HOUSTON RECOVERY CENTER, LGC

Finding #2023-001 – Material Weakness and Material Noncompliance. Major federal programs: U. S. Department of Treasury, Assistance Listing #21.027, COVID-19 Coronavirus State and Local Fiscal Recovery Funds, Passed through Harris County, Texas, Contract #220163, Contract year: 12/01/22 – 12/31/24, Assistance Listing #93.788, Opioid STR, Passed through the Texas Health and Human Services Commission, Contract #HHS000357900001, Contract years: 09/01/21 – 08/31/22 and 09/01/22 – 08/31/23, Passed through the University of Texas Health Science Center, San Antonio, Contract #HHS000561800001, Contract year: 09/01/21 – 08/31/22. Other federal programs: U. S. Department of Health and Human Services:, Assistance Listing #93.243, Substance Abuse and Mental Health Services Projects of Regional and National Significance, Contract #5H79TI080624-03, Contract year: 09/30/21 – 09/29/22, Contract #5H79TI080624-04, Contract year: 09/30/22 – 09/29/23, Passed through the City of Houston Health Department, Assistance Listing #93.243, Contract #H79SP080300, Contract years: 11/01/21 – 10/31/22, 11/01/22 – 10/31/23 and 06/08/21 – 06/30/23, Assistance Listing #93.959, Block Grants for Prevention and Treatment of Substance Abuse, Passed through the Texas Health and Human Services Commission, Contract #HHS000130500019, Contract years: 09/01/21 – 08/31/22 and 09/01/22 – 08/31/23. Criteria: Allowable costs – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, §200.430 requires that charges to awards for salaries and wages be based on records that accurately reflect the work performed. These records must 1) be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable and properly allocated; 2) reasonably reflect the total activity for which the employee is compensated; 3) comply with the established accounting policies and practices of the agency; and 4) support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one activity. Houston Recovery Center’s procedures for allocating payroll costs are not sufficient to ensure that costs are appropriately allocated amongst federal and other funding streams. Condition and context: Houston Recovery Center has personnel funded by more than one grant award. The responsibilities for each position are examined and an assessment of time needed to perform each assigned task is made. The time allotment is then converted to a percentage of salary, documented on the personnel action form for each employee, and used to create the personnel section of each grant budget. Each grant is charged based on the percentages documented on the personnel action forms. In fiscal 2022, quarterly time studies were utilized to support that the budgeted estimates per the personnel action forms were reasonable and, if needed, adjustments were made in the general ledger. On July 1, 2022, Houston Recovery Center changed third-party payroll processors and the new processor did not provide the capability to charge time to more than one cost center. Therefore, while allocations are still made in the general ledger based on the percentages documented on the employee’s personnel action form, actual time worked by grant/cost center was not tracked. Additionally, a time study was not performed in the year ended June 30, 2023 to evaluate the reasonableness of time charged to the grants. Questioned costs: Unknown. Cause: Houston Recovery Center’s payroll provider advised that the payroll software could provide the capability of personnel to charge multiple grants consistent with time work efforts. After implementation of the new system, the payroll provider worked for months to meet that requirement only to conclude that they were unable to provide the ability to charge to more than one grant. Effect: Allocation of payroll costs may not properly reflect the time and effort expended on the specific federal program. Recommendation: Houston Recovery Center should establish policies and procedures to ensure that grants are charged based on actual time and effort expended. Views of responsible officials and planned corrective actions: Management agrees with the finding. See Corrective Action Plan.

Finding #2023-002 – Significant Deficiency. Major federal programs: U. S. Department of Treasury, Assistance Listing #21.027, COVID-19 Coronavirus State and Local Fiscal Recovery Funds, Passed through Harris County, Texas, Contract #220163, Contract year: 12/01/22 – 12/31/24, Assistance Listing #93.788, Opioid STR, Passed through the Texas Health and Human Services Commission Contract #HHS000357900001, Contract years: 09/01/21 – 08/31/22 and 09/01/22 – 08/31/23, Passed through the University of Texas Health Science Center, San Antonio, Contract #HHS000561800001, Contract year: 09/01/21 – 08/31/22. Other federal programs: U. S. Department of Health and Human Services:, Assistance Listing #93.243, Substance Abuse and Mental Health Services Projects of Regional and National Significance, Contract #5H79TI080624-03, Contract year: 09/30/21 – 09/29/22, Contract #5H79TI080624-04, Contract year: 09/30/22 – 09/29/23, Passed through the City of Houston Health Department, Assistance Listing #93.243, Contract #H79SP080300, Contract years: 11/01/21 – 10/31/22, 11/01/22 – 10/31/23 and 06/08/21 – 06/30/23, Assistance Listing #93.959, Block Grants for Prevention and Treatment of Substance Abuse, Passed through the Texas Health and Human Services Commission, Contract #HHS000130500019, Contract years: 09/01/21 – 08/31/22 and 09/01/22 – 08/31/23. Criteria: Reporting – Management is responsible for establishing and maintaining an effective system of internal control over government grant billings to ensure all costs are reimbursed and that government grant revenue and receivables are properly reflected in the financial statements in accordance with generally accepted accounting principles and the Uniform Guidance. Condition and context: Houston Recovery Center is required to submit monthly reimbursement requests for five of its federal programs; one program requires reimbursement requests based on achievement of certain milestones rather than time. Out of a sample of 17 requests for the five reimbursement programs, we found six did not have evidence of review and approval as required by Houston Recovery Center’s policies and procedures. Cause and effect: The Senior Grant Accountant position did not provide the grant reimbursements to the Executive Director for review and approval prior to submission. The person in this role has transitioned. Failure to establish and maintain an adequate internal control system over government grant billings could result in the Houston Recovery Center not being reimbursed for program costs or overbilling government grants. Recommendation: Training should be provided to ensure that policies and procedures regarding independent review and approval are followed. Views of responsible officers and planned corrective action: Management agrees with the finding. See Corrective Action Plan.