Finding Text
ACTIVITIES ALLOWED OR UNALLOWED, ALLOWABLE COSTS/COST PRINCIPLES - VARIOUS Partial repeat of finding 2022-005 Finding Type: Material Weakness in Internal Controls over Compliance, Material Noncompliance ALN/CSFA and Program Title: 93.676 - Unaccompanied Alien Children Program Federal Agency: U.S. Department of Health and Human Services Pass-Through Entity: Liberty Wilderness Crossroads Camp Contract Number: 90ZU0362 (direct), 90ZU0501 Criteria: Under 2 CFR Part 200 of the Uniform Guidance, costs should be allocated in the accounting system among grants and should be properly supported. Per the Organization's policies and procedures, certain costs that benefit all programs should be allocated using allocation percentages that are calculated semi-annually. Under 2 CFR 200.438 of the Uniform Guidance, "Costs of entertainment, including amusement, diversion, and social activities and any associated costs (such as gifts), are unallowable unless they have a specific and direct programmatic purpose and are included in a federal award." Additionally, 2 CFR 200.303(a) of the Uniform Guidance requires non-federal entities to establish and maintain effective internal control over federal awards that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Condition: The auditor tested 60 program expenses and noted the following: 1. For 5 expenses, the wrong allocation percentages were used to allocate costs for the period or the Organization was unable to provide support or replicate how costs were allocated. 2. For 6 credit card expenses, the Organization did not have adequate supporting documentation. 3. For 4 credit card expenses, the total of the charges identified by the Organization do not agree to the expense recorded. 4. For 2 expenses, the costs are considered to be unallowable entertainment costs. This was not a statistically valid sample. Cause: 1. Inadequate management review of allocations used for the costs and/or inadequate support for the allocation of the costs. 2. Management approval of credit card charges that are not supported by receipts or other documentation, or the Organization not maintaining the supporting documentation. 3. Difficulties with the credit card company where the Organization could not reconcile the costs in the statement to those that the employees were coding, and differences were typically coded to travel expenses. 4. Inadequate management review of costs that are allowable vs. unallowable for the program. Effect: Incorrectly allocated, unsupported, and unallowable costs were charged to the program, which could result in the grantor requiring repayment. Questioned Costs: Known questioned costs total $21,240, determined by calculating the difference between the costs allocated to the program and the costs that should have been allocated to the program using the allocation percentages in effect at the time the expenses occurred, and by totaling unsupported and unallowable costs. Likely questioned costs total $172,742, determined by dividing the known questioned costs by the total of the sample and applying the error rate to the population of expenditures. Recommendation: We recommend management more specifically review the allocations used when reviewing costs that are allocated among programs, that management ensure all credit card charges are adequately supported and not charge unsupported costs to federal awards, and that management gain a better understanding of allowable and unallowable costs for the program and ensure unallowable costs are not charged to the program. Views of Responsible Officials and Planned Corrective Actions: See management's response and Corrective Action Plan on page 57.