Planning and Service Area 2 Area Agency on AgingLocal Government

U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES, PASSED THROUGH THE CALIFORNIA DEPARTMENT OF AGING AGING CLUSTER ? ALN?S 93.044, 93.045, 93.053 Pass-through Grantor Award # AP-2122-02 Finding 2022-002 Significant Deficiency and Noncompliance: Subrecipient Monitoring Significant Deficiency and Noncompliance: The Agency performed the required contract resolution process late for the fiscal years ended June 30, 2019 and 2020, and has not performed the contract resolution process for the year ended June 30, 2021. Criteria: Under the Special Terms and Conditions in Exhibit D of the AP-2122 Contract with the pass through grantor, Article X Audit Requirements states that the Agency shall have the responsibility for resolving its contracts with subcontractors to determine whether funds provided under this agreement are expended in accordance with applicable laws, regulations, and provisions of contracts or agreements. The Agency shall, at a minimum, perform Contract resolution within fifteen (15) months of the ?Financial Closeout Report?. This report is due by July 31st, following the close of each fiscal year. Therefore the Contract resolution should be performed on or before October 31st of the following year. Cause: The Agency did not have internal controls and procedures in place to initiate and perform the Contract resolution before the required dates. Effect: Significant deficiency in internal controls and noncompliance with the grant contract. A potential effect is that subcontractors could be expending funds that are not allowed under the provisions of the Federal award program (i.e. 2 CFR Part 200) and/or the State contract, which would have to be returned to the grantor. Context: The audit examined the Contract resolution performed for the years ended June 30, 2019 and 2020 and found them to be performed after the due dates of October 31, 2020 and 2021, respectively. The audit also found that the Contract resolution for the year ended June 30, 2021, to be performed by October 31, 2022, has not been performed as of the date of this audit report. This is not a repeat finding. There are no questioned costs related to this finding. Recommendation: The Agency should develop internal controls and procedures to perform the Contract resolution adequately and effectively before the required due date. At a minimum, these procedures should incorporate the required procedures as stated in the AP-2122 Contract, Article X, Items C (5) through (9). Since the procedures require a thorough knowledge of Uniform Guidance (i.e. Single Audit) Cost Principles and GAAP, the Agency should consider contracting with a knowledgeable CPA firm to perform the Contract resolution, or at a minimum, provide ?as-needed? assistance and a review of the completed process. Views of Responsible Officials: The Agency agrees with this finding.

U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES, PASSED THROUGH THE CALIFORNIA DEPARTMENT OF AGING AGING CLUSTER ? CFDA #?S 93.044, 93.045, 93.053 2019-003 Award # A3 1819-02, A9 1819-02 MATERIAL WEAKNESS: As discussed at Finding 2019-001, the Auditee?s monthly and annual ?financial statement close and reporting? process from January to June 2019 experienced material errors in processing transactions and these were not corrected before the annual audit. The non-accounting personnel that replaced the financial analyst before a new analyst could be hired, and the new financial analyst that was hired in March 2019, did not have the experience or training necessary to process transactions in this system. This material weakness affected the internal controls over compliance with major award programs required by Uniform Guidance.MATERIAL NONCOMPLIANCE: As discussed at Finding 2019-002, the Auditee?s financial system did not agree with the reporting for the major award and material audit adjustments had to be made to correctly classify a number of transactions to the proper activity. PERSPECTIVE: I believe this represented an isolated instance for this period as the transactions that were reviewed from June 2019 to October 2019 during subsequent receipt and disbursement activity appeared to show these errors had stopped. The noncompliance described above was found in my review of 100% of the population for payments to the subrecipient providers and the receipts from the California Department on Aging. This resulted in corrections crediting (increasing) revenue by $280,206 and debiting (decreasing) expenditures by $45,079. None of this resulted in questioned costs. This is not a repeat finding. VIEWS OF THE RESPONSIBLE OFFICIAL OF THE AUDITEE: The Agency agrees with this finding.

U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES, PASSED THROUGH THE CALIFORNIA DEPARTMENT OF AGING AGING CLUSTER ? CFDA #?S 93.044, 93.045, 93.0532019-004 Award # A3 1819-02, A9 1819-02 MATERIAL NONCOMPLIANCE: The auditee submitted the single audit reporting package late. The reporting package was accepted on August 21, 2019, but was due on June 30, 2019, including an extension of ninety days. CRITERIA: 2 CFR Section 200.512 Administrative requirements require for all single audits, the data collection form and reporting package be submitted to the Federal Audit Clearinghouse (FAC) by the due date, including extensions. CAUSE: Due to factors beyond control of management, which related to the predecessor auditor resigning just before the audit was scheduled to start, put undue hardship on the Agency to quickly replace the auditor, which did not happen in time for the single audit to be completed on time. EFFECT: Results in noncompliance and the auditee cannot qualify for being audited as a low-risk auditee for 2 consecutive fiscal years. QUESTIONED COSTS: None PERSPECTIVE: I believe this to be an isolated instance and the auditee has taken steps for the current fiscal year to ensure the data collection form and reporting package are timely submitted. This is not a repeat finding. RECOMMENDATION: I recommend that the auditee contract with the auditor well in advance of the due date and begin the audit on a date that gives ample time to submit the required forms. VIEWS OF THE RESPONSIBLE OFFICIAL OF THE AUDITEE: The Agency agrees with this finding.

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