Finding 1080131 (2023-004)

Activities Allowed or Unallowed; Allowable Costs/Cost Principles 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)). Insurance refunds must be credited against insurance costs in the year the refund is received (2 CFR 200.447(e)). 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. Repeat Finding Yes: 2022-004. 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 $20,547 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 (August 2022, October 2022, and March 2023) for testing, reviewing all non-payrollrelated expenses, resulting in testing approximately 290 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. - One instance of a transposition error between the fuel summary report and the reimbursement request, where the amounts in the reimbursement request listed the number of gallons of fuel as opposed to the cost of the fuel, resulting in the Organization receiving a smaller reimbursement than what it was eligible for of $1,111. - In two of the months selected for testing, the fuel costs for the same five vehicles in both months were excluded from the reimbursement request, resulting in the Organization receiving a smaller reimbursement than what it was eligible for of $15,539. The vehicle VINs are *7081, *2676, *2427, *4288, and *2962. - The fuel reimbursement summary for October 2022 for VIN *9460 shows regular fill-ups in gallons exceeding the fuel tank capacity for this vehicle. - The fuel reimbursement summary for October 2022 shows multiple vehicles (VINs *5418, *5421, *4450, and *1256) that received fill-ups of both diesel fuel and regular unleaded 10% ethanol gasoline. It is the auditor’s understanding that this is not recommended for vehicles. - Multiple instances where the available supporting documentation was incomplete, resulting in questioned costs of $20,547. - Multiple instances where documentation provided did not include sufficient detail to determine if products and/or services provided meet the definition of allowable activity, or to determine if insurance coverages were for assets owned by the Organization. - One expenditure for which reimbursement was requested in August 2022 and again in September 2022 amounting to $17,951. This duplicate reimbursement was corrected in the March 2023 reimbursement request. - 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. - Multiple instances where the expenditure appears to be for a vehicle owned by the Organization, however, the supporting documentation shows the service is for a different vehicle than that noted on the reimbursement request. - Auditor was unable to determine if insurance refunds received were credited against insurance 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.