Finding Text
Significant Deficiency - Allocation of Insurance Expense - Allowable Costs U.S. Department of the Treasury AL #21.027 U.S. Department of Labor AL #17.258 / 17.259 / 17.278 Criteria: Uniform Guidance requires federal awards to be expended only for allowable activities and that the costs charged are in accordance with the applicable cost principles. Condition: The Organization's internal controls over financial reporting did not ensure that prepaid insurance and monthly adjustments to the account were based on current insurance statements resulting in an inaccurate amount allocated to grants each month. Cause: This situation was attributed to the turnover and vacancy in the accounting department and the shortage of support staff. Effect: Insurance expense allocated to grants and reimbursed by grantors was more than the actual expenditure resulting in disallowed costs and the potential need to refund grantors. Total insurance costs overallocated to grants for the year did not meet the threshold to be reported as a questioned cost. Questioned Costs: None Recommendation: Implement procedures to (1) reconcile prepaid insurance and insurance expense to the actual policies (2) allocate insurance expense based on the annual policy expense over 12 months and (3) ensure allocation calculations are updated annually for the new policy amounts. Response: The Organization agrees with the finding. The Organization will implement a method to ensure prepaid insurance is appropriately adjusted and insurance costs are accurately recorded and allocated to grants.