Finding Text
Documentation of Allocations of Costs (Repeat of Finding 2023-04) - Federal Agency: U.S. Department of Agriculture Pass-Through Agency: MN DEED Assistance Listing Number(s):17.258, 17.278 and 17.259 (WIOA Cluster) Federal Agency: U.S. Department of Health and Human Services Pass-Through Agencies: MN DEED and various counties Assistance Listing Number: 93.558 (TANF) Compliance Requirement: Allowable Costs Criteria: Federal regulations require organizations to maintain records that clearly identify the source and use of funds for federally funded activities. This includes documentation supporting the allocation of costs to ensure they are reasonable, allowable, and allocable. Additionally, organizations must implement internal controls, including review procedures, to ensure the accuracy and compliance of financial allocations. Condition: For the fiscal year ended June 30, 2024, the Organization did not maintain sufficient documentation to support the calculation of its cost allocation. Furthermore, no evidence was provided to demonstrate that a review of the cost allocation was performed to ensure its accuracy and compliance with applicable regulations. Specifically, the Organization was unable to produce detailed records or worksheets showing how costs were allocated across programs and departments, and there was no documentation of a formal review process. For the WIOA Cluster 38 of the 60 disbursements tested (totaling $61,668) could not be traced back to support showing what the allocation percentages by grant should have been or how the allocation percentages were determined. For TANF 55 of the 60 disbursements tested (totaling $33,165) could not be traced back to support showing what the allocation percentages by grant should have been or how the allocation percentages were determined. Cause: The Organization does not have a formalized process for retaining and organizing documentation related to cost allocations. Additionally, the established review procedures were not followed. These issues may stem from inadequate training of staff responsible for financial record-keeping and review, or from weaknesses in internal controls over documentation retention and compliance monitoring. Effect: The lack of supporting documentation and absence of a review process increases the risk that costs may be inaccurately allocated, potentially resulting in noncompliance with federal requirements. This could lead to questioned costs, disallowed expenditures, and the potential repayment of federal funds. Questioned costs: For WIOA Cluster – $61,668 For TANF - $33,165 Recommendation: The Organization should adopt a comprehensive documentation retention policy that includes specific procedures for maintaining records related to cost allocations. This policy should ensure that all relevant documentation is retained for the required period and is readily accessible for audit purposes. Additionally, the Organization should enforce a formal review process to verify the accuracy and compliance of cost allocations. Staff responsible for financial record-keeping and compliance should receive training on documentation standards, review procedures, and the requirements of the Uniform Guidance. Responsible Officials Response: CMJTS has since worked with DEED to updated our cost allocation policy, and DEED approved our new policy. In this policy, the CMJTS fiscal team will work with CMJTS program managers to update allocations for the upcoming month. Changes to allocations will be documents and saved for record retention.