NATIONAL ASSOCIATION OF CHRONIC DISEASE DIRECTORS

Finding 2024-002: Overdrawn Federal Funding Compliance Requirements: Cash Management; Reporting Type: Material Weakness in Internal Control over Compliance and Material Noncompliance Federal Agency: Corporation for National and Community Service AL Numbers and Titles: 94.006 – AmeriCorps National Federal Award Number: 22NDHGA003 Questioned Costs: $748,053 Repeat Finding: No Criteria: Under 2 CFR § 200.305(b), federal funds must be drawn only as needed to meet the immediate cash requirements of the program. Recipients must minimize the time between the transfer of funds and disbursement. Per 2 CFR § 200.516(c), the auditor must report known questioned costs greater than $25,000 for a federal program, even if the program is not audited as a major program. Condition: As of September 30, 2024, NACDD has overdrawn a total of $748,053 in excess of expenditures to date in federal funds under the AmeriCorps grant. The overdrawn amount remained outstanding at year-end and had not been repaid or offset by additional allowable expenditures as of the date of this report. Cause: The overdrawn funds were caused by a failure in internal processes for reconciling drawdowns to actual expenditures. The drawdown analysis file used to request funds was corrupted, and no compensating control was in place to detect or prevent overdraws. Furthermore, NACDD did not implement timely corrective action after identifying the issue, and their internal control processes did not ensure compliance with federal cash management regulations. Additionally, Federal Financial Reports (FFRs) submitted by the organization did not accurately reflect actual allowable expenditures, and overstated cumulative grant activity. There was no timely reconciliation between the organization’s accounting records and amounts reported to the granting agency, as required. Effect: NACDD is in violation of federal cash management requirements, having drawn down $748,053 more in federal funds than expended as of year-end. This represents questioned costs and could result in a requirement to return funds to the granting agency. This issue exposes the organization to noncompliance risk and potential findings by federal oversight agencies. Additionally, incorrect reporting on the FFRs may have misled the grantor regarding the organization’s use of federal funds and the timing of expenditures. This constitutes a noncompliance with the Reporting requirement under 2 CFR 200.327–328, and calls into question the accuracy and completeness of required grantor submissions. Recommendation: We recommend that NACDD take immediate steps to address the overdrawn federal funds of $748,053 related to AmeriCorps grant by either remitting the excess to the granting agency or applying eligible FY25 expenditures, if allowable. To prevent recurrence, NACDD should implement formal monthly reconciliation procedures to ensure that all federal drawdowns are fully supported by actual expenditures recorded in the general ledger. Additionally, internal controls over financial reporting should be strengthened to ensure that amounts reported on the Federal Financial Reports (FFRs) and AmeriCorps’ eGrants system are accurate and agree to supporting records. Staff responsible for grant compliance should receive training on Uniform Guidance requirements, particularly those related to allowable costs, cash management, and reporting. Finally, NACDD should conduct a retrospective review of prior reports submitted to AmeriCorps for this project to assess whether corrections or disclosures are necessary and notify the grantor as appropriate. Views of Responsible Officials Corrective Actions: Management agrees with this finding. Please refer to the Corrective Action Plan.

Finding 2024-003: Unsupported Payroll Charges and Improper Drawdown of Federal Funds Compliance Requirements: Allowable Costs/Cost Principles; Cash Management; Reporting Type: Material Weakness in Internal Control over Compliance and Material Noncompliance Federal Agency: U.S. Department of Health and Human Services (Centers for Disease Control and Prevention) AL Numbers and Titles: 93.809 – National Organizations for Chronic Disease Prevention and Health Promotion Federal Award Number: NU58DP007562 Questioned Costs: $423,094 Repeat Finding: No Criteria: In accordance with 2 CFR §200.403 and §200.405, costs charged to a federal award must be necessary, reasonable, and allocable, and must conform to the terms and conditions of the award. Per 2 CFR §200.430(i), charges for salaries and wages must be supported by records that accurately reflect the work performed and be supported by a system of internal control. Furthermore, 2 CFR §200.305(b) requires that non-federal entities minimize the time between federal fund drawdown and disbursement, and limits advances to amounts needed for the immediate cash requirements of the program. Condition: During our testing of payroll-related transactions charged to the 93.809 federal program, we identified a significant reallocation of personnel costs from unrestricted funds to the federal grant that occurred late in the audit period. These charges related to multiple employees whose compensation was not included in the originally approved budget for the federal program. At the time of our testing, no formal budget revision had been submitted to the awarding agency, and the names of these staff had not been recorded in the federal grant reporting system as required by the award terms. Additionally, the auditee was unable to provide any documentation, such as certifications, labor distribution reports, calendars, or other records, to support that these employees worked on activities allocable to the federal program. We further noted that the auditee drew down federal funds prior to the recording of these payroll charges, at a time when the costs in question had neither been incurred nor documented. This resulted in federal funds being drawn in advance of need, contrary to federal cash management requirements. Cause: The auditee did not have adequate internal controls to ensure that only appropriately budgeted and documented payroll costs were charged to the federal award. In addition, the organization lacked procedures to confirm that federal funds were drawn only for costs that were allowable, incurred, and supported at the time of drawdown. These weaknesses allowed significant payroll reallocations to be processed retroactively without timely budget amendments or sufficient documentation of allocability. Effect: As a result of these control deficiencies, a total of $423,094 in personnel-related costs, including direct salaries, fringe benefits, and associated indirect costs, was charged to the federal program without appropriate budget authorization or time and effort support. These unsupported costs were also used as the basis for a drawdown of federal funds that occurred before the expenditures were recorded or substantiated. This resulted in noncompliance with both cost principles and cash management requirements and exposes the auditee to potential disallowance or repayment of federal funds. Recommendation: We recommend that the auditee enhance internal controls related to grant budgeting, payroll allocations, and cash management. These controls should ensure that payroll costs charged to federal awards are included in the approved budget or are formally revised and submitted to the grantor, are supported by accurate time and effort documentation, and that federal funds are drawn only when actual, allowable costs have been incurred and documented. We further recommend that the auditee consult with the awarding agency to determine whether any retroactive budget revision or corrective action is available or whether repayment of questioned costs will be required. Views of Responsible Officials Corrective Actions: Management agrees with this finding. Please refer to the Corrective Action Plan.

Section III – Federal Award Findings and Questioned Costs Finding 2023-002: Overdrawn Federal Funding Compliance Requirement: Allowable Costs/Costs Principles and Cash Management Type: Material Noncompliance and Material Weakness over Internal Control Federal Agency: U.S. Department of Health and Human Services AL Numbers and Titles: 93.809 – National Center for Chronic Disease Prevention and Health Promotion Federal Award Number: NU58DP006510 Questioned Costs: $380,644 Repeat Finding: No Criteria: NACDD requests funds from the U.S. Department of Health and Human Services under the advance payment method. In accordance with 45 CFR 74.22, cash advances to a recipient organization shall be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the recipient organization in carrying out the purpose of the approved program or project. The timing and amount of cash advances shall be as close as is administratively feasible to the actual disbursements by the recipient organization for direct program or project costs and the proportionate share of any allowable indirect costs. According to 2 CFR §200.403 - §200.405 (Allowable Costs/Cost Principles), costs must be necessary, reasonable, and allocable to the federal award. Additionally, Section 200.303 of the Uniform Guidance indicates that the nonfederal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. The Uniform Guidance also indicates that these internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” (Green Book) issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by COSO. The Office of Management and Budget (OMB) has clarified that the references to the Green Book and COSO were only provided as best practices and not requirements. Condition: During our testing, we identified duplicated federal award expenditures amounting to $380,644, resulting in overdrawn federal funds by $380,644. The excess cash on hand was not returned to the funding source in a timely manner. Cause: This issue occurred due to inadequate controls over the recording of expenses and the drawdown of federal funds. 28 ASSOCIATION OF STATE AND TERRITORIAL CHRONIC DISEASE PROGRAM DIRECTORS D/B/A THE NATIONAL ASSOCIATION OF CHRONIC DISEASE DIRECTORS SCHEDULE OF FINDINGS AND QUESTIONED COSTS - Continued Section III – Federal Award Findings and Questioned Costs – continued Finding 2023-002: Overdrawn Federal Funding - continued Effect: NACDD is not in compliance with federal regulations concerning allowable costs, disbursement of federal funds and excess cash. In addition, a lack of adequate controls over allowable costs and cash management could result in a reasonable possibility that NACDD would not detect errors in the normal course of performing duties and correct them in a timely manner. Recommendation: We recommend that management conduct regular reconciliations of grant expenses to identify and correct duplicate entries promptly and review cash management practices to prevent overdraws on federal funds. Views of Responsible Officials Corrective Actions: Management agrees with this finding. Please refer to the Corrective Action Plan.