Audit 372658

Non-compliance with Allowable Cost/Cost principle Condition: The Organization has charged late fees on rent and finance charges on unpaid rent to the federal award. These cost items totaled $157,710, which were charged to the federal program as allowable expenditures. Under Uniform Guidance, these types of charges are unallowable. Criteria: Costs charged to federal awards must be necessary, reasonable, and allowable under applicable cost principles. Late fees on rent, finance charges on unpaid rent, and other penalties for late payment are not allowable and should not be charged to federal programs in accordance with the provisions of Uniform guidance. Cause: The Organization did not have adequate procedures to prevent unallowable late-payment- related charges from being recorded to federal programs. Effect: The Organization charged unallowable costs totaling $157,710 to the federal award. These costs do not meet Uniform Guidance Allowable Cost/Cost Principles and accordingly a refund liability has been recognized by the Organization to Department for the said amount. Recommendation: The Organization should strengthen internal controls so that late fees, finance charges, and penalties are identified and excluded from federal expenditures, provide training to accounting staff on allowable and unallowable costs, and enhance the review of expense coding before charges are allocated to federal programs. Management views and corrective action plans: Management will enhance the review of expense coding before posting charges to federal awards, update the written procedures to clearly identify unallowable cost categories, provide refresher training to finance staff on allowable versus unallowable costs, and perform periodic reviews of expenditures to ensure that any such costs are promptly identified and corrected.