Finding Text
Finding 2024-001, Expense Allocations - Financial Management (Assistance Listing 16.575)
Criteria: Per 2 CFR § 200.302(a) (Financial Management), all recipient and subrecipient financial management systems must be sufficient to track expenditures and establish that funds have been used in accordance with federal statutes, regulations, and the terms and conditions of the federal award.
Condition and Context: The Agency’s general ledger for the program included occupancy expenses that were not used for the program. Although these expenses were erroneously recorded in the general ledger under the program, they were correctly excluded from the submitted claims.
Cause: These expenses were incorrectly allocated in the general ledger due to weaknesses in internal controls over expense classification and allocation. The financial management system lacked adequate review mechanisms to ensure expenses were properly assigned to the correct program and reconciled with the submitted claims.
Effect: The misallocation of expenses in the general ledger resulted in financial reports that do not accurately reflect actual program expenditures. This misstatement could impact budgetary decisions, financial reporting accuracy, and overall compliance with federal regulations.
Identification as a Repeat Finding: No.
Questioned Costs: None.
Recommendation: We recommend that the Agency strengthen its policies and procedures for expense allocation by implementing a more structured review and approval process. This should include enhanced internal controls, periodic reconciliations of expenses between the general ledger and submitted claims, and staff training on accurate cost classification. Additionally, management should establish clear documentation procedures to support the proper allocation of expenses in the general ledger and ensure compliance with federal regulations.