Criteria: 2CFR 200.403, Factors affecting allowability of costs, states that in order for a cost to be allowable under Federal awards it must be accorded consistent treatment. 2CFR 200.412 states that each item of cost for the same purpose must be treated consistently in like circumstances as either a direct or an indirect cost in order to avoid double-charging of Federal awards. Appendix IV to Part 200 4, Direct Allocation Method, all costs are treated as direct costs except general administration and general expenses. Under this method indirect costs consist exclusively of general administration and general expenses. 2CFR 200.425, Audit services, states the audit costs of auditing a non-federal entity that is exempted from having an audit conducted under the Single Audit Act and subpart F of this part because its expenditures under Federal awards are less than $750,000 during the non-Federal entity?s fiscal year are unallowable. 2CFR200.432, Conferences, defines allowable conferences as those necessary and reasonable for successful performance under the Federal award. Condition: A portion of the audit fee for the December 31, 2021 audit was charged as a direct expense ($423). The Council was not required to have a Single Audit for 2021, so this would not be considered allowable. A portion of the fees to send the finance director and a Board member to a conference ($750) were charged as a direct expense. Neither of these attendees were involved in the direct performance of the Federal program, so this would not be considered allowable. Costs for QuickBooks accounting software and payroll services, HR related software, and website costs ($4,047) were charged as direct costs. These are general administration expenses that should have been classified as indirect costs. Further, costs were not treated consistently within the accounting system. A portion of the audit costs, conference fees and software/computer costs were recorded as direct costs to the Federal program and a portion were recorded as indirect costs to other programs. The Organization did not have internal controls in place to meet the costs principles contained in the Uniform Guidance due to the issue discussed in Comment 2022-001. Cause: The Organization was not aware the grants received were Federal awards and they were not familiar with the cost principles contained in the Uniform Guidance. They were relying on the budget accepted by the Agency that passed them the awards. Effect: Since the 10% de minimis indirect cost rate was used, any unallowable costs that were reported as direct costs would cause the calculated indirect costs to be overstated. The grantor could request that any direct costs considered unallowable be repaid. Context: The unallowable costs noted were a minor portion of the direct costs charged to the Federal program. The program was charged approximately $463,000 of direct costs. Approximately 83% ($384,000) of the direct costs were wages, benefits and independent contractor fees for providers that worked directly for the Opiod STR program and direct rent for the program space. No exceptions we noted during our testing of these. The remaining 17% of the direct costs (approximately $79,000) were for a variety of expenses. We separated these items into 2 categories: recurring/annual charges allocated to the program of approximately $24,000 and other various costs. We tested the Organization?s allocation methodology for the identifiable recurring/annual costs. The results of this testing identified items that should have been classified as general administration indirect costs, as described above, which amounted to approximately $4,500. Testing was also done on the other various direct costs. There were 177 of these items totaling approximately $55,000. We tested a sample of 20 of these items. $750 of directly allocated costs for a conference were considered unallowable out of this testing. Questioned Costs: As a result of our testing, we concluded that the potentially unallowable costs and change in the indirect calculation would not be significantly different than the amounts discussed above and would not approach the $25,000 threshold for questioned costs. As a result, no costs have been questioned. Recommendation: We recommend that personnel involved in grant management and recordkeeping receive training on the Uniform Guidance cost principles and other pertinent Federal regulations. We recommend that a system and review process be implemented to insure that all costs are treated consistently and classified properly and that costs charged to Federal awards are appropriate. The Organization should follow the cost principles when designing budgets for future programs.
2022-008. Single Audit Report Submission Criteria or specific requirement (including statutory, regulatory, or other citation): In accordance with 2 CFR 200.412, the City is required to complete and submit the data collection form within the earlier of 30 days after receipt of the auditor’s report, or nine months after the end of the audit period. Condition and Context: The City did not obtain an independent audit within the required period for submission. Cause: Lack of internal controls to ensure an independent audit was completed timely. Effect or potential effect: The City did not comply with the requirements of 2 CFR 200.512. Questioned costs: None. Identification as a repeat finding, if applicable: Repeat of finding 2021-007. Recommendation: The City should develop a course of action to ensure that future single audit reports are completed and submitted to the Federal Audit Clearinghouse in accordance with the requirements of 2 CFR 200.512. Views of responsible officials: As detailed in the Corrective Action Plan, management has agreed to the findings and recommendation noted above.
U.S. Department of Agriculture Passed through the Kansas Department of Health and Environment Special Supplemental Nutrition Program for Women, Infants, and Children - 10.557 - Award number 202222W100643 Criteria or Specific Requirement – Allowable Costs/Cost Principles and Significant Deficiency Per 2 CFR 200.412 costs may be classified as direct or indirect costs and the charging of indirect costs are further governed by 2 CFR 200.414. The Unified Government has not elected to use the De Minimus indirect cost rate as allowed under the regulations nor do they have a federally negotiated indirect cost rate agreement. Per the WIC Policy and Procedures Manual, Expenses Section, 15.b., the Unified Government should negotiate a rate with the State Agency (SA) annually. As part of the negotiation, the Local Agency (LA) must submit an Indirect Cost Rate (ICR) proposal, including all documents and calculations used to determine the ICR, to the SA with the annual budget. The rate negotiated by the SA will be equal to or less than the indirect rate approved by the U.S. Dept. of Health and Human Services for KDHE. Per 2 CFR 200.303, the non-Federal entities receiving federal awards (i.e., auditee management) establish and maintain internal control design to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: For the Unified Government's Special Supplemental Nutrition Program for Women, Infants, and Children grant, for specific indirect cost rate was negotiated and approved by the Kansas Department of Health for the period July 1, 2021 through June 30, 2022. The Unified Government was unable to find a subsequent renewal or change in the negotiated rate governing such charges to the award. Questioned Costs – $37,931 related to the award number 202222W100643 for the grant period of October 1, 2021 through September 30, 2022. An approved indirect cost rate was not available for the period of July 1, 2022 through September 30, 2022. Context: In the absence of an updated agreement, the Unified Government used the indirect cost rate from its most recent agreement, which covered the period of July 2021 to June 2022 for periods outside of the agreed upon time (July 2022 through September 2022). Given an updated agreement was not present, it was uncertain if such charges were allowable or accurately charged to the award. Identification of Prior Year Finding: N/A Effect: Inappropriate indirect costs may be charged to the award based on unapproved agreements. Cause: The Unified Government does not have proper controls in place to monitor indirect costs and timing of when new negotiations may be required to support ongoing indirect costs. Recommendation: We recommend the Unified Government appropriately store records where department personnel can access them when needed. Views of Responsible Official and Planned Corrective Actions: Management will work internally to complete the annual calculation of the indirect rate and develop a solution, a shared document solution to provide indirect rate information to departments in a consistent and timely manner.
Criteria: 2CFR 200.403, Factors affecting allowability of costs, states that in order for a cost to be allowable under Federal awards it must be accorded consistent treatment. 2CFR 200.412 states that each item of cost for the same purpose must be treated consistently in like circumstances as either a direct or an indirect cost in order to avoid double-charging of Federal awards. Appendix IV to Part 200 4, Direct Allocation Method, all costs are treated as direct costs except general administration and general expenses. Under this method indirect costs consist exclusively of general administration and general expenses. 2CFR 200.425, Audit services, states the audit costs of auditing a non-federal entity that is exempted from having an audit conducted under the Single Audit Act and subpart F of this part because its expenditures under Federal awards are less than $750,000 during the non-Federal entity?s fiscal year are unallowable. 2CFR200.432, Conferences, defines allowable conferences as those necessary and reasonable for successful performance under the Federal award. Condition: A portion of the audit fee for the December 31, 2021 audit was charged as a direct expense ($423). The Council was not required to have a Single Audit for 2021, so this would not be considered allowable. A portion of the fees to send the finance director and a Board member to a conference ($750) were charged as a direct expense. Neither of these attendees were involved in the direct performance of the Federal program, so this would not be considered allowable. Costs for QuickBooks accounting software and payroll services, HR related software, and website costs ($4,047) were charged as direct costs. These are general administration expenses that should have been classified as indirect costs. Further, costs were not treated consistently within the accounting system. A portion of the audit costs, conference fees and software/computer costs were recorded as direct costs to the Federal program and a portion were recorded as indirect costs to other programs. The Organization did not have internal controls in place to meet the costs principles contained in the Uniform Guidance due to the issue discussed in Comment 2022-001. Cause: The Organization was not aware the grants received were Federal awards and they were not familiar with the cost principles contained in the Uniform Guidance. They were relying on the budget accepted by the Agency that passed them the awards. Effect: Since the 10% de minimis indirect cost rate was used, any unallowable costs that were reported as direct costs would cause the calculated indirect costs to be overstated. The grantor could request that any direct costs considered unallowable be repaid. Context: The unallowable costs noted were a minor portion of the direct costs charged to the Federal program. The program was charged approximately $463,000 of direct costs. Approximately 83% ($384,000) of the direct costs were wages, benefits and independent contractor fees for providers that worked directly for the Opiod STR program and direct rent for the program space. No exceptions we noted during our testing of these. The remaining 17% of the direct costs (approximately $79,000) were for a variety of expenses. We separated these items into 2 categories: recurring/annual charges allocated to the program of approximately $24,000 and other various costs. We tested the Organization?s allocation methodology for the identifiable recurring/annual costs. The results of this testing identified items that should have been classified as general administration indirect costs, as described above, which amounted to approximately $4,500. Testing was also done on the other various direct costs. There were 177 of these items totaling approximately $55,000. We tested a sample of 20 of these items. $750 of directly allocated costs for a conference were considered unallowable out of this testing. Questioned Costs: As a result of our testing, we concluded that the potentially unallowable costs and change in the indirect calculation would not be significantly different than the amounts discussed above and would not approach the $25,000 threshold for questioned costs. As a result, no costs have been questioned. Recommendation: We recommend that personnel involved in grant management and recordkeeping receive training on the Uniform Guidance cost principles and other pertinent Federal regulations. We recommend that a system and review process be implemented to insure that all costs are treated consistently and classified properly and that costs charged to Federal awards are appropriate. The Organization should follow the cost principles when designing budgets for future programs.
2022-008. Single Audit Report Submission Criteria or specific requirement (including statutory, regulatory, or other citation): In accordance with 2 CFR 200.412, the City is required to complete and submit the data collection form within the earlier of 30 days after receipt of the auditor’s report, or nine months after the end of the audit period. Condition and Context: The City did not obtain an independent audit within the required period for submission. Cause: Lack of internal controls to ensure an independent audit was completed timely. Effect or potential effect: The City did not comply with the requirements of 2 CFR 200.512. Questioned costs: None. Identification as a repeat finding, if applicable: Repeat of finding 2021-007. Recommendation: The City should develop a course of action to ensure that future single audit reports are completed and submitted to the Federal Audit Clearinghouse in accordance with the requirements of 2 CFR 200.512. Views of responsible officials: As detailed in the Corrective Action Plan, management has agreed to the findings and recommendation noted above.
U.S. Department of Agriculture Passed through the Kansas Department of Health and Environment Special Supplemental Nutrition Program for Women, Infants, and Children - 10.557 - Award number 202222W100643 Criteria or Specific Requirement – Allowable Costs/Cost Principles and Significant Deficiency Per 2 CFR 200.412 costs may be classified as direct or indirect costs and the charging of indirect costs are further governed by 2 CFR 200.414. The Unified Government has not elected to use the De Minimus indirect cost rate as allowed under the regulations nor do they have a federally negotiated indirect cost rate agreement. Per the WIC Policy and Procedures Manual, Expenses Section, 15.b., the Unified Government should negotiate a rate with the State Agency (SA) annually. As part of the negotiation, the Local Agency (LA) must submit an Indirect Cost Rate (ICR) proposal, including all documents and calculations used to determine the ICR, to the SA with the annual budget. The rate negotiated by the SA will be equal to or less than the indirect rate approved by the U.S. Dept. of Health and Human Services for KDHE. Per 2 CFR 200.303, the non-Federal entities receiving federal awards (i.e., auditee management) establish and maintain internal control design to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: For the Unified Government's Special Supplemental Nutrition Program for Women, Infants, and Children grant, for specific indirect cost rate was negotiated and approved by the Kansas Department of Health for the period July 1, 2021 through June 30, 2022. The Unified Government was unable to find a subsequent renewal or change in the negotiated rate governing such charges to the award. Questioned Costs – $37,931 related to the award number 202222W100643 for the grant period of October 1, 2021 through September 30, 2022. An approved indirect cost rate was not available for the period of July 1, 2022 through September 30, 2022. Context: In the absence of an updated agreement, the Unified Government used the indirect cost rate from its most recent agreement, which covered the period of July 2021 to June 2022 for periods outside of the agreed upon time (July 2022 through September 2022). Given an updated agreement was not present, it was uncertain if such charges were allowable or accurately charged to the award. Identification of Prior Year Finding: N/A Effect: Inappropriate indirect costs may be charged to the award based on unapproved agreements. Cause: The Unified Government does not have proper controls in place to monitor indirect costs and timing of when new negotiations may be required to support ongoing indirect costs. Recommendation: We recommend the Unified Government appropriately store records where department personnel can access them when needed. Views of Responsible Official and Planned Corrective Actions: Management will work internally to complete the annual calculation of the indirect rate and develop a solution, a shared document solution to provide indirect rate information to departments in a consistent and timely manner.
Criteria Per 2 CFR § 200.403 and § 200.412–415 of the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), non-federal entities must have consistent and equitable methods for allocating indirect costs to federal programs. Condition The Organization was unable to provide adequate support to substantiate its allocation of indirect costs to federal awards. Cause The Organization does not have formal policies and procedures for the allocation and application of indirect costs to federal awards. Effect Without a formal policy, there is an increased risk of inconsistent or noncompliant cost allocation practices, which may lead to questioned costs, audit findings, or disallowed reimbursements by federal awarding agencies. Questioned Costs None Context The organization does not have procedures in place to allocate indirect costs to contracts. Auditor allocated costs based on allowed percentages as part of testing. Recommendation We recommend that management develop and implement a comprehensive indirect cost allocation policy that aligns with Uniform Guidance requirements. The policy should clearly define the methodology for calculating, allocating, and applying indirect costs to federal awards and be communicated to all relevant personnel. Views of Responsible Officials See the accompanying Corrective Action Plan.
Criteria Per 2 CFR § 200.403 and § 200.412–415 of the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), non-federal entities must have consistent and equitable methods for allocating indirect costs to federal programs. Condition The Organization was unable to provide adequate support to substantiate its allocation of indirect costs to federal awards. Cause The Organization does not have formal policies and procedures for the allocation and application of indirect costs to federal awards. Effect Without a formal policy, there is an increased risk of inconsistent or noncompliant cost allocation practices, which may lead to questioned costs, audit findings, or disallowed reimbursements by federal awarding agencies. Questioned Costs None Context The organization does not have procedures in place to allocate indirect costs to contracts. Auditor allocated costs based on allowed percentages as part of testing. Recommendation We recommend that management develop and implement a comprehensive indirect cost allocation policy that aligns with Uniform Guidance requirements. The policy should clearly define the methodology for calculating, allocating, and applying indirect costs to federal awards and be communicated to all relevant personnel. Views of Responsible Officials See the accompanying Corrective Action Plan.
Criteria Per 2 CFR § 200.403 and § 200.412–415 of the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), non-federal entities must have consistent and equitable methods for allocating indirect costs to federal programs. Condition The Organization was unable to provide adequate support to substantiate its allocation of indirect costs to federal awards. Cause The Organization does not have formal policies and procedures for the allocation and application of indirect costs to federal awards. Effect Without a formal policy, there is an increased risk of inconsistent or noncompliant cost allocation practices, which may lead to questioned costs, audit findings, or disallowed reimbursements by federal awarding agencies. Questioned Costs None Context The organization does not have procedures in place to allocate indirect costs to contracts. Auditor allocated costs based on allowed percentages as part of testing. Recommendation We recommend that management develop and implement a comprehensive indirect cost allocation policy that aligns with Uniform Guidance requirements. The policy should clearly define the methodology for calculating, allocating, and applying indirect costs to federal awards and be communicated to all relevant personnel. Views of Responsible Officials See the accompanying Corrective Action Plan.
Criteria Per 2 CFR § 200.403 and § 200.412–415 of the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), non-federal entities must have consistent and equitable methods for allocating indirect costs to federal programs. Condition The Organization was unable to provide adequate support to substantiate its allocation of indirect costs to federal awards. Cause The Organization does not have formal policies and procedures for the allocation and application of indirect costs to federal awards. Effect Without a formal policy, there is an increased risk of inconsistent or noncompliant cost allocation practices, which may lead to questioned costs, audit findings, or disallowed reimbursements by federal awarding agencies. Questioned Costs None Context The organization does not have procedures in place to allocate indirect costs to contracts. Auditor allocated costs based on allowed percentages as part of testing. Recommendation We recommend that management develop and implement a comprehensive indirect cost allocation policy that aligns with Uniform Guidance requirements. The policy should clearly define the methodology for calculating, allocating, and applying indirect costs to federal awards and be communicated to all relevant personnel. Views of Responsible Officials See the accompanying Corrective Action Plan.
Criteria Per 2 CFR § 200.403 and § 200.412–415 of the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), non-federal entities must have consistent and equitable methods for allocating indirect costs to federal programs. Condition The Organization was unable to provide adequate support to substantiate its allocation of indirect costs to federal awards. Cause The Organization does not have formal policies and procedures for the allocation and application of indirect costs to federal awards. Effect Without a formal policy, there is an increased risk of inconsistent or noncompliant cost allocation practices, which may lead to questioned costs, audit findings, or disallowed reimbursements by federal awarding agencies. Questioned Costs None Context The organization does not have procedures in place to allocate indirect costs to contracts. Auditor allocated costs based on allowed percentages as part of testing. Recommendation We recommend that management develop and implement a comprehensive indirect cost allocation policy that aligns with Uniform Guidance requirements. The policy should clearly define the methodology for calculating, allocating, and applying indirect costs to federal awards and be communicated to all relevant personnel. Views of Responsible Officials See the accompanying Corrective Action Plan.
Criteria Per 2 CFR § 200.403 and § 200.412–415 of the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), non-federal entities must have consistent and equitable methods for allocating indirect costs to federal programs. Condition The Organization was unable to provide adequate support to substantiate its allocation of indirect costs to federal awards. Cause The Organization does not have formal policies and procedures for the allocation and application of indirect costs to federal awards. Effect Without a formal policy, there is an increased risk of inconsistent or noncompliant cost allocation practices, which may lead to questioned costs, audit findings, or disallowed reimbursements by federal awarding agencies. Questioned Costs None Context The organization does not have procedures in place to allocate indirect costs to contracts. Auditor allocated costs based on allowed percentages as part of testing. Recommendation We recommend that management develop and implement a comprehensive indirect cost allocation policy that aligns with Uniform Guidance requirements. The policy should clearly define the methodology for calculating, allocating, and applying indirect costs to federal awards and be communicated to all relevant personnel. Views of Responsible Officials See the accompanying Corrective Action Plan.
Criteria Per 2 CFR § 200.403 and § 200.412–415 of the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), non-federal entities must have consistent and equitable methods for allocating indirect costs to federal programs. Condition The Organization was unable to provide adequate support to substantiate its allocation of indirect costs to federal awards. Cause The Organization does not have formal policies and procedures for the allocation and application of indirect costs to federal awards. Effect Without a formal policy, there is an increased risk of inconsistent or noncompliant cost allocation practices, which may lead to questioned costs, audit findings, or disallowed reimbursements by federal awarding agencies. Questioned Costs None Context The organization does not have procedures in place to allocate indirect costs to contracts. Auditor allocated costs based on allowed percentages as part of testing. Recommendation We recommend that management develop and implement a comprehensive indirect cost allocation policy that aligns with Uniform Guidance requirements. The policy should clearly define the methodology for calculating, allocating, and applying indirect costs to federal awards and be communicated to all relevant personnel. Views of Responsible Officials See the accompanying Corrective Action Plan.
CONDITION: For the calendar year 2021, the City of McKeesport submitted a listing to the Department of Treasury, of eligible expenses for the Coronavirus State and Local Fiscal Recovery Federal Funding. This listing contained the ShotSpotter as referenced in Finding 2021-003 which was already reimbursed to the City as part of the Community Development Block Grant (CDBG) Program by the Department of Housing and Urban Development. CRITERIA: In accordance with Section 2 CFR 200.412 of the Uniform Guidance, federal expenses are prohibited from being charged to more than one federal program. CAUSE: It appears that there was a lack of communication between City personnel handling the reporting of federal funds expended to the various federal agencies as to which ones had already been claimed as eligible. The lack of reconciled detailed general ledger reporting for both the CDBT Grant Program and the ARPA Grant (SLFRF) Program most likely contributed to this oversight as well. EFFECT: The City of McKeesport did not comply with the requirements of Section 2 CFR 200.412 of the Uniform Guidance, which prohibits federal expenses from being charged to more than one federal program. QUESTIONED COST: $99,000 RECOMMENDATION: I am recommending that City management review this eligible expense charged to the Coronavirus State and Local Fiscal Recovery Federal Funding Program, concur that this is an expense that was already reimbursed by the Department of Housing and Urban Development for the benefit of the City’s CDBG Grant Program, and then remove this as an eligible expense for 2021 reporting purposes, and possibly replace with other eligible expenses not previously reported to the Department of Treasury. VIEWS OF RESPONSIBLE OFFICIALS: The City concurs with the above noted finding and addresses this issue in the ‘Corrective Action Plan’ included within this report.
CONDITION: For the calendar year 2021, the City of McKeesport submitted a listing to the Department of Treasury, of eligible expenses for the Coronavirus State and Local Fiscal Recovery Federal Funding. This listing contained the ShotSpotter as referenced in Finding 2021-003 which was already reimbursed to the City as part of the Community Development Block Grant (CDBG) Program by the Department of Housing and Urban Development. CRITERIA: In accordance with Section 2 CFR 200.412 of the Uniform Guidance, federal expenses are prohibited from being charged to more than one federal program. CAUSE: It appears that there was a lack of communication between City personnel handling the reporting of federal funds expended to the various federal agencies as to which ones had already been claimed as eligible. The lack of reconciled detailed general ledger reporting for both the CDBT Grant Program and the ARPA Grant (SLFRF) Program most likely contributed to this oversight as well. EFFECT: The City of McKeesport did not comply with the requirements of Section 2 CFR 200.412 of the Uniform Guidance, which prohibits federal expenses from being charged to more than one federal program. QUESTIONED COST: $99,000 RECOMMENDATION: I am recommending that City management review this eligible expense charged to the Coronavirus State and Local Fiscal Recovery Federal Funding Program, concur that this is an expense that was already reimbursed by the Department of Housing and Urban Development for the benefit of the City’s CDBG Grant Program, and then remove this as an eligible expense for 2021 reporting purposes, and possibly replace with other eligible expenses not previously reported to the Department of Treasury. VIEWS OF RESPONSIBLE OFFICIALS: The City concurs with the above noted finding and addresses this issue in the ‘Corrective Action Plan’ included within this report.