Audit 370739

Criteria Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) require non-federal entities to prepare a schedule of expenditures of federal awards (SEFA) for the period covered by the entity’s financial statements. Under the Uniform Guidance, the non-federal entities are required to identify in their accounts all federal awards received and expended, as well as the federal programs under which they were received. Condition During our audit of federal award expenditures, we noted contract expense for a federal program was misclassified and not included a part of the federal awards program’s expenditures. Cause Upon inquiry with management, cost was erroneously assigned to a non-federal program in a journal entry prepared at the end of the month. Effect A major program reported in the Schedule of Expenditures of Federal Awards was understated by $23,200. Recommendation We recommend the Organization strengthen its review procedures in the allocation of expenditures to ensure all program expenses are properly allocated when recording accrual entries. Views of Responsible Officials Management concurs with the finding.

Criteria For cost-reimbursement contracts under the Federal Acquisition Regulation, it is required that the nonfederal entity request reimbursement for (a) only allocable, allowable, and reasonable contract costs that have already been paid, or (b) if the non-federal entity is not delinquent in paying costs of contract performance in the ordinary course of business, costs incurred, but not necessarily paid. Condition During our test of controls on cash management, where requests for federal award reimbursement are reviewed prior to submission by reviewing supporting documents, schedules, reports to ensure amounts have been paid with the organization’s funds prior to the reimbursement request, we noticed one month in our sample did not have evidence of review by the executive director. Cause The Organization does not have written policies and procedures describing how drawdowns are requested, approved and documented. The communication from outsourced accountants to the executive director on drawdowns for that month did not include supporting schedules, and the executive director did not request from the outsourced accountants for such information. Effect Because internal controls of the Organization were not fully effective in the process of drawdowns, there existed an increased risk for noncompliance under the reimbursement payment method of the Uniform Guidance. Questioned Costs: There are no questioned costs. Recommendation We recommend the Organization establish policies and procedures to ensure adequate internal controls over the drawdown process of federal awards. Prior to submission of drawdown, supporting schedules and reports are reviewed by the executive director or appropriate management personnel. Views of Responsible Officials Management concurs with the finding.