Methodist Services

Finding #2024-001 – Material Weakness – Accounting Recordkeeping (continued) All Programs Other Criteria Accounting tasks such as timely monthly analysis, reconciliations and review of accounts play a key role in providing the accuracy of accounting data and information included in the interim and year-end financial statements. Trial balances should be maintained for the Organization continuously, in accordance with U.S. GAAP. Detailed supporting schedules should be maintained for all significant asset, liability, revenue and expense accounts. Reconciling items should be investigated and resolved in a timely manner. All of the forementioned items are essential to ensure that financial statements and data collection forms are submitted in conformance with 2 CFR Section 200.512(a)(1). Condition During the year ended June 30, 2023, management was unable to provide timely year-end trial balances in accordance with U.S. GAAP without significant adjusting journal entries required to accurately reflect the underlying accounting transactions. The additional effort needed to reconcile fiscal year 2023 balances resulted in delays in reconciling fiscal year 2024 balances. Cause The Organization’s Accounting/Finance Department experienced significant turnover in personnel which resulted in a backlog of recording transactions and invoicing during the year ended June 30, 2024. Additionally, there was a change in Executive leadership during the fiscal year. This resulted in reconciliations not being performed timely. Effects Not performing timely and complete monthly and year-end account reconciliations and closing procedures leads to a continually and growing backlog of transactions and journal entries that are not posted to the accounting system, which renders the accounting information ineffective for making well-informed business decisions. This has led to the expenditure of significant time and effort by many to complete the required reconciliation procedures and prevented the timely delivery of financial statements to management, board members and funders. In addition, this led to the Organization to be noncompliant with required deadlines for Uniform Guidance and Data Collection Form submission. Questions Costs None. Perspective This audit finding is systematic. Statistical Sample A statistical sample is not applicable to this finding. Repeat Finding This audit finding is a repeat finding. Recommendation We recommend that individuals overseeing the accounting and finance department continue to review the Organization’s current accounting policies and update existing policies or implement new policies, as needed, to ensure that the trial balances are accurately maintained throughout the year, reconciliations are completed and reviewed monthly or quarterly, as appropriate, and the trial balances and related supporting schedules are prepared and reviewed timely after year-end. Views of Responsible Officials Management agrees with the finding. There was significant turnovers in the finance department, including the CFO and the finance director. These turnovers affected the ability of the Organization to produce the information on time for the auditors. The Organization is working with external consultants to improve the timeliness of reconciliations and audit preparation and recruiting vacant positions. We completed accounting policy changes which will correct the issues noted. Management is confident that the issues that have been noted have been rectified.

Finding #2023-001 – Material Weakness – Accounting Recordkeeping All Programs Other Criteria Accounting tasks such as timely monthly analysis, reconciliations and review of accounts play a key role in providing the accuracy of accounting data and information included in the interim and year-end financial statements. Trial balances should be maintained for the Organization continuously, in accordance with U.S. GAAP. Detailed supporting schedules should be maintained for all significant asset, liability, revenue and expense accounts. Reconciling items should be investigated and resolved in a timely manner. All of the forementioned items are essential to ensure that financial statements and data collection forms are submitted in conformance with 2 CFR Section 200.512(a)(1). Condition During the year ended June 30, 2023, management was unable to provide timely year-end trial balances in accordance with U.S. GAAP without significant adjusting journal entries required to accurately reflect the underlying accounting transactions. Cause The Organization’s Accounting/Finance Department experienced significant turnover in personnel which resulted in a backlog of recording transactions and invoicing during the year ended June 30, 2023. This resulted in reconciliations not being performed timely. Effects Not performing timely and complete monthly and year-end account reconciliations and closing procedures leads to a continually and growing backlog of transactions and journal entries that are not posted to the accounting system, which renders the accounting information ineffective for making well-informed business decisions. This has led to the expenditure of significant time and effort by many to complete the required reconciliation procedures and prevented the timely delivery of financial statements to management, board members and funders. In addition, this led to the Organization to be noncompliant with required deadlines for Uniform Guidance and Data Collection Form submission. Questions Costs None. Perspective This audit finding is systematic. Statistical Sample A statistical sample is not applicable to this finding. Repeat Finding This audit finding is not a repeat finding. Recommendation We recommend that individuals overseeing the accounting and finance department continue to review the Organization’s current accounting policies and update existing policies or implement new policies, as needed, to ensure that the trial balances are accurately maintained throughout the year, reconciliations are completed and reviewed monthly or quarterly, as appropriate, and the trial balances and related supporting schedules are prepared and reviewed timely after year-end. Views of Responsible Officials Management agrees with the finding. There was significant turnovers in the finance department, including the CFO and the finance director. These turnovers affected the ability of the Organization to produce the information on time for the auditors. The Organization is working with external consultants to improve the timeliness of reconciliations and audit preparation and recruiting vacant positions. We completed accounting policy changes which will correct the issues noted. Management is confident that the issues that have been noted have been rectified.

Finding #2023-002 – Material Weakness – Activities Allowed or Unallowed, Allowable Costs Principles 93.558 Temporary Assistance for Needy Families – Out of School Time Program 93.600 Head Start Payroll Approval Criteria Under the Uniform Guidance (2 CFR 200), entities are required to maintain effective internal controls to ensure the proper stewardship of federal funds, including appropriate oversight of payroll expenditures. Specifically, payroll transactions should be reviewed and approved by management prior to payment to ensure accuracy, completeness, and compliance with relevant policies. Condition During our audit of the Organization for compliance with Uniform Guidance requirements, we noted that the client was unable to provide sufficient evidence of management review or approval of payroll transactions before disbursement. Payroll costs were verified through additional supporting documentation including payroll registers and time cards. In total sixty-five payroll samples were selected for testing and the lack of review occurred for all items tested. Cause It appears that the client has not enforced sufficient procedures to document the review of payroll prior to processing. This may be due to turnover in the Accounting/Finance Department which resulted in these procedures not being properly documented and maintained. Effects Without proper review of payroll before payment, there is an increased risk of inaccuracies, fraud, or noncompliance with federal and organizational requirements. Failure to detect errors in a timely manner could lead to unauthorized or incorrect payroll disbursements, potentially resulting in questioned costs or disallowed expenditures. Payroll costs were verified through additional supporting documentation including payroll registers and time cards. Questions Costs None. Perspective This audit finding is systematic. Statistical Sample The sample was a statistically valid sample. Repeat Finding This audit finding is not a repeat finding. Recommendation We recommend that Organization establish and enforce formal procedures requiring documented management review and approval of all payroll transactions before they are processed. The review process should be supported by evidence, such as approval signatures, electronic audit trails, or other verifiable records. In addition, management should perform regular reconciliations of payroll to ensure compliance with federal and organizational policies. Views of Responsible Officials Management agrees with the finding. The Organization concurs with the finding and has already begun implementing a revised payroll approval process. Management is developing a formal payroll review policy, including electronic approval workflows, to ensure proper documentation and oversight of payroll prior to disbursement is maintained.

Finding #2023-003 – Significant Deficiency – Activities Allowed or Unallowed, Allowable Cost Principles 93.558 Temporary Assistance for Needy Families – Out of School Time Program 93.600 Head Start Lack of Supporting Documentation for Disbursements Criteria Costs charged to federal grants must meet the provisions of the standards for documentation of expenses contained in 2 CFR 200.430(i)(1) which requires that charges to federal awards for disbursements must be based on records that accurately reflect actual costs incurred. These records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated. This would include supporting invoices to be maintained and reviewed prior to payment. Condition During the audit, it was identified that supporting invoices could not be provided for three nonpayroll related disbursements. The population sampled was all nonpayroll related disbursements. Total number of selections tested was sixty-five, which comprised 2% of the total population. Cause This significant deficiency may have resulted from inadequate procedures for the retention of supporting documentation or a lack of oversight and reconciliation processes in the disbursement cycle. The failure to accurately reconcile recorded amounts to the supporting invoices further indicates a breakdown in internal controls. Effects The absence of supporting invoices and discrepancies between recorded amounts and invoice amounts create a risk of unauthorized or unsupported disbursements. This weakens the Organization’s ability to demonstrate compliance with federal grant requirements and increases the likelihood of disallowed costs or questioned costs in future audits. Failure to adequately control disbursements may also expose the client to potential financial misstatements or fraud. Questions Costs In total, $141 of expenses could not be supported. Perspective This audit finding is systematic. Statistical Sample The sample was a statistically valid sample. Repeat Finding This audit finding is not a repeat finding. Recommendation We recommend that the Organization strengthen its internal control procedures to ensure that all disbursement transactions are properly supported by invoices or other appropriate documentation before they are recorded and paid. The client should implement a regular reconciliation process to ensure that recorded amounts agree with supporting documentation. Additionally, management should establish policies for the retention of documentation to ensure it is readily available for audit and compliance purposes. Views of Responsible Officials Management agrees with the finding. The Organization is in the process of updating its procedures to ensure that all disbursements are supported by invoices and that recorded amounts are regularly reconciled with supporting documentation. Additionally, the Organization will implement a formal policy for document retention to ensure audit readiness.

Finding #2023-004 – Material Weakness – Reporting 93.558 Temporary Assistance for Needy Families – Out of School Time Program 93.600 Head Start Untimely Submission of Required Reports Criteria Under the Uniform Guidance (2 CFR Part 200), nonfederal entities are required to submit accurate and timely financial, performance, and other reports to federal awarding agencies as specified by the terms of the federal awards. Timely submission of these reports is essential for ensuring transparency, accountability, and proper monitoring of grant activities. Condition The Organization is required to submit quarterly financial and performance reports. The total population was eight reports and of those four were selected for testing. These financial and performance reports were not submitted to the granting agencies within the deadlines established by the terms and conditions of the federal awards. Cause The failure to submit reports on time may have been due to insufficient internal controls or inadequate procedures for tracking reporting deadlines. It may also indicate a lack of staffing resources or ineffective communication between departments responsible for preparing and submitting the reports. Effects The untimely submission of required reports can hinder the granting agencies’ ability to monitor the progress and financial management of federal awards. This increases the risk of noncompliance with federal regulations and may result in penalties, suspension of funding, or negative impacts on future funding opportunities. Questions Costs None. Perspective Four reports were selected for testing out of eight. The four reports were filed between two to six weeks late. As a result this audit finding is systemic. Statistical Sample The sample was a statistically valid sample. Repeat Finding This audit finding is not a repeat finding. Recommendation We recommend that the Organization strengthen its internal controls to ensure that all required reports are submitted to granting agencies on time. Management should implement a centralized system to track reporting deadlines and designate responsible personnel to monitor and ensure compliance with these deadlines. Additionally, periodic reviews of the reporting process should be conducted to identify any potential issues and address them proactively. Views of Responsible Officials Management agrees with the finding. The Organization agrees with this finding and has begun implementing corrective actions to ensure timely submission of required reports. The Organization is in the process of developing a reporting schedule and assigning dedicated personnel to monitor deadlines.

2021-001 U.S. Department of Housing and Urban Development Federal Program Agency: Continuum of Care Program Federal Programs: PA0028L3T001911 ? Monument Village Supportive Housing Program PA0028L3T001810 ? Fresh Start Supportive Housing Program PA0060L3T001911 ? Fresh Start Supportive Housing Program PA0056L3T001807 ? Fairway Commons Supportive Housing Program PA0564L3T001908 ? Fairway Commons Supportive Housing Program Pass-Through Agency: City of Philadelphia, Office of Homeless Services Continuum of Care Program ? Hope Bridge Program ? 20-20585 and 21-20585 Federal Assistance Listing Number: 14.267 Section III ? Findings and Questioned Costs ? Major Federal Programs (Continued) Award Period: July 1, 2020 to June 30, 2021 July 1, 2020 to August 31, 2021 September 1, 2020 to June 30, 2021 July 1, 2020 to November 30, 2020 December 1, 2020 to June 30, 2021 May 1, 2020 to April 30, 2021 May 1, 2021 to June 30, 2021 Type of Finding: Other Noncompliance and Significant Deficiency in Internal Control Over Compliance Criteria: The non-Federal entity must use one of the following methods of procurement. (b) Procurement by small purchase procedures. Small purchase procedures are those relatively simple and informal procurement methods for securing services, supplies, or other property that do not cost more than the Simplified Acquisition Threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources. (2 CFR 200.320) Condition and Context: In our procurement test, we had sampled one vendor whose services were either provided or expended as part of this federal award program. We had observed that management had adopted its procurement and conflict of interest policies but did not follow its policy for performing costs and price analysis of vendors having dollars expended by a federal program. This would include the tracking of quotations from multiple vendors, maintaining of vendor files, and the use of minority vendors. Questioned Costs: None Cause: Methodist Services? procurement policy for small purchases was not followed and no related controls were placed into service regarding small purchases. Effect: Methodist Services was not in compliance with small purchases procurement methods under the Uniform Guidance. Repeat Finding: No. Recommendation: We recommend that management review its current procurement policy, modify where needed, and add a procedure encompassing the steps of both tracking and maintenance of files which would include price quotes, cost analysis and include minority vendors. Views of Responsible Offices and Corrective Action Plan: Please refer to the Methodist Services? Corrective Action Plan.

2021-002 U.S. Department of Housing and Urban Development Federal Program Agency: Continuum of Care Program Federal Programs: PA0028L3T001911 ? Monument Village Supportive Housing Program PA0028L3T001810 ? Fresh Start Supportive Housing Program PA0060L3T001911 ? Fresh Start Supportive Housing Program PA0056L3T001807 ? Fairway Commons Supportive Housing Program PA0564L3T001908 ? Fairway Commons Supportive Housing Program Pass-Through Agency: City of Philadelphia, Office of Homeless Services Continuum of Care Program - Hope Bridge Program ? 20-20585 and 21-20585 Federal Assistance Listing Number: 14.267 Award Period: July 1, 2020 to June 30, 2021 July 1, 2020 to August 31, 2021 September 1, 2020 to June 30, 2021 July 1, 2020 to November 30, 2020 December 1, 2020 to June 30, 2021 May 1, 2020 to April 30, 2021 May 1, 2021 to June 30, 2021 Type of Finding: Other Noncompliance and Significant Deficiency in Internal Control Over Compliance Criteria: Where grants are used to pay for rent for all or a part of a structure, the rent paid must be reasonable in relation to rents being charged in the area for comparable space. In addition, the rent may not exceed rents currently being charged by the same owner for comparable unassisted space (24 CFR section 578.49(b)(1)). Where grants are used to pay rent for individual housing units, the rent paid must be reasonable in relation to rents being charged for comparable units taking into account relevant features. In addition, the rents may not exceed rents currently being charged by the same owner for comparable unassisted units, and the portion of rents paid with grant funds may not exceed HUD-determined fair market rents. Grant funds in an amount up to one month?s rent may be used to pay the non-recipient landlord for any damages to leased units by homeless participants (24 CFR sections 578.49(b)(2) and 578.51(g) and (j)). Condition and Context: During our testing it was noted that management had not performed an analysis of the rent reasonableness on the rents charged by the lessor to Methodist Services to comparable residential units within the vicinity of Methodist Services residential locations. Questioned Costs: None Cause: Management was unaware of the necessary step of performing and documenting a rent reasonableness analysis on its third-party lessors. Effect: Documentation was not available to review related to the above noted compliance requirements. Repeat Finding: No. Recommendation: We recommend that management implement both a policy and procedure to perform an evaluation of the rent reasonableness on all of its rental units subsidized by HUD and other government pass-through agencies. This analysis should compare value of unit rents currently charged by a lessor to comparable units in the private unassisted market. A determination that rents charged are not in excess of rents currently being charged by the owner for comparable unassisted units. Views of Responsible Offices and Corrective Action Plan: Please refer to the Methodist Services? Corrective Action Plan.

Criteria: The non-Federal entity must use one of the following methods of procurement. (b) Procurement by small purchase procedures. Small purchase procedures are those relatively simple and informal procurement methods for securing services, supplies, or other property that do not cost more than the Simplified Acquisition Threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources. (2 CFR 200.320) Condition and Context: During our testing of procurement, we had sampled a total of five out of seven vendors whose services were provided and expended as part of this federal award program. We had observed that management has properly implemented both a procurement and conflict of interest policy, but as part of the requirements under Uniform Guidance, Methodist Services has not implemented a procedure to document cost and price analysis of vendors. This would include the tracking of quotations from multiple vendors, maintaining of vendor files, and the use of minority vendors. None of the small purchase procurements tested had supporting documentation of price or rate quotations from an adequate number of qualified sources. Questioned Costs: None Cause: Methodist Services? procurement policy for small purchases was not followed and no related controls were placed into service regarding small purchases. Effect: Methodist Services was not in compliance with small purchases procurement methods under the Uniform Guidance. Recommendation: We recommend that management review its current procurement policy, modify where needed, and add a procedure encompassing the steps of both tracking and maintenance of files which would include price quotes, cost analysis and include minority vendors. Views of Responsible Offices and Corrective Action Plan: Please refer to the Methodist Services? Corrective Action Plan. .

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