Finding Text
Criteria and Condition: According to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (the Uniform Guidance), section 200.403, establishes principles and standards for determining costs for federal awards carried out through grants, cost reimbursement contracts, and other agreements with State and local governments. To be allowable, under federal awards, costs must meet certain criteria:
a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles.
b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount 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.
d) Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost.
e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for State and local governments and Indian tribes only, as otherwise provided for in this part.
f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally financed program in either the current or a prior period.
g) Be adequately documented.
h) Cost must be incurred during the approved budget period.
Additionally, 2 CFR 200.303 indicates that non-Federal Entities receiving Federal awards must 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 terms and conditions of the Federal award. For five of the forty disbursement samples selected, PEBC was unable to provide adequate documentation for the selected items. Two of the samples were noted by management to have been improperly coded to the federal grant. As a result, the auditor was unable to determine the allowability of these sample selections under the Coronavirus State and Local Fiscal Recovery Funds grant related to the student educator test stipend program. Further, the auditor was unable to determine whether costs were incurred during the approved budget period.
Cause: The condition was caused by a lack of internal controls over Coronavirus State and Local Fiscal Recovery Funds claims for student educator test stipend expenditures.
Effect: When adequate support is not obtained and used to support the amount charged to the federal program or supported by an after-the-fact review, there is a risk that unsupported or inaccurate costs are being charged to the federal program.
Context: During testing procedures over Coronavirus State and Local Fiscal Recovery Funds disbursements for the activities allowed or unallowed compliance requirement, the auditor was unable to obtain source documents from management for five of the forty samples.
Identification of Repeat Findings: This is not a repeat finding.
Recommendation: Proper control activities should be implemented to allow for a consistent, accurate, and allowable method to support distribution of expenditures to federal programs, which could include a consistent multi-stage review process for expenditures that are to be allocated to the Coronavirus State and Local Fiscal Recovery Funds grant. Further, management should clearly organize and retain records to support approved amounts being listed as expenditures on their SEFA.