Finding Number 2023-002
• Significant deficiency in internal controls over compliance related to allowable costs and period of performance.
Criteria
• 2 U.S. CFR Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards require that costs must be neces...
Finding Number 2023-002
• Significant deficiency in internal controls over compliance related to allowable costs and period of performance.
Criteria
• 2 U.S. CFR Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards require that costs must be necessary and reasonable for the performance of the Federal Award, that costs be determined in accordance with GAAP, and that costs be adequately documented including the allocation of those costs.
Condition/Context for Evaluation
• IPHC’s internal controls over non-payroll charges to the Federal Award did not include review for allowability, accrual in the proper period, or that adequate documentation existed to support the amounts charged or allocated. Three out of 25 nonpayroll disbursements tested did not include evidence supporting one or more of these controls.
Questioned Costs
• $2,674
Cause
• IPHC’s operation of internal controls were not sufficient to ensure allowable costs were charged in accordance with 2 U.S. CFR 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards.
Effect or Potential Effect
• As a result, charges were made to Federal awards that were not allowable.
Repeat Finding
• Not applicable.
Recommendation
• We recommend that IPHC ensure internal controls include reviewing costs charged to the Federal Award for conformity with 2 U.S. CFR Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards for allowability, allocability, and reasonableness.
o Allowability 200.403, 200.404, 200.405
o Allowable budget period – 200.403 (h)
Contact Person(s):
• Executive Director: David Wilson (david.wilson@iphc.int);
• Assistant Director: Andrea Keikkala (andrea.keikkala@iphc.int)
Explanation and specific reasons for disagreement with the audit finding or that corrective action is not required (if applicable): Not applicable.
Corrective action planned:
We acknowledge that the deficiencies identified, while minor in dollar value to the grant, represent areas for improvement. The specific issues identified were:
1. Field office rental: A field office rental statement was partially charged to the incorrect fiscal year. Reason: The landlord submitted the invoice for payment after the year-end close (FY2022) and was subsequently fully charged to FY2023, instead of being split across fiscal years.
2. Postage (2 elements): The IPHC loads postage stamps on a stamps.com account to process missing logbook notices to vessel owners, a function that pertains to a grant. Clear delineation of the cost of the stamps allocated to the grant and the stamps allocated to activities that do not qualify under the grant were not enumerated. The employee that requested the stamps in the procurement software did so because the lead team member was not available. When procuring the stamps the face-value of a stamp was used at $0.60 instead of $0.57, a discount the organization receives due to bulk purchase and stamp.com membership. The cost of this error was $9.96.
At the start of FY2023, we used a single operating Fund (Fund 30 – Statistics) to record income and expenses for data related activities that included some grant funds. During the course of the year, we commenced the development of the new 5-year grant application with NOAA Fisheries to cover IPHC’s Directed Commercial Catch Sampling of Pacific halibut in Alaska (IPHC Grant 802) (Grant Number: NOAA-NMFS-AK-2023-2007663) from FY2022-FY2026. During this grant renewal/development process, a decision was taken to split Fund 30 – Statistics into two, with Fund 35 AK Cost-Recovery being created. This new Fund 35 was developed to contain only those expenses and income that were deemed as eligible under the grant rules. Over the course of the year, the Secretariat categorized income and expenses between the two Funds, which involved recoding some transactions coded to Fund 30 at the start of the fiscal year, to Fund 35 later in the year.
For FY2024, we will continue to undertake monthly reconciliation and month-end close processes to ensure charges are appropriately coded and attributed. In addition, the year-end reconciliation and close processes will support the attestation of funds spent under the grant within one month of the fiscal year ending.
This proactive approach aims to ensure timely completion for the single audit, allowing for comprehensive scrutiny of costs assigned to the grant before incorporating financial statements for review during the single audit process.
Further, we will ensure preliminary scrutiny and month-end close of financial reports pertaining to grant funds before loading them to the auditors for review.
Finally, our procedures have already been improved to ensure that costs charged to the federal awards are charged to the appropriate activity code and are allowable under federal cost principles.
Anticipated completion date: Completed - 1 December 2023, and annually by year-end closeout.