Finding Text
Finding 2024-007 - Material Weakness: Allowable Costs and Activities – Compliance and Control Finding
ALN 84.116 – Fund for the Improvement of Postsecondary Education
Federal Agency: U.S. Department of Education
Federal Award Numbers: P116Z230322 and P116Z220015
Pass-Through Entity: None
Criteria Or Specific Requirement: 2 CFR section 200.403 requires adequate documentation for allowable activities and costs and 2 CFR section 200.403(e) requires charges to the grant to be in accordance with generally accepted accounting principles (GAAP). Uniform Guidance requires that controls over compliance be properly designed, in place and operating effectively to ensure compliance with the requirements of the federal programs.
Condition: We noted through procedures performed that costs were not supported by adequate documentation and costs were not charged to the grant in accordance with GAAP. Internal controls designed for this federal program did not detect these errors.
Cause: Controls over compliance put in place by management were not operating effectively as it relates to these compliance requirements.
Effect: The possibility exists that noncompliance with federal requirements could go undetected without proper controls over compliance.
Questioned Costs: $34,890 of known questioned costs were identified in our testing sample Likely questioned costs exceed $25,000.
Context: In a sample of 40 individual costs charged to the grant, the following occurred:
• A charge of $3,000 was recorded against the grant but was supported by documentation totaling only $621.
• A charge of $32,511 was recorded as an expense to the grant, although the amount related to prepaid costs for future services or benefits that had not yet been incurred.
• In addition, 31 individual costs in the sample lacked appropriate review and approval for the charges applied to the grant.
Identification As A Repeat Finding: Not applicable
Recommendation: We recommend that management review the internal controls over allowable costs and activities to ensure the control is designed to ensure the correct amount of salaries are charged to the grant based on the approved time and effort certifications.
Views Of Responsible Officials: All expenses must be supported by documentation and comply with Generally Accepted Accounting Principles (GAAP) standards. A pre-review checklist will be required for all charges against FIPSE grants. Prepaid items must be recorded in the prepaid ledger and amortized appropriately. Documentation will be retained in alignment with the University Record Retention policy.
Management will implement a formal review and approval process to ensure that all allowable costs are verified for compliance with applicable regulations and approved by designated personnel prior to reimbursement or payment.