Finding 2022-4 Utilities Expense Improperly Classified as Rent
Name of Federal Agency:
Listing Award
Number Number
64.033 13-ZZ-134
U. S. Department of Veterans Affairs (VA)
Program Title
VA Supportive Services for Veteran Families (SSVF)
Criteria or specific requirement: Generally Accepted Accounting Principles (GAAP) requires
financial transactions be properly classified as to purpose and function.
13
THE ALSTON WILKES SOCIETY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED DECEMBER 31, 2022
Section III - Federal Award Findings and Questioned Costs (continued)
Condition: We selected a judgmental sample of 40 transactions to test. One out of the 40 sample
items appears to be improperly classified. Our audit testing identified a transaction in the amount of
$6,596.26 (sample item # 21) out of $134,400.16 total sample items that was recorded as" Rent,
Penalties, Fees," when evidence shows it should have been recorded as utility expenses.
Cause of condition: Existing internal controls did not properly function, where an employee
performing their normal duties, in the normal course of business, should have identified the error and
corrected it in a timely manner.
Potential effect of condition: This condition results in a noncompliance finding for the period under
audit.
Questioned Costs: The costs are allowable, but improperly classified. No questioned costs
identified.
Prevalence and Consequence: A judgmental sample of 40 items was selected. Out of the 40
sample items tested, one was found to be improperly classified. This condition appears to be an
isolated incident.
Repeat Finding: No
Recommendation: We recommend management continue to peruse effective internal controls to
enable an employee, during the performance of their normal course duties, to identify errors in a
reasonable amount of time, in order to enable management to identify and correct such errors at the
time, or before they are recorded in the accounting records.
Finding 2022-5 No Prior Written Approval for Capital Disbursements in Excess of $10,000
Name of Federal Agency:
Listing Award
Number Number
64.033 13-ZZ-134
U. S. Department of Veterans Affairs (VA)
Program Title
VA Supportive Services for Veteran Families (SSVF)
Criteria or specific requirement:
2 CFR 200.1 Definition for: Capital Expenditures means expenditures to acquire capital assets or
expenditures to make additions, improvements, modifications, replacements, rearrangements,
reinstallations, renovations, or alterations to capital assets that materially increase their value or
useful life.
14
THE ALSTON WILKES SOCIETY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED DECEMBER 31, 2022
Section III - Federal Award Findings and Questioned Costs (continued)
2 CFR 200.452 Maintenance and repair costs states: Costs incurred for utilities, insurance,
security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment
(including Federal property unless otherwise provided for) which neither add to the permanent value
of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition,
are allowable. Costs incurred for improvements that add to the permanent value of the buildings and
equipment or appreciably prolong their intended life must be treated as capital expenditures (see §
200.439). These costs are only allowable to the extent not paid through rental or other agreements.
2 CFR 200.439 Equipment and Other Capital Expenditures, (b) (1-3)
1 Capital expenditures for general purpose equipment, buildings, and land are allowable as
direct costs, but only with the prior written approval of the Federal agency or pass-through
entity.
2 Capital expenditures for special purpose equipment are allowable as direct costs, provided
that items with a unit cost of $10,000 or more have the prior written approval of the Federal
agency or pass-through entity, and
3 Capital expenditures for improvements to land, buildings, or equipment that materially
increase their value or useful life are allowable as a direct cost, but only with the prior written
approval of the Federal agency or pass-through entity.
Condition: We identified two transactions where the Society should have received prior written
approval from the awarding agency, before incurring the costs. The transactions, in the amounts of
$26,057 and $18,000, were recorded as equipment maintenance expense, and floor repairs,
respectively. In accordance 2 CFR 200.439 b, it appears the cost should have had prior written
approval.
Cause of condition: The reason the condition occurred appears to be the lack of a thorough
understanding of the cost principles under the Uniform Guidance (2 CFR Part 200, Subpart E - Cost
Principles).
Potential effect of condition: The possible effect of this condition is non-compliance with prior
written approval requirements for disbursements totaling $44,057.51.
Section III - Federal Award Findings and Questioned Costs (continued)
Questioned Costs: This condition resulted in questioned costs totaling $44,057.51. The
questioned cost amount was computed by adding the total of the two sample items tested for this
condition, as shown below:
Sample # Description
28 Floor Repairs
29 Equipment Maintenance
Amount
$18,000.00
26,057.51
$ 44,057.51
Prevalence and Consequence: A judgmental sample of 40 disbursements totaling $134,400.16
was selected. Out of the 40 sample items tested, two were identified where prior written approval
was not obtained, totaling $44,057.51.
Repeat Finding: No
Recommendation: We recommend management ensure accounting personnel responsible for the
administration of funds related to award programs, refamiliarize themselves with 2 CFR 200
Subpart E - Cost Principles, to enable them to recognize when prior written approval is required, and
when to capitalize certain capital expenditures when the federal criteria are met for nongovernmental
entities.
Finding 2022-4 Utilities Expense Improperly Classified as Rent
Name of Federal Agency:
Listing Award
Number Number
64.033 13-ZZ-134
U. S. Department of Veterans Affairs (VA)
Program Title
VA Supportive Services for Veteran Families (SSVF)
Criteria or specific requirement: Generally Accepted Accounting Principles (GAAP) requires
financial transactions be properly classified as to purpose and function.
13
THE ALSTON WILKES SOCIETY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED DECEMBER 31, 2022
Section III - Federal Award Findings and Questioned Costs (continued)
Condition: We selected a judgmental sample of 40 transactions to test. One out of the 40 sample
items appears to be improperly classified. Our audit testing identified a transaction in the amount of
$6,596.26 (sample item # 21) out of $134,400.16 total sample items that was recorded as" Rent,
Penalties, Fees," when evidence shows it should have been recorded as utility expenses.
Cause of condition: Existing internal controls did not properly function, where an employee
performing their normal duties, in the normal course of business, should have identified the error and
corrected it in a timely manner.
Potential effect of condition: This condition results in a noncompliance finding for the period under
audit.
Questioned Costs: The costs are allowable, but improperly classified. No questioned costs
identified.
Prevalence and Consequence: A judgmental sample of 40 items was selected. Out of the 40
sample items tested, one was found to be improperly classified. This condition appears to be an
isolated incident.
Repeat Finding: No
Recommendation: We recommend management continue to peruse effective internal controls to
enable an employee, during the performance of their normal course duties, to identify errors in a
reasonable amount of time, in order to enable management to identify and correct such errors at the
time, or before they are recorded in the accounting records.
Finding 2022-5 No Prior Written Approval for Capital Disbursements in Excess of $10,000
Name of Federal Agency:
Listing Award
Number Number
64.033 13-ZZ-134
U. S. Department of Veterans Affairs (VA)
Program Title
VA Supportive Services for Veteran Families (SSVF)
Criteria or specific requirement:
2 CFR 200.1 Definition for: Capital Expenditures means expenditures to acquire capital assets or
expenditures to make additions, improvements, modifications, replacements, rearrangements,
reinstallations, renovations, or alterations to capital assets that materially increase their value or
useful life.
14
THE ALSTON WILKES SOCIETY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED DECEMBER 31, 2022
Section III - Federal Award Findings and Questioned Costs (continued)
2 CFR 200.452 Maintenance and repair costs states: Costs incurred for utilities, insurance,
security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment
(including Federal property unless otherwise provided for) which neither add to the permanent value
of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition,
are allowable. Costs incurred for improvements that add to the permanent value of the buildings and
equipment or appreciably prolong their intended life must be treated as capital expenditures (see §
200.439). These costs are only allowable to the extent not paid through rental or other agreements.
2 CFR 200.439 Equipment and Other Capital Expenditures, (b) (1-3)
1 Capital expenditures for general purpose equipment, buildings, and land are allowable as
direct costs, but only with the prior written approval of the Federal agency or pass-through
entity.
2 Capital expenditures for special purpose equipment are allowable as direct costs, provided
that items with a unit cost of $10,000 or more have the prior written approval of the Federal
agency or pass-through entity, and
3 Capital expenditures for improvements to land, buildings, or equipment that materially
increase their value or useful life are allowable as a direct cost, but only with the prior written
approval of the Federal agency or pass-through entity.
Condition: We identified two transactions where the Society should have received prior written
approval from the awarding agency, before incurring the costs. The transactions, in the amounts of
$26,057 and $18,000, were recorded as equipment maintenance expense, and floor repairs,
respectively. In accordance 2 CFR 200.439 b, it appears the cost should have had prior written
approval.
Cause of condition: The reason the condition occurred appears to be the lack of a thorough
understanding of the cost principles under the Uniform Guidance (2 CFR Part 200, Subpart E - Cost
Principles).
Potential effect of condition: The possible effect of this condition is non-compliance with prior
written approval requirements for disbursements totaling $44,057.51.
Section III - Federal Award Findings and Questioned Costs (continued)
Questioned Costs: This condition resulted in questioned costs totaling $44,057.51. The
questioned cost amount was computed by adding the total of the two sample items tested for this
condition, as shown below:
Sample # Description
28 Floor Repairs
29 Equipment Maintenance
Amount
$18,000.00
26,057.51
$ 44,057.51
Prevalence and Consequence: A judgmental sample of 40 disbursements totaling $134,400.16
was selected. Out of the 40 sample items tested, two were identified where prior written approval
was not obtained, totaling $44,057.51.
Repeat Finding: No
Recommendation: We recommend management ensure accounting personnel responsible for the
administration of funds related to award programs, refamiliarize themselves with 2 CFR 200
Subpart E - Cost Principles, to enable them to recognize when prior written approval is required, and
when to capitalize certain capital expenditures when the federal criteria are met for nongovernmental
entities.