Finding Text
Finding No.: 2022-008 Pass-Through Entity: Republic of the Marshall Islands Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social and Political Development of the Territories Federal Award No.: Compact of Free Association Program, As Amended Area: Activities Allowed or Unallowed Area: Allowable Costs/Cost Principles Questioned Costs: $8,764 Criteria: In accordance with the applicable activities allowed or unallowed requirements, institutions must demonstrate that costs incurred are allowable under the relevant program legislation, federal awarding agency regulations, and the terms and conditions of the award and consistent with the purpose of the grant. Federal program expenditures should be necessary and reasonable for the performance of the Federal award in accordance with allowable costs/cost principles requirements and be adequately documented. Furthermore, 2 CFR 200.303(a) states that the subrecipient must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: For seven (or 15%) of forty-six items, aggregating $45,045 of $1,436,730 in total payroll expenditures, deficiencies were noted, as follows: Item # Check# Description Expense Amount Questioned Cost 1 55287 Salaries and wages and benefits $ 3,828 $2,549 2 49523 Benefits 12 12 3 51393 Salaries and wages and benefits 1,338 1,338 4 51616 Salaries and wages and benefits 1,171 1,171 5 49741 Salaries and wages and benefits 153 153 6 52930 Salaries and wages and benefits 154 154 7 55878 Salaries and wages and benefits 3,387 3,387 $10,043 $8,764 For item #s 1 through 4, there was no approved employment contract or other supporting documents on file to substantiate whether such expenditures were allowable costs of the underlying grants. For item #1, only $2,549 is included in the total questioned costs, which relates to the salaries - overload for which no approved overload contract was provided. Item #s 5 through 7 relates to salaries and wages and related fringe benefits (employer contributions for social security and health insurance) of employees whose designation do not appear to be related and consistent with the purpose of the related subgrant. Furthermore, such were not supported by adequate documentation to ascertain whether such expenditures are associated to underlying subgrant. Cause: The College lacks adequate internal controls over compliance with the applicable activities allowed or unallowed requirements. Effect: The College is not in compliance with the applicable activities allowed or unallowed requirements and allowable costs/cost principles requirements. Accordingly, questioned costs of $8,764 result because the projected questioned costs exceed the $25,000 threshold. Recommendation: College management should improve internal control policies and strengthen controls and procedures over compliance with the applicable federal regulations on activities allowed or unallowed. Views of Auditee and Planned Corrective Actions: The College agrees with the finding and provides details in its Corrective Action Plan.