ADDICTION RECOVERY CARE ASSOCIATION, INC.Non-Profit

We noted that the performance reports specified by the federal award contract were not prepared and filed in a timely manner. We also noted certain instances in which financial reports were not submitted within thetimeline specified by the terms of the contract.

Criteria: An entity should have adequate controls in place to ensure that costs included in federal grant reimbursement requests are allowable under the terms of the award. Condition and Context: During our review of allowable costs for the year ended June 30, 2023, we noted certain capital expenditures that were not approved in writing by the federal awarding agency or the pass-through entity as required by the cost principles outlined in 2 CFR 200.439. Questioned Costs: $26,566 Cause: Management oversight Effect: The Organization may receive reimbursements through federal programs for which it is not entitled. Repeat Finding: No Recommendation: Reinforce controls to ensure all project invoices including capital expenditures are reviewed and that only eligible costs are reported under the federal award, or that prior authorization by the federal awarding agency or pass-through entity is obtained when required. Views of Management: Management agrees with the finding and is implementing procedures that are further discussed in the corrective action plan. See Corrective Action Plan.

Criteria: All grantees that expend federal funds must comply with the procurement guidelines found in 2 CFR 200.318-.327 and use documented procurement procedures that are consistent with the applicable laws and regulations for the acquisition of property or services required under a Federal award or subaward. Condition and Context: The Organization developed a procurement policy during the year ended June 30, 2023 in response to prior audit findings; however, the policy does not include complete and current procurement procedures that fully align with the requirements of section 2 CFR 200.318-.327. The Organization’s program expenditures for the year ended June 30, 2023 did not include purchases in excess of the Simplified Acquisition Threshold and thus informal procurement procedures were acceptable. Questioned Costs: None Cause: Management oversight Effect: Without a documented procurement policy that aligns with the requirements of 2 CFR 200.318-.327, purchases may be made under the federal program that do not comply with the relevant procurement standards established by 2 CFR 200. Repeat Finding: Yes; 2022-004 Recommendation: Management should revise its procurement policy to include current language and the required elements of 2 CFR 200.318-.327. Views of Management: Management agrees with the finding and is implementing procedures that are further discussed in the corrective action plan. See Corrective Action Plan.

Criteria: The Organization’s contract for the federal award includes periodic performance reporting requirements that are due on certain dates following the reporting period-end. Condition and Context: We noted that the performance reports specified by the grant agreement were not prepared and filed in a timely manner. Questioned Costs: None Cause: Management oversight Effect: Without adequate controls over these filings requirement, the Organization may not be in compliance with the terms of the grant agreement. Repeat Finding: No Recommendation: Prepare and file the delinquent performance reports with the pass-through entity as soon as possible. Views of Management: Management agrees with the finding and is implementing procedures that are further discussed in the corrective action plan. See Corrective Action Plan.

United States Department of Health and Human Services Pass-through from North Carolina Department of Health and Human Services Program Name: Block Grants for Prevention and Treatment of Substance Abuse Federal Assistance Listing Number - 93.959 Finding 2022-003 Significant Deficiency and Nonmaterial Noncompliance - Allowable Costs/Activities Criteria: An entity should have adequate controls in place to ensure that costs included in federal grant reimbursement requests are allowable under the terms of the award. Condition and Context: During our review of allowable costs for the year ended June 30, 2022, we noted the following matters: (1) two instances in which state sales taxes that could have been legally recouped by means of refund were included in the grant reimbursement request, (2) two instances in which there was inadequate documentation supporting the current pay rate of an employee whose wages were included in the program costs, and (3) one instance where the reported indirect costs exceeded the amount allowed under the terms of the award. The total questioned costs related to these findings were immaterial to the federal program; however, we have identified a significant deficiency as there were multiple instances of disallowed costs noted through our testing. Cause: Clerical oversight and failure to follow the Organization's internal control activities for maintaining supporting documentation for changes in employee pay rates. Effect: The Organization may receive reimbursements through federal programs to which it is not entitled. Recommendation: Reinforce controls whereby an individual who is not responsible for preparing the cost reimbursement report reviews the supporting documentation for the included costs to verify that only allowable costs are included in the reimbursement request, and adhere to control activities related to employee pay rate changes. Views of Management: Management agrees with the finding and is implementing procedures that are further discussed in the corrective action plan. See Corrective Action Plan.

United States Department of Health and Human Services Pass-through from North Carolina Department of Health and Human Services Program Name: Block Grants for Prevention and Treatment of Substance Abuse Federal Assistance Listing Number - 93.959 Finding 2022-004 Significant Deficiency and Noncompliance - Procurement Criteria: All grantees that expend federal funds must comply with the procurement guidelines found in 2 CFR 200.318- .327 and use documented procurement procedures that are consistent with the applicable laws and regulations for the acquisition of property or services required under a Federal award or subaward. Condition and Context: The Organization has developed a basic purchasing policy that includes appropriate control activities; however, the policy does not include complete procurement procedures that fully align with the requirements of section 2 CFR 200.318-.327. The Organization's program expenditures for the year ended June 30, 2022 did not include purchases in excess of the Simplified Acquisition Threshold and thus informal procurement procedures were acceptable. Cause: As the Organization has only recently started receiving federal awards, they were not aware of these requirements and did not have the necesssary policies and procedures in place to comply with the procurement guidelines. Effect: Without a documented procurement policy that aligns with the requirements of 2 CFR 200.318-.327, purchases may be made under the federal program that do not comply with the relevant procurement standards established by 2 CFR 200. Recommendation: Management should formulate and adopt a procurement policy that includes the required elements of 2 CFR 200.318-.327. Views of Management: Management agrees with the finding and is implementing procedures that are further discussed in the corrective action plan. See Corrective Action Plan.

United States Department of Health and Human Services Pass-through from North Carolina Department of Health and Human Services Program Name: Block Grants for Prevention and Treatment of Substance Abuse Federal Assistance Listing Number - 93.959 Finding 2022-005 Significant Deficiency and Noncompliance - Special Tests and Provisions Criteria: North Carolina regulations require entities that receive, use, or expend State funds, including federal funds passed through the North Carolina Department of Health and Human Services (NCDHHS), to submit a notarized Conflict of Interest policy to the applicable state agency. Condition and Context: During our testing of this special provision, management was able to provide the signed Annual Conflict of Interest Verification provided to the NCDHHS; however, management was unable to locate a copy of the notarized Conflict of Interest policy that was on file with the NCDHHS during the audit period. Cause: Management oversight in document retention. Effect: Without adequate controls over document retention, the Organization may not be able to demonstrate to responsible officials that documentation filing requirements are met. Recommendation: Contact the NCDHHS to obtain a copy of the notarized Conflict of Interest statement on file. If the Organization is unable to do so, it should file a signed and notarized Conflict of Interest policy with the agency as soon as possible. Views of Management: Management agrees with the finding and is implementing procedures that are further discussed in the corrective action plan. See Corrective Action Plan.