Finding Text
Finding 2023-005, Allowable Costs/Cost Principles and Period of Performance, Internal Control
Identification of the federal program
Assistance listing number and title: COVID-19 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters)
Agency: U.S. Department of Homeland Security
Name of the pass-through entity: Texas Division of Emergency Management (TDEM)
Federal award identification number (FAIN): 4485DRTXP0000001
Criteria or specific requirement (including statutory, regulatory or other citation)
2 CFR 200.303(a) requires that a non-federal entity must “(a) establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls would be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States and the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).”
Condition
For all expenditures selected for testing, sufficient evidence was not provided over the control of review of allowability of costs, and of whether the costs were incurred within the period of performance.
Cause
The System failed to effectively implement controls over the required criteria on allowability and period of performance.
Effect or potential effect
Costs charged to Federal awards may be inaccurate, unallowable, and incurred outside of the allowable period.
Questioned costs
None.
Context
From the population of expenditures amounting to $12,170,642, EY randomly selected 40 expenditures for testing of internal controls. All (or 100%) of the 40 selections totaling $218,630 did not have evidence of the review and approval performed over the allowability of costs and of whether they were incurred within the period of performance.
Identification as a repeat finding, if applicable
Not a repeat finding.
Recommendation
We recommend management implement effective internal controls to ensure expenses are allowable under the awarded and incurred in the period of availability. Management must maintain documentation evidencing the controls.
Views of responsible officials
Management involved in this project performed the review of costs noting such costs were allowable and incurred in the proper period per the program requirements. No documentation of this review and approval was prepared. Management has implemented formal documentation processes to demonstrate that review and approval was performed.