Audit of MCC's Fiscal Years 2019 and 2018 Financial Statements

Audit Report
Report Number
0-MCC-20-004-C

The Office of Inspector General (OIG) contracted with the independent certified public accounting firm of CliftonLarsonAllen LLP to conduct the audit. The objectives were to: (1) express an opinion on whether the financial statements as of September 30, 2019, and 2018, were presented fairly, in all material respects; (2) evaluate MCC’s internal controls; and (3) determine whether MCC complied with applicable laws and regulations. The audit concluded that MCC’s financial statements are presented fairly, in all material respects, and found no instances of noncompliance with provisions of laws and regulations. The auditors reported two significant deficiencies (modified repeat findings) in internal controls related to grant accrual estimates and validation, and Millennium Challenge Accounts’ financial reporting. To address the weaknesses identified in the report, OIG made 9 recommendations, which OIG considers open and unresolved.

Recommendations

Recommendation 1

MCC update the "Grant Accrual Financial Management Division Desktop Procedures" to document and determine what MCC should do with validated costs identified that were not part of the accrued costs, and what was the root cause of the initial omission by MCA. Based on that outcome, MCC should revise MCA guidance as appropriate or provide additional training to prevent recurrence.

Questioned Cost:
$0
Funds For Better Use:
$0
Close Date:
Recommendation 2

MCC Update the "Grant Accrual Financial Management Division Desktop Procedures" to require MCC to review the adequacy of the MCAs' procedure manual that addresses the MCA internal process with its project directors and engineers for capturing work completed but not yet billed or paid. MCC should provide recommendations for improvement where warranted.

Questioned Cost:
$0
Funds For Better Use:
$0
Recommendation 3

MCC update the "Grant Accrual Financial Management Division Desktop Procedures" to address and document what additional steps should be taken to ensure the reliability of the grant accrual estimate and the validation process when the compact is entering into its final year and or closure period (i.e., 120 days after the compact end date).

Questioned Cost:
$0
Funds For Better Use:
$0
Recommendation 4

MCC develop, document, and implement an internal procedure that requires the Department of Compact Operations to disclose unique financial aspects of the compact, or additional financial agreements impacting the compact, to the Financial Management Division for review to determine if the MCA needs additional guidance to properly accrue for those costs.

Questioned Cost:
$0
Funds For Better Use:
$0
Recommendation 5

MCC update the "Retentions Data Call: Millennium Challenge Account Guidance" to provide additional requirements for MCAs to reconcile retention balances reported in the quarterly data calls with the relevant balances recorded in the MCAs' financial system, investigate any variances noted, and submit this reconciliation with the quarterly data call to MCC for review.

Questioned Cost:
$0
Funds For Better Use:
$0
Close Date:
Recommendation 6

MCC coordinate with the Vice President of Department of Compact Operations the updating of the "Fiscal Accountability Plans" to require MCAs to develop an internal process with project directors and engineers on how to capture work completed but not yet billed or paid, and document in a desktop procedure manual.

Questioned Cost:
$0
Funds For Better Use:
$0
Recommendation 7

MCC coordinate with the Vice President of Department of Compact Operations the updating of the "Fiscal Accountability Plans" to require MCAs to ensure that the Fiscal Agent is integrated within the grant accrual process to verify when grant accruals have been paid and should no longer be reported as an accrual in the data call.

Questioned Cost:
$0
Funds For Better Use:
$0
Recommendation 8

MCC provide MCAs with additional training concerning the reporting of advance liquidations in the grant accrual process for in-house invoices and works completed but not invoiced as of quarter end.

Questioned Cost:
$0
Funds For Better Use:
$0
Recommendation 9

MCC develop, implement, and document procedures for how MCC will assist the MCAs to enable them to meet the compact/threshold audit requirements.

Questioned Cost:
$0
Funds For Better Use:
$0