Program: AL 20.509 – Formula Grants for Rural Areas – Allowability & Subrecipient Monitoring Grant Number & Year: NE-2021-11-00, Performance End FFY 2024; NE-2023-030-00, Performance End October 30, 2025; NE-2024-006-00, Performance End December 31, 2026 Federal Grantor Agency: U.S. Department of Transportation Criteria: Per 2 CFR § 1201.1 (January 1, 2024), the U.S. Department of Transportation adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at Title 2 CFR part 200. 2 CFR § 200.403 (January 1, 2024) requires costs to be reasonable, necessary, and adequately documented. A good internal control plan requires procedures to be in place to ensure compliance with Federal and State requirements. 2 CFR § 200.332(d) (January 1, 2024) requires the pass-through entity to do the following: Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. 2 CFR § 200.430(i)(1) (January 1, 2024) states the following, in relevant part: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; * * * * (vii) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards . . . . Per 2 CFR § 200.405(a) (January 1, 2024), “A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received.” 2 CFR § 200.442(a) (January 1, 2024) states the following: Costs of organized fund raising, including financial campaigns, endowment drives, solicitation of gifts and bequests, and similar expenses incurred to raise capital or obtain contributions, are unallowable. Fund raising costs for the purposes of meeting the Federal program objectives are allowable with the prior written approval of the Federal agency. Condition: The Agency lacked adequate documentation to support that payments were for allowable activities and in accordance with allowable cost principles. A similar finding was noted in the prior audit. Repeat Finding: 2023-065 Questioned Costs: $4,905 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: During the fiscal year, the Agency paid 64 subrecipients a total of $12,622,391. We selected five payments to subrecipients for testing. The Agency performed financial reviews for subrecipients; however, the reviews tested did not always include all necessary supporting documentation. When additional documentation was needed, we provided the Agency with the opportunity to obtain additional support from the subrecipient; however, adequate support was not always obtained or able to be provided. See Schedule of Findings and Questioned Costs for chart/table. We noted the following: • Two subrecipients tested did not have adequate support for all personnel charges. One individual tested was reimbursed at the non-operating rate but should have been reimbursed at the operating rate. Another individual’s personnel costs were based on budgeted amounts. • Fuel costs for one subrecipient did not agree with invoices. • One subrecipient did not properly report revenues collected, resulting in an overcharge of the Federal reimbursement. • All five subrecipients tested had capital or non-operating costs that were not adequately supported. Costs allocated between programs were not adequately supported, travel costs did not appear reasonable, and fundraising costs of $100 were charged. Cause: Procedures were not adequate to ensure costs were in accordance with Federal requirements. Effect: Increased risk for errors or misuse of funds. Recommendation: We recommend the Agency improve procedures to ensure expenditures are allowable and in accordance with Federal regulations. Management Response: NDOT acknowledges the audit findings related to subrecipient monitoring and cost allowability under the grant funding. We will continue to ensure compliance with regulations and are committed to improving our internal controls to prevent recurrence of similar findings.
Program: AL 20.509 – Formula Grants for Rural Areas – Allowability & Subrecipient Monitoring Grant Number & Year: NE-2021-11-00, Performance End FFY 2024; NE-2023-030-00, Performance End October 30, 2025; NE-2024-006-00, Performance End December 31, 2026 Federal Grantor Agency: U.S. Department of Transportation Criteria: Per 2 CFR § 1201.1 (January 1, 2024), the U.S. Department of Transportation adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at Title 2 CFR part 200. 2 CFR § 200.403 (January 1, 2024) requires costs to be reasonable, necessary, and adequately documented. A good internal control plan requires procedures to be in place to ensure compliance with Federal and State requirements. 2 CFR § 200.332(d) (January 1, 2024) requires the pass-through entity to do the following: Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. 2 CFR § 200.430(i)(1) (January 1, 2024) states the following, in relevant part: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; * * * * (vii) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards . . . . Per 2 CFR § 200.405(a) (January 1, 2024), “A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received.” 2 CFR § 200.442(a) (January 1, 2024) states the following: Costs of organized fund raising, including financial campaigns, endowment drives, solicitation of gifts and bequests, and similar expenses incurred to raise capital or obtain contributions, are unallowable. Fund raising costs for the purposes of meeting the Federal program objectives are allowable with the prior written approval of the Federal agency. Condition: The Agency lacked adequate documentation to support that payments were for allowable activities and in accordance with allowable cost principles. A similar finding was noted in the prior audit. Repeat Finding: 2023-065 Questioned Costs: $4,905 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: During the fiscal year, the Agency paid 64 subrecipients a total of $12,622,391. We selected five payments to subrecipients for testing. The Agency performed financial reviews for subrecipients; however, the reviews tested did not always include all necessary supporting documentation. When additional documentation was needed, we provided the Agency with the opportunity to obtain additional support from the subrecipient; however, adequate support was not always obtained or able to be provided. See Schedule of Findings and Questioned Costs for chart/table. We noted the following: • Two subrecipients tested did not have adequate support for all personnel charges. One individual tested was reimbursed at the non-operating rate but should have been reimbursed at the operating rate. Another individual’s personnel costs were based on budgeted amounts. • Fuel costs for one subrecipient did not agree with invoices. • One subrecipient did not properly report revenues collected, resulting in an overcharge of the Federal reimbursement. • All five subrecipients tested had capital or non-operating costs that were not adequately supported. Costs allocated between programs were not adequately supported, travel costs did not appear reasonable, and fundraising costs of $100 were charged. Cause: Procedures were not adequate to ensure costs were in accordance with Federal requirements. Effect: Increased risk for errors or misuse of funds. Recommendation: We recommend the Agency improve procedures to ensure expenditures are allowable and in accordance with Federal regulations. Management Response: NDOT acknowledges the audit findings related to subrecipient monitoring and cost allowability under the grant funding. We will continue to ensure compliance with regulations and are committed to improving our internal controls to prevent recurrence of similar findings.
2022-002 – ACTIVITIES ALLOWED OR UNALLOWED Federal Program: Shuttered Venue Operators Grant Federal Agency: Small Business Administration Assistance Listing Number: 59.075 Grant Award Number and Year: SBAHQ21SVO11340, 8/5/2021 – 8/4/2022 Criteria: The Shuttered Venue Operators Grant (SVOG) award documents include provisions that state cost principles must follow 2 CFR 200 Cost Principles, and Audit Requirements for Federal Awards, which sets the rules for allowable costs for federal awards. In accordance with 2 CFR 200.442, fundraising costs are not allowable. In addition, the U.S. Small Business Administration (SBA) issued Post-Award Frequently Asked Questions for the SVOG on February 16, 2022, which further clarified that fundraising is not an allowable cost for SVOG awards. Condition: Our testing identified that the Foundation’s detail of expenditures reimbursed under its SVOG award included fundraising expenses. After being made aware of these unallowable costs, the Foundation was able to identify additional allowable costs which could be substituted for the unallowable costs initially claimed for reimbursement. Therefore, there was no adjustment or refund needed for the SVOG awards claimed by the Foundation. Questioned Costs: No questioned costs as the Foundation was able to identify additional allowable costs it had incurred as described above. Cause: Foundation personnel responsible for administering this award and ensuring compliance were not familiar with the allowable cost principles of 2 CFR 200. Effect: The initial supporting calculations used to develop the required reports submitted to the SBA included unallowable costs. There was no net effect on the reports submitted, after correction of the supporting calculations. Recommendation: We recommend the Foundation ensure that personnel who are responsible for administering and overseeing new federal award activity be sufficiently knowledgeable about such federal programs, including reading the allowable costs principles referred to in the grant agreements and reviewing for subsequent guidance released by awarding agencies. Foundation’s Corrective Action Plan: To ensure compliance moving forward with federal grant opportunities, the Foundation will require staff responsible for compliance, to review all program requirements and monitor for subsequently released guidance issued by the awarding agencies.
2022-002 – ACTIVITIES ALLOWED OR UNALLOWED Federal Program: Shuttered Venue Operators Grant Federal Agency: Small Business Administration Assistance Listing Number: 59.075 Grant Award Number and Year: SBAHQ21SVO11340, 8/5/2021 – 8/4/2022 Criteria: The Shuttered Venue Operators Grant (SVOG) award documents include provisions that state cost principles must follow 2 CFR 200 Cost Principles, and Audit Requirements for Federal Awards, which sets the rules for allowable costs for federal awards. In accordance with 2 CFR 200.442, fundraising costs are not allowable. In addition, the U.S. Small Business Administration (SBA) issued Post-Award Frequently Asked Questions for the SVOG on February 16, 2022, which further clarified that fundraising is not an allowable cost for SVOG awards. Condition: Our testing identified that the Foundation’s detail of expenditures reimbursed under its SVOG award included fundraising expenses. After being made aware of these unallowable costs, the Foundation was able to identify additional allowable costs which could be substituted for the unallowable costs initially claimed for reimbursement. Therefore, there was no adjustment or refund needed for the SVOG awards claimed by the Foundation. Questioned Costs: No questioned costs as the Foundation was able to identify additional allowable costs it had incurred as described above. Cause: Foundation personnel responsible for administering this award and ensuring compliance were not familiar with the allowable cost principles of 2 CFR 200. Effect: The initial supporting calculations used to develop the required reports submitted to the SBA included unallowable costs. There was no net effect on the reports submitted, after correction of the supporting calculations. Recommendation: We recommend the Foundation ensure that personnel who are responsible for administering and overseeing new federal award activity be sufficiently knowledgeable about such federal programs, including reading the allowable costs principles referred to in the grant agreements and reviewing for subsequent guidance released by awarding agencies. Foundation’s Corrective Action Plan: To ensure compliance moving forward with federal grant opportunities, the Foundation will require staff responsible for compliance, to review all program requirements and monitor for subsequently released guidance issued by the awarding agencies.
Finding No. 2022-001 Allowable Costs/Activities Allowed Fiscal Year: 2021-2022 Criteria Shuttered Venue Operators Grant (SVOG) was structured as grant program and therefore all recipients must implement their awards and spend funds consistent with the Code of Federal Regulations, Title 2, Subtitle A, Chapter II, Part 200 ? Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. However, when the program statute allows the use of SVOG award funds for a specific use beyond the scope of uses outlined in the Uniform Guidance, that use is allowed. All Shuttered Venue Operators Grant Program award funds expended must be eligible, allowable, allocable, and reasonable. Allowable costs are those costs that align with the statute and other basic frameworks. Fundraising is not an allowable use of SVOG funds and is further prohibited in line with 2 CFR 200.442. Costs of contributions and donations, including cash, property and services from non-Federal entity to other entities are also unallowable under 2 CFR 200.434. Condition The Organization used SVOG funds as contributions to other not-for-profit organizations. Questioned Costs $900 Cause The Organization did not comply with cost principles under 2 CFR Part 200, Subpart E section 200.434 Contributions and donations. Effect This finding falls under the audit area of Allowable costs and Activities Allowed. Costs that are not allowable under the grant were charged to the federal program. Material noncompliance for this assertion has been determined as an error rate greater than $61,000, individually and/or in aggregate. In evaluating the finding, auditors determined that the finding does not rise to the level of a significant deficiency or a material weakness. Recommendation We recommend that the Organization strengthen procedures to ensure they are following compliance requirements of Allowable costs/Activities allowed under the Uniform Guidance.
Finding No. 2022-001 Allowable Costs/Activities Allowed Fiscal Year: 2021-2022 Criteria Shuttered Venue Operators Grant (SVOG) was structured as grant program and therefore all recipients must implement their awards and spend funds consistent with the Code of Federal Regulations, Title 2, Subtitle A, Chapter II, Part 200 ? Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. However, when the program statute allows the use of SVOG award funds for a specific use beyond the scope of uses outlined in the Uniform Guidance, that use is allowed. All Shuttered Venue Operators Grant Program award funds expended must be eligible, allowable, allocable, and reasonable. Allowable costs are those costs that align with the statute and other basic frameworks. Fundraising is not an allowable use of SVOG funds and is further prohibited in line with 2 CFR 200.442. Costs of contributions and donations, including cash, property and services from non-Federal entity to other entities are also unallowable under 2 CFR 200.434. Condition The Organization used SVOG funds as contributions to other not-for-profit organizations. Questioned Costs $900 Cause The Organization did not comply with cost principles under 2 CFR Part 200, Subpart E section 200.434 Contributions and donations. Effect This finding falls under the audit area of Allowable costs and Activities Allowed. Costs that are not allowable under the grant were charged to the federal program. Material noncompliance for this assertion has been determined as an error rate greater than $61,000, individually and/or in aggregate. In evaluating the finding, auditors determined that the finding does not rise to the level of a significant deficiency or a material weakness. Recommendation We recommend that the Organization strengthen procedures to ensure they are following compliance requirements of Allowable costs/Activities allowed under the Uniform Guidance.