Finding Text
Finding 2024-003, Unallowable Expense (Assistance Listing 93.696)
Criteria: Per 2 CFR § 200.403, costs charged to a federal award must be necessary, reasonable, and allocable to the program. Assistance Listing Number 93.696, Certified Community Behavioral Health Clinic, requires that costs allocated to the program meet these criteria to ensure compliance with federal regulations.
Condition and Context: During our testing of the Agency’s expenses charged to the program, we noted one item out of ten items tested that did not relate to the federal program.
Cause: The expense was incorrectly allocated to the program due to misclassification or inadequate review during the allocation process. Internal controls designed to ensure proper expense classification were either insufficient or not effectively implemented, leading to the incorrect charge.
Effect: Although the expense was charged to the federal program, it was not allowable under the program’s cost principles, resulting in noncompliance with federal regulations. If not addressed, this could lead to inaccurate financial reporting and potential disallowance of costs.
Identification as a Repeat Finding: No.
Questioned Costs: None.
Recommendation: We recommend that the Agency enhance its internal controls over expense allocation by implementing a more structured review and approval process. This should include enhanced staff training on cost allowability, periodic reconciliations of expenses to program requirements, and management oversight to ensure compliance with federal regulations. Additionally, the Agency should establish clear documentation procedures to verify and support the appropriateness of charges to the program before expenses are recorded.