Finding Text
Finding: Direct charges for major improvements of real property. Criteria: Allowable Costs/ Cost Principles (Non-profit Organization) Per the Compliance Supplement for UC programs, improper direct charging of costs related to the acquisition, construction, or major capital improvements of real property is unallowable. Funding under this program cannot be directly used for any of these purposes as the program does not have statutory authority to do so. Expenses such as direct charges of acquisition costs, mortgage principal and interest payments, and direct charges for alterations to real property which are considered major capital improvements* and required to be capitalized and depreciated under GAAP, are unallowable as direct charges to the UC Program awards. Only depreciation properly calculated (see 45 CFR 75.436), recorded, and supported by the recipient organization in accordance with GAAP may be charged to UC Program awards. Condition and Context, and Cause: During our audit, noted to charges to the UC programs which were unallowable per the above criteria. See discussion above at 2024-006 additional context/cause. Result: Amounts identified as unallowable costs per the compliance guidance have been included in the contract liability as disclosed in Note 12. See the Summary of Unallowable Costs and Questioned Costs tables for detail on page 56. Recommendation: The auditors recommend the Organization re-implement internal controls to track allowable expenditures and reconcile qualifying costs with cash draws.