparation of year-end reconciliations and journal entries and the preparation of the financial statements. ‐ Select and apply accounting principles that are in conformity with accounting principles generally accepted in the United States of America. Accordingly, the Town is unable to, and has not established, internal controls over the selection and application of accounting principles. Criteria - Under SAS 115, an internal control deficiency exists when management does not possess the financial expertise to prepare end reconciliations and prepare financial statements in accordance with generally accepted accounting principles. Condition: Management lack the expertise to prepare the financial statements in accordance with GAAP. Cause: Unknown Effect: Because management lacks expertise in financial accounting and reporting, there is more than a remote likelihood that a misstatement of the entity’s financial statements that is more than inconsequential will not be prevented or detected under the provisions of SAS 115.

During the course of our audit it was noted that grant reimbursement request is not being conducted timely. Criteria: Grant reimbursements should be requested timely. This also makes calculating expenditures related to possible single audits to be reconciled. Condition: Management was not requesting grant reimbursement timely when expenditures were incurred. Cause: Unknown Effect: Makes it very difficult for cash flow and revenue recognition to be completed timely and accurately.

– During the course of our audit it was noted that payroll timesheets and grant allocation was not being follow properly. Time for employees was allocated to grants based on budget/scheduled time rather than actual time via a timesheet. Management could not justify time spent to specific grants by specific employees. The Company also could not support multiple invoices requested for review for audit evidence. Criteria: Grants require time to be allocated to them based on specific time spent rather than budget. Grants require backup for reimbursement. Condition: No timesheets were kept or approved Effect: Grant compliance was not followed.

Criteria: Boards are required to meeting a regularly to provide guidance and support to management Condition: There were no board meeting prior to August 5, 2022 or other documentation of board exercising their fiduciary responsibility to oversee the Company’s operations. Effect: Little to no board oversight.

Criteria: The Rural Behavioral Health Workforce Coordinating Centers – Northern Border Region grant award requires a SF-424a and an annual Federal Financial Report (FFR). A data collection form is required to be filed within 9 months after year end. Condition: No documentation was available to determine that the SF-424a or annual Federal Financial Report (FFR) for the year ended June 30, 2022 has been filed. The data collection form was not filed within 9 months after year end. Cause: There were no procedures in place for timely filing of reports or retention polices for grant reporting. Effect: Without documentation for reporting and untimely filing of the data collection form, the Company is not in compliance with the reporting requirements.

Criteria: The Company is required to hold documentation of each drawdown of grant revenue. Condition: Management could not provide documentation of the drawdowns of grant revenue. Effect: Lack of documentation of draw down approval and evidence of reimbursement.

Criteria: The financial statements and Schedule of Federal Awards required material adjustments in order for an opinion to be issued. Condition: Many accounts required material adjustments to comply with GAAP. Effect: The financial statements and Schedule of Federal Awards had multiple errors that required material adjustments

Criteria: The financial statements require adequate backup and support. Condition: Management did not have adequate support/documentation for audit procedures. Effect: During the course of the audit multiple items required took substantial time to locate and provide to the auditors for audit backup and support. This required multiple delays in the audit and ultimately resulted in a disclaimer of opinion

Condition: Prior to November 14, 2022, invoices paid did not require documentation of approval. The former executive director paid invoices with no review or approval. Invoices to support the expenditures was not consistently retained. Criteria: Internal controls should be in place to provide that expenditures are only paid after they are reviewed and approved. Invoices or other documentation should be retained to support expenditures. Cause: There were no procedures in place to require authorization of expenditures or filing of invoices to support expenditures. Effect: Because of the failure to require approval and the lack of documentation to support expenditures, there is more than a remote possibility that material misstatements could occur without detection. Because of the failure to retain evidence for expenses, it wasn’t possible to issue an opinion about the existence and carrying amount of expenses.

Criteria: Proper segregation of duties should be impamented to prevent various duties to be completed without review Condition: The Company operates a small office limiting the ability for segregation of duties to be in place. Many of the accounting functions are performed by one employee with the review of a second employee. A deficiency will occur when staffs are away for vacation, sick days and other events which cause various duties to be completed without review. Effect: Lack of segregation of duties

Block Grants for Prevention and Treatment of Substance Abuse (Recovery Support and Training – CFDA #96.959; Passed thru State of Vermont Department of Health Grant #403420-08911 Grant period – Year ended June 30, 2022, Vermont Alcohol and Drug Information Clearinghouse – CFDA #93.959; Passed thru the State of Vermont Department of Health Grant #03420-08889 – Year ended June 30, 2022, Rural Behavioral Health Workforce Coordinating Centers – Northern Border Region – CFDA #93.912; Grant #1 U2SRH43523-01-00 – Year ended August 31, 2022) Criteria: Allowable cost criteria in 2 CFR part 200 require federal payments to be made for payroll based on actual time allocated. Activities allowed Condition: The Company could not provide any back-up for the allocated time requested for reimbursement of payroll. Cause:Proper timesheets were not kept. Effect: The federal grant was incorrectly charged without support. Questioned Costs: $405,190 Context: The Company was audited by the Office of Inspector General for Substance Abuse and Mental Health Services Administration programs. Multiple infractions were noted.

Block Grants for Prevention and Treatment of Substance Abuse (Recovery Support and Training – CFDA #96.959; Passed thru State of Vermont Department of Health Grant #403420-08911 Grant period – Year ended June 30, 2022, Vermont Alcohol and Drug Information Clearinghouse – CFDA #93.959; Passed thru the State of Vermont Department of Health Grant #03420-08889 – Year ended June 30, 2022 Material Weaknesses in Internal Control over Compliance: See findings 2022-2, 2022-3, 2022-4, 2022-5, 2022-7, and 2022-9

Rural Behavioral Health Workforce Coordinating Centers – Northern Border Region – CFDA #93.912; Grant #1 U2SRH43523-01-00 – Year ended August 31, 2022) Material Weakness in Internal Control over Compliance: See findings 2022-2, 2022-3, 2022-4, 2022-5, 2022-6, 2022-7, 2022-9, 2022-10

Rural Behavioral Health Workforce Coordinating Centers – Northern Border Region – CFDA #93.912; Grant #1 U2SRH43523-01-00 – Year ended August 31, 2022) Criteria: According to 2 CFR section 200.305(b), non-federal entities must minimize the time elapsed between the transfer of federal funds and disbursement by the non-federal entity for direct program costs. Condition: Drawdown reports were not available for testing and financial reports weren’t available to determine that the time elapsed between the transfer of federal funds and disbursement by the non-federal entity for direct program costs was minimized. Effect: The entity may not be in compliance with the cash management requirements. Questioned Costs: $0 Context: There was a significant amount of turnover within the organization. Due to the turnover and the lack of record retention policies and procedures, records of drawdowns and documentation to support compliance with cash management requirements couldn’t be located. On November 14, 2022, the Company adopted new records management policies and procedures.