Hunger at HomeNon-Profit

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.

Finding 2022-002: Information on the Federal Program: Assistance Listing Number 21.027 - Coronavirus State and Local Fiscal Recovery Funds, United States Department of Treasury. Pass-Through Entity: City of San Jose. Award Number: DB#647322. Compliance Requirements: Procurement and Suspension and Debarment. Type of Finding: Significant Deficiency. Criteria: Program requirements state that the Organization was required to comply with reporting requirements related to debarment and suspension. Condition: We noted no written policies or procedures in place to verify that an entity with which the Organization plans to enter into a covered transaction is not debarred, suspended, or otherwise excluded. Cause: As noted in 2022-001, 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, resulting in the specific compliance matter identified in this finding. Effect or Potential Effect: As a result, the Organization does not appear to meet the program compliance requirement. Questioned Costs: $0. Context: We were unable to obtain sufficient appropriate audit evidence to determine federal compliance, however our testing of direct expenditures during the audit noted no apparent covered transactions with debarred, suspended, or otherwise excluded entities, resulting in no questioned costs. Repeat Finding: Not applicable. Recommendation: Formal procedures should be established to ensure compliance with federal debarment and suspension requirements. Views of Responsible Official: Once Ewell Sterner, CEO, was made aware of the lack of grant administration and reporting, he discussed it with Jane Sanchez, CPA, to determine the extent of the inadequacy. He then pursued the path to correct it. See Corrective Action below.

Finding 2020-01 Timely Account Reconciliation and Financial Statement Preparation Finding Type: Financial Statement Finding Criteria: To help ensure that financial reports, including audited financial statements, are accurate and prepared timely enough to meet filing requirements and provide useful information for decision making, general ledger accounts, should be reconciled monthly and annual financial statements should be prepared within a reasonable period after year-end. Condition: During our audit, we noted certain accounts were not properly reconciled, increasing the risk of accounting errors and causing significant delays in the completion of the annual audit. In addition, financial statement preparation and related required supplementary schedules, schedule of expenditures of federal awards (SEFA) were not properly prepared, increasing the risk of accounting errors and causing significant delays in the completion of the annual audit. Cause: Internal controls were not properly designed, executed, and monitored to ensure timely preparation of reports and reconciliation schedules for various financial statement accounts and schedules for year-end audit purposes. Effect: As a result, Hunger at Home may have not had accurate and timely financial information for decision making and its annual financial statement audit was significantly delayed. Recommendation: We recommend that management strengthen the related internal controls over monitoring of its year-end reconciliation and preparation of its financial statements to ensure that the general ledger accounts reflect proper and complete activity consistent with their basis of accounting. We believe that reviews, evaluations of transactions, and reconciliations by the Treasurer of all account balances should be performed on a regular basis during the year. View of Responsible Officials: Management agrees with this finding and offers the following explanation. During the fiscal year under review there was a confluence of events that negatively affected our ability to complete account reconciliations and prepare financial statements in a timely manner. During the pandemic the Organization experienced tremendous growth and received federal grants for the first time, which forced a large volume of accounting transactions without the proper development of accounting policies and procedures and personnel dedicated to accounting and grant compliance. The Organization will be able to complete account reconciliations and produce financial statements in a timely manner going forward. The Organization is looking to expand accounting and grant personnel to continue bettering operations.

Finding 2020-02 Lack of Internal Control for Coronavirus Relief Fund and Disaster Grants ? Public Assistance Programs Finding Type: Federal Awards Findings Federal Program: Coronavirus Relief Fund; assistance listing number 21.019; Disaster Grants ? Public Assistance; assistance listing number 97.036 Criteria: Under the Uniform Guidance, the Organization must 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 statues, regulations, and the terms and conditions of the Federal award. Costs must be adequately documented in order to be allowable under Federal awards. Condition: During our audit, we noted the Organization did not have properly documented internal controls or have established internal controls established that would reduce the risk of accounting errors and fraud from being detected. Effect: As a result, Hunger at Home may not be able to detect or prevent errors or fraud from occurring in a timely manner. Recommendation: We recommend management strengthen the documentation related to internal controls over grant compliance and ensure the controls are being consistently applied. We believe the documentation and monitoring over these controls will prevent any errors and fraud from going undetected. View of Responsible Officials: Management agrees with this finding and offers the following explanation. During the fiscal year under review there was a confluence of events that negatively affected our ability to complete account reconciliations and prepare financial statements in a timely manner. During the pandemic the Organization experienced tremendous growth and received federal grants for the first time, which forced a large volume of accounting transactions without the proper development of accounting policies and procedures and personnel dedicated to accounting and grant compliance. The Organization will design and document internal controls to catch and prevent errors and fraud in a timely manner