Finding 2021-006 Allowable Costs/Cost Principles – Internal Control and Compliance over Allowable Costs/Cost Principles Identification of the Federal Program: Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grants/Entitlement Grants Federal Agency: U.S. Department of Housing and Urban Development Pass-Through Entity: County of San Bernardino Community Development and Housing Federal Award Identification Number: ADEL-18-1-03K-0134 ADEL-19-CV-2-05Q/0190 Assistance Listing Number: 21.019 Assistance Listing Title: Coronavirus Relief Fund Federal Agency: Department of Treasury Pass-Through Entity: State of California Department of Finance County of San Bernardino Federal Award Identification Number: N/A CARES21-ALLC-ADE Criteria or Specific Requirement (Including Statutory, Regulatory, or Other Citation): Pursuant to Code of Federal Regulation §200.403 Requirements for pass-through entities. Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity. (d) Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost. Finding 2021-006 Allowable Costs/Cost Principles – Internal Control and Compliance over Allowable Costs/Cost Principles (Continued) Condition: Community Development Block Grants/Entitlement Grants During our audit, we noted that two (2) out of four (4) samples summed up to $17,060 had no proper source documents to indicate the procurement and payment were properly approved. Coronavirus Relief Fund During our audit, we noted that three (3) out of ten (10) samples summed up to $79,085 had no proper source documents to indicate the procurement and payment were properly approved. Cause: The City was not able to safeguard the documents substantiating the transactions being charged to the grant. Effect or Potential Effect: The City did not comply with the CFR’s requirements for allowable costs. There is an increased risk that the charges do not represent the actual costs incurred. Questioned Costs: Known questionable costs $96,145. Context: See condition above for the context of the finding. Identification as a Repeat Finding, If Applicable: Not applicable. Recommendation: We recommended the City to strengthen safeguarding of source documents to properly substantiate the charges made to the grant. Views of Responsible Officials: Management concurs the finding. (e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part. (f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally-financed program in either the current or a prior period. See also § 200.306(b). (g) Be adequately documented. See also §§ 200.300 through 200.309 of this part. (h) Cost must be incurred during the approved budget period. The Federal awarding agency is authorized, at its discretion, to waive prior written approvals to carry forward unobligated balances to subsequent budget periods pursuant to § 200.308(e)(3).
Criteria: The requirements for matching are contained in 2 CFR Section 200.306, This states that any matching costs meet certain criteria including that they be verifiable from the entity’s records. Per the terms and conditions of the award, it is understood and agreed that PAX must provide the minimum amount of cost sharing as stipulated in the budget approved by the Grants Officer. PAX must maintain written records to support all allowable costs which are claimed as being its contribution to cost participation. Condition: Per the terms of the award, PAX agreed to expend a share of the total program cost financed by PAX and/or others from non-federal funds in accordance with 2 CFR 200.306. PAX’s books and records did not contain the necessary information to verify whether this matching requirement was met. Citation: 2 CFR 200.306 Cause: PAX did not have an effective internal control system in place for monitoring that the cost sharing requirement was being met. Effect: The accounting team did not allocate the expenses related to the cost share in the books and records throughout the year. However, they provided schedules that detailed the expenses related to the cost share after year-end as part of the audit process. Questioned Costs: None. Context: This was a universal matter that impacted the entity as a whole. Repeat Finding: Yes Recommendation: We recommend that an internal control system be established to monitor PAX’s share of the award costs. This system should include tracking these expenses in a separate cost center in the books and records and reconciling to the amount reported to the grantor as well as the budget. View of Responsible Officials: See Corrective Action Plan attached.
Finding No.: 2019-006 Federal Agency: U.S. Department of Health and Human Services CFDA Program: 93.104 Comprehensive Community Mental Health Services for Children with Serious Emotional Disturbances (SED) Award Number: 6U79SM062447-04M001 and 6U79SM062447-04M004 Area: Matching, Level of Effort, Earmarking Questioned Costs: $-0- Criteria: In accordance with 2 CFR Subpart 200.306, for all Federal awards, any shared costs or matching funds and all contributions, including cash and third-party in-kind contributions, must be accepted as part of the non-Federal entity's cost sharing or matching when such contributions meet all of the following criteria: 1. Are verifiable from the non-Federal entity's records; 2. Are not included as contributions for any other Federal award; 3. Are necessary and reasonable for accomplishment of project or program objectives; 4. Are allowable under subpart E of this part; 5. Are not paid by the Federal Government under another Federal award, except where the Federal statute authorizing a program specifically provides that Federal funds made available for such program can be applied to matching or cost sharing requirements of other Federal programs; 6. Are provided for in the approved budget when required by the Federal awarding agency; and 7. Conform to other provisions of this part, as applicable. Condition: Support for the non-federal match for Business Units H71040 and H81040 were not provided. Cause: CHCC did not enforce internal controls over recordkeeping and monitoring controls to substantiate compliance with matching requirements. Effect: CHCC is in noncompliance with applicable matching requirements. No questioned costs are presented as we are unable to quantify the extent of noncompliance. Finding No.: 2019-006, continued Federal Agency: U.S. Department of Health and Human Services CFDA Program: 93.104 Comprehensive Community Mental Health Services for Children with Serious Emotional Disturbances (SED) Award Number: 6U79SM062447-04M001 and 6U79SM062447-04M004 Area: Matching, Level of Effort, Earmarking Questioned Costs: $-0- Identification as a Repeat Finding: Finding No. 2018-012. Recommendation: Responsible CHCC personnel should establish recordkeeping system whereby underlying support for matching requirements is substantiated and filed. Views of Responsible Officials: CHCC’s Corrective Action Plan provides a detailed rationale for disagreement with the finding. Auditor Response: Underlying accounting records supporting the non-federal match were not provided. In addition, initial draft reports were provided to CHCC on 09/06/24 and 09/24/24. It was also agreed during the 09/06/24 and 10/04/24 meetings for CHCC to provide corresponding underlying accounting records to resolve the finding; however, no documentations were provided within the agreed timeline. Accordingly, finding is sustained.
Finding No.: 2019-006 Federal Agency: U.S. Department of Health and Human Services CFDA Program: 93.104 Comprehensive Community Mental Health Services for Children with Serious Emotional Disturbances (SED) Award Number: 6U79SM062447-04M001 and 6U79SM062447-04M004 Area: Matching, Level of Effort, Earmarking Questioned Costs: $-0- Criteria: In accordance with 2 CFR Subpart 200.306, for all Federal awards, any shared costs or matching funds and all contributions, including cash and third-party in-kind contributions, must be accepted as part of the non-Federal entity's cost sharing or matching when such contributions meet all of the following criteria: 1. Are verifiable from the non-Federal entity's records; 2. Are not included as contributions for any other Federal award; 3. Are necessary and reasonable for accomplishment of project or program objectives; 4. Are allowable under subpart E of this part; 5. Are not paid by the Federal Government under another Federal award, except where the Federal statute authorizing a program specifically provides that Federal funds made available for such program can be applied to matching or cost sharing requirements of other Federal programs; 6. Are provided for in the approved budget when required by the Federal awarding agency; and 7. Conform to other provisions of this part, as applicable. Condition: Support for the non-federal match for Business Units H71040 and H81040 were not provided. Cause: CHCC did not enforce internal controls over recordkeeping and monitoring controls to substantiate compliance with matching requirements. Effect: CHCC is in noncompliance with applicable matching requirements. No questioned costs are presented as we are unable to quantify the extent of noncompliance. Finding No.: 2019-006, continued Federal Agency: U.S. Department of Health and Human Services CFDA Program: 93.104 Comprehensive Community Mental Health Services for Children with Serious Emotional Disturbances (SED) Award Number: 6U79SM062447-04M001 and 6U79SM062447-04M004 Area: Matching, Level of Effort, Earmarking Questioned Costs: $-0- Identification as a Repeat Finding: Finding No. 2018-012. Recommendation: Responsible CHCC personnel should establish recordkeeping system whereby underlying support for matching requirements is substantiated and filed. Views of Responsible Officials: CHCC’s Corrective Action Plan provides a detailed rationale for disagreement with the finding. Auditor Response: Underlying accounting records supporting the non-federal match were not provided. In addition, initial draft reports were provided to CHCC on 09/06/24 and 09/24/24. It was also agreed during the 09/06/24 and 10/04/24 meetings for CHCC to provide corresponding underlying accounting records to resolve the finding; however, no documentations were provided within the agreed timeline. Accordingly, finding is sustained.
Criteria: The requirements for matching are contained in 2 CFR Section 200.306, This states that any matching costs meet certain criteria including that they be verifiable from the entity’s records. Per the terms and conditions of the award, it is understood and agreed that PAX must provide the minimum amount of cost sharing as stipulated in the budget approved by the Grants Officer. PAX must maintain written records to support all allowable costs which are claimed as being its contribution to cost participation. Condition: Per the terms of the award, PAX agreed to expend an amount not less than $365,986 of the total program cost for financing by the PAX and/or others from non-federal funds in accordance with 2 CFR 200.306. PAX’s books and records did not contain the necessary information to verify whether this matching requirement was met. Citation: 2 CFR 200.306 Cause: PAX did not have an effective internal control system in place for monitoring that the cost sharing requirement was being met. Effect: The accounting team did not allocate the expenses related to the cost share in the books and records throughout the year. However, they provided schedules that detailed the expenses related to the cost share after year-end as part of the audit process. Questioned Costs: None. Context: This was a universal matter that impacted the entity as a whole. Repeat Finding: Yes Recommendation: We recommend that an internal control system be established to monitor PAX’s share of the award costs. This system should include tracking these expenses in a separate cost center in the books and records and reconciles to the amount reported to the grantor as well as the budget. View of Responsible Officials: See Corrective Action Plan attached.