Condition: Out of $263,000 in depreciation expense included in as eligible expenditures to the grant, approximately $240,000 related to vehicles purchased using MTA federal grants (80% federally funded, 20% matched). This amount was incorrectly included in the eligible cost pool, contrary to federal cost principles. Criteria: Per 2 CFR §200.436, depreciation charges must exclude any portion of the cost of buildings and equipment borne by or donated by the federal government. Cause: The inclusion of federally funded vehicle depreciation resulted from inadequate cost allocation practices and insufficient review of depreciation schedules before charging expenses to the grant. Effect: Although $263,000 of depreciation was incorrectly included, the reimbursed amount ($130,294) was fully supported by other allowable costs totaling $1.6 million. Therefore, the unallowable depreciation did not lead to improper use of federal funds or a material misstatement. This issue is isolated and does not indicate a systemic control weakness. Recommendation: Implement stronger internal controls over cost allocation and grant expense reviews, including: - Periodic reconciliation of depreciation schedules against federal funding sources. - Staff training on 2 CFR §200.436 requirements. - Pre-approval process for expenses charged to federal grants. Views of Responsible Officials and Planned Corrective Actions: Management concurs with the finding. Corrective actions will include: - Updating policies to ensure compliance with federal cost principles. - Conducting staff training sessions on allowable costs. - Implementing a review checklist for grant-related expenses to prevent recurrence.
Assistance Listing Number(s): 20.509 Name of Federal Program or Cluster: Formula Grants for Rural Areas and Tribal Transit Program Name of Federal Agency: Department of Transportation Federal Award Identification Number: CY2024 WETAP Federal Award Year: January 1, 2024 through December 31, 2024 Criteria: According to 2 CFR §200.436(b)(1), “The depreciation cost is not allowable for equipment that was paid for by the Federal Government either directly or through a non-federal entity's federal award.” Additionally, costs charged to a federal award must be allowable, allocable, and reasonable per 2 CFR §200.403. Condition: During the preliminary review of expenditures charged to federal programs, it was noted that depreciation expense was recorded for a vehicle that had been 100% federally funded in a prior year. The depreciation was charged to the major federal program in the current fiscal year. Cause: The depreciation was charged due to a lack of review procedures to ensure that federally funded assets are excluded from depreciation calculations allocated to federal awards. Effect or Potential Effect and Questioned Costs: As a result, unallowable costs were charged to the federal program, which may result in questioned costs and potential repayment to the federal agency, as well as noncompliance with federal cost principles. Context: The error was not a part of our sample. It was discovered as a year-end journal entry. Repeat Finding: No Recommendation: Management should conduct a review of depreciation charges for the current and future years to ensure that federally funded assets are excluded from depreciation allocations to federal programs.
Assistance Listing Number(s): 20.509 Name of Federal Program or Cluster: Formula Grants for Rural Areas and Tribal Transit Program Name of Federal Agency: Department of Transportation Federal Award Identification Number: CY2024 WETAP Federal Award Year: January 1, 2024 through December 31, 2024 Criteria: According to 2 CFR §200.436(b)(1), “The depreciation cost is not allowable for equipment that was paid for by the Federal Government either directly or through a non-federal entity's federal award.” Additionally, costs charged to a federal award must be allowable, allocable, and reasonable per 2 CFR §200.403. Condition: During the preliminary review of expenditures charged to federal programs, it was noted that depreciation expense was recorded for a vehicle that had been 100% federally funded in a prior year. The depreciation was charged to the major federal program in the current fiscal year. Cause: The depreciation was charged due to a lack of review procedures to ensure that federally funded assets are excluded from depreciation calculations allocated to federal awards. Effect or Potential Effect and Questioned Costs: As a result, unallowable costs were charged to the federal program, which may result in questioned costs and potential repayment to the federal agency, as well as noncompliance with federal cost principles. Context: The error was not a part of our sample. It was discovered as a year-end journal entry. Repeat Finding: No Recommendation: Management should conduct a review of depreciation charges for the current and future years to ensure that federally funded assets are excluded from depreciation allocations to federal programs.