Finding Text
Condition: Reconciliation of the HAF client assistance expenditures for the year ended June 30, 2023, revealed approximately $290,000 of federal funds were held by a vendor contracted to process and disburse client assistance and were reported as federal expenditures. This amount had increased to $433,522 by October 26, 2023. The funds were offset against assistance payments processed by the vendor on November 14, 2023. During the operation of the program, the vendor received refunds of client assistance that were not timely remitted to DSHA or utilized to fund assistance.
A similar finding was noted during the audit of the year ended June 30, 2023. Refer to finding 2023-006.
Criteria: The Uniform Guidance Cost Principles requires DSHA to offset credits against program expenditures in 2 CFR 200.406(a):
Applicable credits refer to those receipts or reduction-of-expenditure-type transactions that offset or reduce expense items allocable to the Federal award as direct or indirect (F&A) costs. Examples of such transactions are purchase discounts, rebates or allowances, recoveries or indemnities on losses, insurance refunds or rebates, and adjustments of overpayments or erroneous charges. To the extent that such credits accruing to or received by the non-Federal entity relate to allowable costs, they must be credited to the Federal award either as a cost reduction or cash refund, as appropriate.
Questioned Costs: $433,522
Effect: The funds held by the vendor were initially recorded as program costs.
Cause: DSHA was notified, by the vendor, that a credit was available to be applied to fund future assistance. The vendor did not apply the credit without DSHA’s explicit approval, which was not granted until November 14, 2023.
Recommendation: We recommend DSHA review the design and implementation of internal controls to address the identified weaknesses in internal control.