Finding Text
Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Cash Management
Federal Award Identification
Assistance Listing Program Title: Formula Grants for Rural Areas
Assistance Listing Program Number: 20.509
Federal Award ID Number and Year: Various
Federal Agency: U.S. Department of Transportation
Pass-Through Entity: Nebraska Department of Transportation
Criteria
The Organization must establish and maintain effective internal control over the Federal
award that provides reasonable assurance that they are managing the Federal award in
compliance with Federal statutes, regulations, and the terms and conditions of the Federal
Award (2 CFR 200.303).
Costs must be adequately documented. (2 CFR 200.403(g)).
Costs must be paid for prior to the date of the reimbursement request. (2 CFR
200.305(b)(3)).
Condition
The Organization lacked adequate documentation to support:
- That certain expenditures followed an approval process before being paid.
- That certain expenditures were for allowable activities and in accordance with
allowable cost principles.
The Organization requested reimbursement for expenses that had not yet been paid.
Repeat Finding
No.
Cause
Procedures within the Organization were inadequate to ensure that expenditures follow a
review and approval process prior to being paid, that costs were in accordance with
Federal requirements and that only costs which had been paid for were requested for
reimbursement.
Effect or Potential Effect
Increased potential for errors or misuse of funds.
Questioned Costs
Known $35,806
Statistical Sample
No.
Context
During the fiscal year, the Organization requested a monthly reimbursement from the
pass-through entity. Auditor selected three of these monthly reimbursement requests
(September 2021, May 2022, and June 2022) for testing, reviewing all non-payroll-related
expenses, resulting in testing approximately 90 different line items composing many more
individual transactions. Within this sample, auditor noted:
- Multiple instances where no documentation existed to support a system of internal
control whereby expenditures were approved by a competent individual prior to
their being paid.
- Multiple instances where documentation provided did not include sufficient detail
to determine if products and/or services provided meet the definition of allowable
activity, resulting in questioned costs of $2,921.
- One expenditure for which reimbursement was requested in May 2022 and again
in June 2022 amounting to $1,283 (questioned cost amount included in previous
point).
- For June 2022, an inability to crosswalk between the Organization’s internal fuel
summary report and the related vendor statements, resulting in questioned costs
of $32,885. Additionally, we noted both character and line transposition errors
between the fuel summary report and the reimbursement request. Similarly,
auditor was unable to obtain evidence that fuel expenditures were paid prior to
the Organization requesting reimbursement.
- Multiple instances of expenditure misclassification in violation of the invoicing and
documentation guidelines issued by the pass-through entity, resulting in no
additional questioned costs.
Recommendation
We recommend the Organization establish a system of internal control consisting of
policies and procedures whereby all expenditures are properly explained with supporting
documentation and are reviewed and approved prior to payment. Additionally, that only
those expenditures which have been paid for are requested for reimbursement.
Views of Responsible Officials
See Corrective Action Plan, below.