Finding Text
Finding 2024-002 – Activities Allowed/Allowable Costs & Cash Management Type of Finding: Material weakness over controls over compliance and noncompliance Federal Agency: U.S. Department of Treasury & U.S. Department of Health and Human Services Federal Program: Coronavirus State and Local Fiscal Recovery Funds – ALN 21.027 and Refugee and Entrant Assistance State/Replacement Designee Administered Program – ALN 93.566 Criteria: An organization should have a strong system of internal control that includes review of general disbursement for proper classification and allowability in accordance with the terms and conditions of the award agreements and federal regulations. An organization should also have controls in place that minimizes the time elapsing between the transfer of federal funds and the disbursement by the organization for direct program or project costs. Condition and Context: During the year September 30, 2024 a dispute arose between the Organization and its landlord. After consulting with a lawyer, the Organization stopped paying rent to the landlord and instead deposited the monthly rent money into its own separate cash account. The Organization still drew down the amount of the rental costs from the above funding sources to make the monthly deposits into the separate cash account. After year end the Organization and landlord settled their dispute which included the landlord waiving its right to the escrowed rent. Questioned Costs: For the year ended September 30, 2024 federal funds of $247,379 and $56,737 were drawn down from assistance listing numbers 93.566 and 21.027, respectively, for rent expense that ultimately was never incurred. Cause:The organization drew down amounts that for costs it had not incurred at the time and would ultimately not incur. Effect or Potential Effect: Grants were overcharged for rental payments that were never made. Recommendation: We recommend that management implement procedures to ensure expenditures implement controls that ensure grants are only drawn down for costs that have been incurred.