Finding Text
Finding No.: 2023-011 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Compact of Free Association, As Amended Questioned Costs: $100,327 Area: Allowable Costs/Cost Principles Criteria: Federal program expenditures should be necessary and reasonable for the performance of the Federal award, in accordance with allowable costs/cost principles requirements, and be directly related to, and in accordance with, program intent and objectives. Furthermore, 2 CFR 200.303(a) states that a recipient of a Federal award must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition 1: Of 43 non-payroll transactions tested, aggregating $5,876,660 of $31,535,023 in total non-payroll program expenditures, we noted the following: 1. For 1 (or 2%), cost was not adequately documented due to lack of supporting vendor invoice: Item # Fund # Encumbrance/ Voucher/JV # Account Total 1 10402 22/00003564 BRV Contractual Services $ 100,000 2. For 7 (or 16%), the underlying grant award nos. D23AF00042-00 and D23AF00074-00 terms and conditions state that assistance under the awards may not be sub-granted or transferred. However, $1,847,500 of the grant assistance was disbursed directly to the Enewetak/Ujelang Local Government (EULGOV) and a subgrant agreement with EULGOV was not available. This item is also reported as a matter of noncompliance within Finding 2023-019, including associated questioned costs. Therefore, no questioned cost is presented at this finding. Condition 2: Of 25 payroll transactions tested, aggregating $20,005 of $18,441,905 in total payroll program expenditures, we noted the following: 1. For 3 (or 12%), leave hours were not supported by an approved leave form: Item # Employee # PPE Hours Amount 1 206603 11/19/2022 8 $ 50 3 090465 12/03/2022 24 196 2 04093566 03/11/2023 8 81 $ 327 2. For 1 (or 4%), direct payment to EULGOV was in breach of the underlying grant award nos. D23AF00042-00 and D23AF00074-00 terms and conditions, as noted under Condition 1 item 2 above. No questioned cost for these awards is presented at this finding. Cause: RepMar did not effectively maintain documentation to support expenditures charged to federal programs and did not effectively monitor the validity and allowability of expenditures. Furthermore, RepMar lacks adequate internal control policies and procedures to facilitate adherence with grant terms and conditions. Effect: RepMar is in noncompliance with allowable costs/cost principles requirements. The reportable questioned cost is $100,327. Identification as a Repeat Finding: Finding Nos. 2022-001 and 2022-002 Recommendation: Documents supporting expenditures should be maintained. Further, RepMar management should strengthen monitoring controls so that expenditures are verified for validity and allowability. Finally, RepMar should adopt adequate internal control policies and procedures to facilitate adherence with grant terms and conditions. Views of Responsible Officials: RepMar’s Corrective Action Plan does not indicate disagreement and provides planned corrective action.