Finding Text
Criteria: Under 2 CFR 200.403, costs charged to federal awards must be necessary, reasonable, and allocable, and must conform to limitations or exclusions set forth in the Uniform Guidance. 2 CFR 200.431 further specifies that fringe benefits must be actually incurred and in accordance with established written policies. Condition: During testing of payroll and related benefits, we identified instances where the organization billed federal awards for employee benefits (e.g., health insurance and retirement contributions) that were not provided or paid on behalf of the employees. The amounts were charged based on estimated budget allocations rather than actual costs incurred, and no reconciliation was performed. Cause: The Organization lacked adequate internal controls to ensure only paid fringe benefit costs were charged to federal awards. There was no process in place to reconcile estimated benefits to paid benefits. Effect: Charging unexpended costs to federal awards resulted in questioned costs totaling $22,241. This practice may lead to misrepresentation of expenditures and noncompliance with federal cost principles. Questioned Costs: $22,241 Recommendation: We recommend the organization implement procedures to ensure benefits charged to federal awards reflect actual costs expended, perform regular reconciliations between estimated and actual benefit costs, and update written policies to align with Uniform Guidance requirements for allowable fringe benefit charges. Views of Responsible Officials and Planned Corrective Action: Management agrees with the finding and in the summer of 2024, the Organization has contracted with a third party accounting company to provide services.