Finding Text
2022-002—Unallowable Gift Card Disbursements Charged to Federal Program
Type of Finding: (F) Instance of Noncompliance Related to Federal Awards
Funding Agency: U.S. Department of Health and Human Services
AL #: 93.231 – COVID-19: Epidemiology and Laboratory Capacity
Award #: Various
Award Period: 09/30/2021 – 09/29/2026
Estimated Questioned Costs: $15,300
Compliance Requirement: Allowable Costs/Cost Principles
Statement of Condition
AAIHB distributed gift cards to both salaried employees and independent contractors as a gesture of appreciation for working extended hours related to COVID-19 contact tracing efforts. The total value of the gift cards was approximately $15,300 and was charged to the COVID-19: Epidemiology and Laboratory Capacity grant (AL #93.231). For contractors, these gift cards were provided in addition to their regular compensation. The gift card disbursements were not processed through payroll nor formalized in contract terms, and there is no documentation indicating the entity obtained approval from the awarding agency.
Criteria
In accordance with 2 CFR § 200.403, costs charged to federal awards must be necessary, reasonable, allocable, and conform to limitations set forth in federal regulations. Per 2 CFR § 200.421(e)(3), the cost of gifts—including cash or cash equivalents such as gift cards—is generally unallowable. Compensation for employees must comply with 2 CFR § 200.430, including support through written policies and documentation of time and effort. Contractor payments must align with procurement standards in 2 CFR § 200.318–200.324 and be governed by written contracts.
Effect
The use of federal funds to provide gift cards constitutes an unallowable cost under Uniform Guidance. The questioned amount may be subject to repayment to the awarding agency or passthrough entity. Cause
The auditee sought to recognize the extraordinary efforts of personnel during the COVID-19 public health response. However, they were unaware that the use of gift cards for this purpose was inconsistent with Uniform Guidance and lacked prior approval or supporting policy.
Recommendation
We recommend the auditee discontinue the use of federal funds for gift card distributions. All compensation for employees should be processed through payroll, supported by appropriate documentation and internal policies. Payments to contractors should be governed by written contracts and comply with applicable procurement standards. If the auditee believes these costs are justifiable, they should consult the awarding agency for a determination and, if necessary, reimburse the federal award.