MOBILE COMMUNITY ACTION, INC.Non-Profit

Finding 2022-001 (Repeat): Audit finding 2022-001 represents a material weakness in internal control over compliance for Mobile Community Action, Inc.'s major federal programs.

Finding 2022-002 (Repeat): Cash Management

Finding 2022-003 (Repeat): Internal Control Over Allowable Costs (Continued)

Finding 2021-001: Account ReconciliationsConditionMCA reconciled significant accounts in the accounting system for the December 31, 2021 audit. However, the reconciliations were not timely in that some reconciliations were not finalized until mid-2022. In addition, material adjustments were proposed and recorded by management during the audit to adjust accounts such as grants receivable, grant revenue, refundable advances, payroll related liabilities and net assets. These accounts required auditor assistance to complete the reconciliations and had an impact on MCA?s ability to prepare the financial statements and schedule of expenditures of federal awards. This finding originated as 2015-003 and was repeated in all subsequent years as findings.CriteriaUniform Guidance 200.302(b)(4) states each non-federal entity must provide for ?effective control over, and accountability for, all funds, property, and other assets.?CauseTurnover and a short-term vacancy in the CFO position resulted in a time period where account reconciliations were not being maintained. Additionally, COVID-19 effects contributed to further delays. Accordingly, the CFO was not able to reconcile accounts and provide audit information in a timely manner.EffectA material weakness in internal control over financial reporting exists due to failure to completely reconcile and adjust accounts which led to material adjusting journal entries being identified during the audit process.RecommendationWe recommend MCA implement systems, procedures and training to ensure accounts are reconciled timely and accurately with the reconciliations completed entirely by MCA accounting staff.View of Responsible OfficialsManagement agrees with the finding and has developed and begun implementation of a corrective action plan.

Finding 2021-002: Cash ManagementQuestioned Costs: NoneConditionAs of the date of this audit report, MCA was holding $559,091 of excess funds from Head Start grant award 04CH4665-03 which is a repeat of audit finding 2018-002 and originated with audit finding 2015-005. MCA has made an appeal to the U.S. Department of Health and Human Services Administration for Children and Families (ACF) into the ACF Appeals Board. MCA also met with representatives of Region IV Head Start in February 2020 to discuss the issue and explore payment options. The appeals and discussions have been placed on hold due to COVID-19.CriteriaUniform Guidance 200.305(b)(1) states ?Advance payments to a non-Federal entity must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the non-Federal entity in carrying out the purpose of the approved program or project.?CauseCOVID-19 delays prevented MCA from reaching an agreement with ACF and Head Start on the $559,091 of excess funds.EffectMCA is not in compliance with Uniform Guidance regulations on cash management.View of Responsible OfficialsManagement agrees with the finding and has developed and begun implementation of a corrective action plan.

Finding 2021-003: Internal Control Over Allowable CostsQuestioned Costs: NoneConditionMCA applied for and was granted a Payroll Protection Program (PPP) loan from the Small Business Administration (SBA) in the amount of $1,745,900 for wages and utility costs from April 2020 to October 2020. The underlying wages and utility costs for the PPP loan were already paid for by MCA?s grant awards, generating $1,745,900 of excess cash. During the year ended December 31, 2021, MCA had used some of the excess cash to repay a loan and purchase land for a Head Start site. These uses of excess cash were not authorized by MCA?s funding sources.CriteriaUniform Guidance 200.406(a) states ?Applicable credits refer to those receipts or reduction-of-expenditure-type transactions that offset or reduce expense items allocable to the Federal award as direct or indirect (F&A) costs. Examples of such transactions are: purchase discounts, rebates or allowances, recoveries or indemnities on losses, insurance refunds or rebates, and adjustments of overpayments or erroneous charges. To the extent that such credits accruing to or received by the non-Federal entity relate to allowable costs, they must be credited to the Federal award either as a cost reduction or cash refund, as appropriate.?CauseMCA was not aware that PPP funds could not be claimed for expenses paid for by grants. MCA has not established instructions or approval from funding sources to either repay the excess cash generated or use on other approved allowable grant costs.EffectMCA generated $1,745,900 of excess cash that needs to be returned to funding sources or used in other approved allowable costs by its funding sources.RecommendationWe recommend MCA establish disposition instructions from its respective funding sources for the excess funds on hand. This could consist of repayment of funds to funding sources or other authorized programmatic uses.View of Responsible OfficialsManagement agrees with the finding and has developed and begun implementation of a corrective action plan.

Condition MCA reconciled significant accounts in the accounting system for the December 31, 2020 audit. However, the reconciliations were not timely in that some reconciliations were not finalized until early 2022. In addition, material adjustments were proposed and recorded by management during the audit to adjust accounts such as grants receivable, grant revenue, refundable advances, payroll related liabilities and net assets. These accounts required auditor assistance to complete the reconciliations and had an impact on MCA?s ability to prepare the financial statements and schedule of expenditures of federal awards. This finding originated as 2015-003 and was also repeated in subsequent years as findings 2016-003, 2017-003, 2018-001 and 2019-001. Criteria Uniform Guidance 200.302(b)(4) states each non-federal entity must provide for ?effective control over, and accountability for, all funds, property, and other assets.? Cause Turnover and a short-term vacancy in the CFO position resulted in a time period where account reconciliations were not being maintained. This required extensive additional time by the current CFO to analyze and reconcile accounts. Furthermore, the events of the COVID-19 pandemic contributed to further financial reporting delays. Effect A material weakness in internal control over financial reporting exists due to failure to completely reconcile and adjust accounts which led to material adjusting journal entries being identified during the audit process. Recommendation We recommend MCA implement systems, procedures and training to ensure accounts are reconciled timely and accurately with the reconciliations completed entirely by MCA accounting staff. View of Responsible Officials Management agrees with the finding and has developed and begun implementation of a corrective action plan.

Condition As of the date of this audit report, MCA was holding $559,091 of excess funds from Head Start grant award 04CH4665-03 which is a repeat of audit finding 2018-002 and originated with audit finding 2015-005. MCA has made an appeal to the U.S. Department of Health and Human Services Administration for Children and Families (ACF) into the ACF Appeals Board. MCA also met with representatives of Region IV Head Start in February 2020 to discuss the issue and explore payment options. The appeals and discussions have been placed on hold due to COVID-19. Additionally, MCA has $116,602 of excess cash on hand for Head Start grant award 04CH010562-01. It should be noted that this balance was repaid during 2021 and no additional unreported Head Start cash on hand was noted for the 2020 audit. Criteria Uniform Guidance 200.305(b)(1) states ?Advance payments to a non-Federal entity must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the non-Federal entity in carrying out the purpose of the approved program or project.? Cause COVID-19 delays prevented MCA from reaching an agreement with ACF and Head Start on the $559,091 of excess funds. As it relates to the $116,602 of excess funds, MCA was not properly monitoring budget to actual expenditures in the Head Start program due to not adequately taking into consideration reimbursements from the CACFP program, state Pre-K funding and the timing of indirect expenses when analyzing Head Start?s budget to actual expenditures. Effect MCA is not in compliance with Uniform Guidance regulations on cash management. View of Responsible Officials Management agrees with the finding and has developed and begun implementation of a corrective action plan.

Condition MCA applied for and was granted a Payroll Protection Program (PPP) loan from the Small Business Administration (SBA) in the amount of $1,745,900 for wages and utility costs from April 2020 to October 2020. The underlying wages and utility costs were already paid for by MCA?s grant awards for which MCA had already received funding to pay those costs. At December 31, 2020, MCA still had the PPP funds in cash and cash equivalents. Criteria Uniform Guidance 200.406(a) states ?Applicable credits refer to those receipts or reduction-of-expenditure-type transactions that offset or reduce expense items allocable to the Federal award as direct or indirect (F&A) costs. Examples of such transactions are: purchase discounts, rebates or allowances, recoveries or indemnities on losses, insurance refunds or rebates, and adjustments of overpayments or erroneous charges. To the extent that such credits accruing to or received by the non-Federal entity relate to allowable costs, they must be credited to the Federal award either as a cost reduction or cash refund, as appropriate.? Cause MCA was not aware that PPP funds could not be claimed for expenses paid for by grants. Effect MCA was reimbursed for the same costs by both grant award funds and PPP funds. Therefore, either MCA?s grants or the SBA will need to be reimbursed for the excess funds received. No costs were questioned as the PPP loan was not forgiven and recognized as revenue until during the year ended December 31, 2021. View of Responsible Officials Management agrees with the finding and has developed and begun implementation of a corrective action plan.

Audit Findings Reference Number 2019-001 Is the finding text contained in a chart or table? NO Finding 2019-001: Account Reconciliations Condition MCA had not reconciled and adjusted a number of accounts such as grants receivable/revenue, prepaid expenses, payroll related liabilities, net assets and indirect expenses in preparation for audit. These accounts required auditor assistance to complete the reconciliations and had an impact on MCA?s ability to prepare the financial statements and schedule of expenditures of federal awards. This finding originated as 2015-003 and was also repeated in subsequent years as findings 2016-003, 2017-003 and 2018-001. MCA was making improvements in this area. However, improvements did not continue due to difficulties caused by the CFO position being vacant for several months in 2019, followed by the effects of the COVID-19. Furthermore, the matters resulted in the audit being completed after the federal deadline which was extended to December 31, 2020. Criteria Uniform Guidance 200.302(b)(4) states each non-federal entity must provide for ?effective control over, and accountability for, all funds, property, and other assets.? Cause Turnover and a short-term vacancy in the CFO position resulted in a time period where account reconciliations were not be maintained which were followed by the events of the COVID-19 pandemic. Effect A material weakness in internal control over financial reporting exists due to failure to completely reconcile accounts which led to material adjusting journal entries being identified during the audit process. These matters contributed to the audit not being completed in a timely manner. Recommendation We recommend MCA implement systems, procedures and training to ensure accounts are reconciled timely and accurately with the reconciliations completed entirely by MCA accounting staff. View of Responsible Officials Management agrees with the finding and has developed and begun implementation of a corrective action plan.

Audit Findings Reference Number 2019-002 Is the finding text contained in a chart or table? NO Finding 2019-002: Cash Management Condition As of the date of this audit report, MCA was holding $559,091 of excess funds from Head Start grant award 04CH4665-03 which is a repeat of audit finding 2018-002 and originated with audit finding 2015-005. MCA has made an appeal to the U.S. Department of Health and Human Services Administration for Children and Families (ACF) into the ACF Appeals Board. MCA also met with representatives of Region IV Head Start in February 2020 to discuss the issue and explore payment options. The appeals and discussions have been placed on hold due to COVID-19. Additionally, MCA has $116,602 of excess cash on hand for Head Start grant award 04CH010562-01. Criteria Uniform Guidance 200.305(b)(1) states ?Advance payments to a non-Federal entity must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the non-Federal entity in carrying out the purpose of the approved program or project.? Cause COVID-19 delays prevented MCA from reaching an agreement with ACF and Head Start on the $559,091 of excess funds. As it relates to the $116,602 of excess funds, MCA was not properly monitoring budget to actual expenditures in the Head Start program due to not adequately taking into consideration reimbursements from the CACFP program, state Pre-K funding and the timing of indirect expenses when analyzing Head Start?s budget to actual expenditures. Effect MCA is not in compliance with Uniform Guidance regulations on cash management. View of Responsible Officials Management agrees with the finding and has developed and begun implementation of a corrective action plan.

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