Sumter County Commission on Alcohol and Drug AbuseLocal Government

Finding 2025-002: Significant Deficiency in Internal Control over Compliance – Documenta􀆟on, Drawdown Support, and Timeliness Type of Finding: Significant Deficiency in Internal Control over Compliance (Uniform Guidance) Criteria In accordance with 2 CFR 200.303, non-Federal en􀆟􀆟es must establish and maintain effec􀆟ve internal control over federal awards to provide reasonable assurance of compliance with federal statutes, regula􀆟ons, and the terms and condi􀆟ons of the federal award. 2 CFR 200.516 requires auditors to report, as audit findings in the federal awards sec􀆟on of the schedule of findings and ques􀆟oned costs, significant deficiencies and material weaknesses in internal control over major programs and material noncompliance with the provisions of federal statutes, regula􀆟ons, or the terms and condi􀆟ons of federal awards related to a major program. Condi􀆟on During the audit of ALN 93.959, we encountered significant delays in obtaining suppor􀆟ng documenta􀆟on for expenditures selected for tes􀆟ng. In many instances, documenta􀆟on was not readily available and required substan􀆟al 􀆟me and effort for management to locate, assemble, or reconstruct. In addi􀆟on, we observed that:  Documenta􀆟on suppor􀆟ng drawdown requests and reimbursement claims was not maintained in a centralized, organized manner that would allow for 􀆟mely retrieval or ready tracing to the underlying accoun􀆟ng records; and  Drawdown ac􀆟vity for the program was not performed on a rou􀆟ne basis (for example, reimbursement requests were some􀆟mes accumulated over several months and then requested in large batches, rather than through a more regular process), and support for these batched drawdowns o􀅌en had to be recreated at the 􀆟me of the audit. Although the expenditures and drawdowns tested were ul􀆟mately supported and agreed to the underlying accoun􀆟ng records, the delays and need to recreate drawdown support indicate that documenta􀆟on and internal control over compliance with recordkeeping and cash-management-related requirements were not consistently maintained in an organized and readily accessible manner. Cause The en􀆟ty does not have sufficiently effec􀆟ve procedures and internal controls in place to ensure that:  Suppor􀆟ng documenta􀆟on for federal program expenditures and drawdowns is maintained contemporaneously with the underlying transac􀆟ons;  Drawdown requests are rou􀆟nely prepared and supported in a manner that clearly demonstrates that costs were incurred prior to reques􀆟ng reimbursement; and  Documenta􀆟on is organized and stored in a centralized manner that allows for 􀆟mely retrieval for management, auditors, or federal/pass-through agencies. Effect As a result of these deficiencies:  There is an increased risk that noncompliance with federal requirements (including documenta􀆟on and cash-management-related requirements) could occur and not be prevented, or detected and corrected, in a 􀆟mely manner;  The en􀆟ty may be unable to readily support expenditures or drawdowns upon request by auditors, federal awarding agencies, or pass-through en􀆟􀆟es; and  Audit inefficiencies and delays occurred due to the 􀆟me required to obtain and/or recreate necessary documenta􀆟on. While our tes􀆟ng did not iden􀆟fy unsupported or unallowable costs for the items selected, the described deficiencies represent a significant deficiency in internal control over compliance for the affected major program. Recommenda􀆟on We recommend that management strengthen internal control over compliance and documenta􀆟on for federal programs by: 1. Implemen􀆟ng procedures to ensure that all suppor􀆟ng documenta􀆟on for federal expenditures and drawdowns is prepared and retained contemporaneously with the underlying transac􀆟ons; 2. Organizing documenta􀆟on in a centralized, consistent manner (for example, by grant and period) that permits 􀆟mely retrieval and clear linkage to the general ledger and reimbursement requests; 3. Establishing and following a regular process and 􀆟metable for preparing and submi􀆫ng reimbursement requests, supported by schedules that reconcile drawdowns to underlying expenditures and accoun􀆟ng records; and 4. Periodically reviewing documenta􀆟on and drawdown files for completeness, organiza􀆟on, and compliance with applicable Uniform Guidance and award-specific requirements. Management Response Management agrees with the finding and will strengthen procedures over documenta􀆟on and drawdown processes, including 􀆟mely, organized maintenance of suppor􀆟ng documenta􀆟on and improved processes for preparing and suppor􀆟ng reimbursement requests.

2022-001 Lack of Accounting Over Drawdowns Criteria: An entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition and context: The Organization does not have an adequate accounting procedures over the federal draw downs. Cause: The Organization has experienced turnover in the accounting department resulting in lapses in internal controls, policies and procedures related to cash management of federal drawdowns. Effect: The Organization could draw down the incorrect amount of federal funds. Recommendation: The Organization should implement more effective internal controls and policies over federal drawdowns. Organization response: The Organization has hired a new executive director and chief financial officer; the management team has implemented new accounting and financial policies within the accounting department to oversee and maintain federal expenditures are incompliance with grant agreements.

CFDA Numbers: 93.959 and 93.788 Criteria: Each recipient shall establish and maintain sufficient financial records. Grantees shall maintain evidence to support how the funds were expended. Condition and context: The Organization had several drawdowns that did not have any support for the draw. Cause: Lack of internal controls over the drawdown process. Effect: Activities or costs that are allowed or allowable could potentially be overpaid or underpaid. Questioned Costs: $523,832 Recommendation: The Organization should establish policies and procedures to ensure grants management properly approves all drawdowns that are to be paid with Federal awards. Organization response: The Organization has hired a new executive director and chief financial officer; the management team has implemented new accounting and financial policies within the accounting department to oversee and maintain federal expenditures are incompliance with grant agreements.

Condition: During the audit of the June 30, 2021 it was determined that SBHS was not in compliance with South Carolina Department of Alcohol and Other Drug Abuse Services (?DAODAS?) Fiscal Year 2021 Funding and Compliance Contract. DAODAS is the primary grantor to SBHS. By letter to SBHS from DAODAS dated July 1, 2021 DAODAS identified the following: 1) SBHS did not deliver any prevention programs, a condition of the grant agreement, since February 2021, 2) Treatment and associated charges at the SBHS women?s residential facility are not in compliance with grant terms and conditions. This condition has likely resulted in: a. A violation of SBHS facility license from South Carolina Department of Health and Environmental Control. b. Likely improper billing for Medicaid patient services due to Medicaid residential treatment notes likely not complying with minimum standards. This condition could result in recoupment of Medicaid payments. 3) Staffing levels across all treatment programs might not be adequate to provide quality care to the individuals served in both outpatient and residential levels of care. 4) DOADAS has questioned certain billing activity and lack of billing activity in certain areas of service. Criteria: Federal and state regulations including the grant contract between DAODAS and SBHS. Context, Cause and Effect: Based upon the above and SBHS is at risk of increased oversight and denial of grant requests / draws for performance of services. Recommendation: We recommend that SBHS develop policies and procedures to remediate grantor concerns. Response: SBHS agrees and will implement the above recommendation by June 30, 2022.