Finding Text
2023-002 Incorrect Allocation of Program Expense and Inadequate Documentation
Program Name/ Assistance Listing Number: 93. 959 Block Grants for Prevention and Treatment of Substance Abuse
Federal Agency: Department of Health and Human Services
Federal Award Identification: Unknown
Type of Finding: Material Weakness
Compliance Requirement: Allowable Costs/Cost Principles
Criteria: According to 2 CFR §200.302, entities receiving federal funds must have effective internal controls over the use of funds to ensure compliance with federal statutes, regulations, and the terms and conditions of the federal award. Furthermore, 2 CFR §200.403 states that costs must be adequately documented and be allocable to the respective federal award to be considered allowable.
Condition: During the testing of 60 expense transactions, the auditor identified the following exceptions:
- 5 transactions were allocated to the incorrect grant.
- 3 transactions were assigned to the incorrect expense program.
- 4 transactions lacked the required invoice and payment approval documentation as per the organization’s internal controls.
Cause of Condition: The identified issues likely stem from a lack of adherence to established internal control procedures and inadequate oversight or training regarding the correct allocation of expenses. Additionally, there may be deficiencies in the document retention process, leading to incomplete records.
Effect: The misallocation of expenses could result in non-compliance with the terms and conditions of federal grants, leading to potential questioned costs and the need for reimbursement of funds. The lack of supporting documentation further increases the risk of noncompliance and reduces the audit trail, which could impair the organization’s ability to justify its use of federal funds.
Questioned Cost: $24,464
Recommendation: The organization should reinforce its internal controls over expense allocation and documentation retention by providing additional training to staff involved in the financial management of grants. Implementing periodic reviews and reconciliations of grant allocations and ensuring that all supporting documentation is complete and properly filed will help mitigate the risk of misallocations and incomplete records in the future.
Description of the Nature and Extent of Issues Reported: We consider the following materiality for consideration of material noncompliance for the major program 93.959 at 5% of the total awards expended amounting to $51,253.
View of Responsible Official: Management agrees with the finding and will implement corrective action.