Finding Text
2024-002: Significant Deficiency: Activities Allowed or Unallowable Costs/Cost Principles Criteria: In accordance with federal regulations, expenditures charged to federal awards must comply with the allowable cost principles outlined in 2 CFR Part 200, Subpart E. Furthermore, recipients and subrecipients are required to operate within the parameters of the approved budget as specified in the grant agreement. Any budgetary revisions must receive prior written approval from the awarding federal agency or pass-through entity, pursuant to 2 CFR § 200.308. Section III: Federal Award Findings and Questioned Costs (Continued) 2024-002: Significant Deficiency: Activities Allowed or Unallowable Costs/Cost Principles (Continued) Condition: During our audit procedures, we noted that the Organization incurred expenditures in excess of the approved amounts within certain budget categories. The reallocation of funds between these categories exceeded the allowable threshold of 10%, as stipulated in the grant agreement, without obtaining the required prior approval. Cause: The Organization’s internal controls over compliance related to the review and reconciliation of budgeted amounts against actual expenditures charged to the grant were not adequately designed or implemented to detect and prevent variances. Effect: As a result, costs submitted for reimbursement exceeded the approved budgetary limits for certain budget line items established in the grant agreement, rendering a portion of the expenditures unallowable under federal regulations. Questioned Costs: None Recommendation: We recommend that the Organization’s management evaluate and strengthen internal control over compliance procedures to ensure expenditures consistently comply with federal cost principles and remain within approved budget line items. Views of Responsible Officials: Management agrees with this finding and their response is included in the corrective action plan.