Finding Text
Criteria: Under the Uniform Guidance, costs charged to a federal program must be allowable, reasonable, allocable, and properly documented, expenditures must be for activities permitted under the federal program, and costs must be incurred within the approved period of performance. Entities must maintain sufficient source documentation to support changes to federal awards. Statement of Condition: During our testing over compliance of allowable activities, allowable costs, and period of performance, supporting invoices or similar documentation was not available for 7 out of 10 expenditures tested. As a result, we were unable to validate whether the costs were allowable under the program, whether the activities were allowable, whether the costs were incurred within the approved period of performance, and whether the expenditures were reasonable and properly supported. Cause of Condition: The entity did not maintain supporting documentation beyond the minimum required retention period and did not have processes in place to preserve institutional knowledge during employee turnover. As a result, supporting records necessary for testing compliance of allowable activities, allowable costs, and period of performance were not available. Effect of Condition: Because invoices or similar documentation was unavailable for the majority of expenditures tested, we were unable to determine if the costs were allowable or incurred within the period of performance, therefore there is a risk of unallowable or unsupported costs being charged to the award, and the entity is not in compliance with federal documentation and cost principles requirements. Questioned Costs: Questioned costs total $129,232, representing the unsupported portion of the 7 out of 10 expenditures for which documentation could not be provided. Recommendation: We recommend that management (1) strengthen internal controls over documentation retention and expenditure support, (2) implement centralized and consistent procedures for retaining invoices and supporting records, (3) conduct periodic internal reviews to ensure all costs charged to federal awards are adequately supported, and (4) provide training to staff responsible for grant accounting to ensure understanding of federal documentation requirements. Identification of Repeat Finding: This is a new finding. Views of Responsible Officials: Management understands and accepts the recommendation as outlined in the Corrective Action Plan.