Finding Text
2023-006 Non-compliance with Compliance Requirements
Program Name/ Assistance Listing Number: 93. 959 Block Grants for Prevention and Treatment of Substance Abuse and 93.788 Multiple Approach Response Strategies (MARS) Federal Agency: Department of Health and Human Services
Federal Award Identification: Unknown
Type of Finding: Material Weakness
Compliance Requirement: Allowable Costs/Cost Principles
Criteria: Per 2 CFR §200.305(b), non-Federal entities are responsible for administering Federal funds in a manner consistent with underlying agreements, program objectives, and the terms and conditions of the Federal award. According to 2 CFR §200.403, costs must meet the following general criteria to be allowable under Federal awards: (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award concerning types or amounts of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-Federal entity. (g) Be adequately documented. See also 2 CFR §200.300 through 200.309 of this part. (h) Costs must be incurred during the approved budget period. The Federal awarding agency is authorized, at its discretion, to waive prior written approvals to carryforward unobligated balances to subsequent budget periods pursuant to 2 CFR §200.308(e)(3).
Condition: During the review of the schedule of expenditures of federal awards, the auditor noted the following conditions:
1. Non-Conforming Expenditures: An expenditure under the MARS Carry Over did not conform to the limitations set forth in the federal award budget. Specifically, $20,892 was charged for Garage Repairs, whereas the grant budget for equipment was only $1,200, designated specifically for two software purchases at $600 each.
2. Inadequate Documentation: a) The FASD Grant had a period that ended on March 14, 2023. Although the grant period was extended, this extension was not documented, b) A $26,383 FASD expenditure was reallocated to MARS 2.0 Carry Over without substantialjustification for the reclassification, and c) An adjustment of $24,044 was made from MARS 2.0 Carry Over FY 2022 without adequate supporting documentation.
3. Expenditures Outside the Approved Grant Period: a) the FASD total award of $340,000 was reported as fully expended in the 2023 fiscal year-end expenditure report (“Close-Out Report”) submitted to the Grants and Funding Management System on January 31, 2024. However, the Schedule of Federal Expenditure showed only $312,707 in expenditures. The remaining $27, 293 was indicated as a carryover for FY 2024. Of the $312,707 in expenditures, $71,277 were incurred after March 14, 2023, with only $21,395 falling within the 45-day closeout period following that date, b) $26,800 in unallowable costs were incurred under the MARS 2.0 Carry Over 45 days after the performance period ended on September 29, 2022, specifically for payroll processing, and c) $1,813 in costs were incurred before the performance period for the “Mars One-Pill Can Kill” grant dated February 1, 2023 to September 29, 2023. There was no prior grant. 4. Misclassification: $2,010 in MARS 3.0 expenditures were incorrectly classified under FASD.
Cause of Condition: Insufficient understanding of program requirements. There is no formal monitoring of program expenditures on a periodic basis to ensure that the Organization’s expenditures and activities align with their grant budget and period of performance. Inconsistent adherence to record retention policies, resulting from the temporary hybrid working-from-home arrangements due to the pandemic, has led to insufficient support for all federal expenditures. The Organization lacks written policies and procedures for allocating expenditures across different programs.
Effect: The current procedures for administering Federal funds are inadequately designed to ensure that costs and activities are managed in a manner consistent with the underlying agreements and the terms and conditions of the Federal award. These deficiencies could lead to misstatements in the SEFA that are not corrected promptly and could result in the charging of unallowable costs.
Questioned Cost: $179,117
Recommendation: We recommend the following actions:
1. Training: Program administrators should receive adequatetraining and acquire knowledge of the compliancerequirements for each specific program to ensure adherence to these requirements.
2. Periodic Program Monitoring: The organization should establish a periodic review process for each program budget to ensure alignment with each line item in the budget.
3. Formal Procedures: The organization should document its procedures for expense allocation to ensure consistency timeliness, and accuracy.
4. Adequate Staffing: The organization should ensure that processes are staffed with knowledgeable personnel capableof reviewing and adhering to established policies and procedures.
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.