Finding Text
U.S. Department of Housing and Urban Development #14.251 Economic Development Initiative, Community Project Funding, and Miscellaneous Grants 2024-005 Lack of Written Allocation Plan for Shared Costs (Significant Deficiency) Criteria: In accordance with 2 CFR §200.405(d), any cost allocated to a federal award must be allocable, reasonable, and based on a method that is supported and consistently applied. In addition, 2 CFR §200.403(g) requires that costs be adequately documented. A written allocation plan is essential to demonstrate that the allocation of shared costs is equitable and in compliance with Uniform Guidance. Condition: The Organization does not have a written cost allocation plan to document the basis for distributing shared costs such as salaries, occupancy, and administrative expenses among its programs and grants. Instead, management relies on grant budgets and staff judgment to determine which costs are charged to each grant. As a result, there is no consistent or documented methodology supporting the allocation of shared costs to benefiting programs. Cause: Management has not developed or implemented a written cost allocation plan. Cost allocations have historically been based on grant budgets or management's understanding of what each grant will support, rather than on a systematic and documented method. Effect: Without a written cost allocation plan, there is an increased risk that costs may not be allocated consistently or accurately among programs and grants. This could result in noncompliance with federal cost principles and potential questioned costs if expenses are not properly supported. Questioned Costs: None noted. Recommendation: We recommend that the Organization develop and implement a written cost allocation plan that outlines the basis for distributing shared costs, including the allocation methodology, the types of costs involved, and the programs affected. The plan should be reviewed periodically and updated as necessary to reflect changes in funding or operations. Supporting documentation for allocations should be maintained and readily available for audit purposes. Views of Responsible Officials and Planned Corrective Actions: Management agrees and recognizes the importance of consistent allocation methodologies. Corrective Action: Increase the Cost Allocation Plan defining allocation bases for shared expenses, supported by documentation and reviewed annually.