Finding Text
Lack of Written Procedures for Determining Allowability of Costs Condition: The Agency did not maintain written procedures for determining the allowability of costs charged to federal awards. Although management performs reviews of expenses to ensure reasonableness, these reviews are not guided by documented policies or standardized criteria. Criteria: In accordance with 2 CFR 200.302(b)(7), non-federal entities must maintain written procedures for determining allowability of costs in accordance with Subpart E - Cost Principles of the Uniform Administrative Requirements, Costs Principles, and Audit Requirements for Federal Awards ("Uniform Guidance"). Cause: Management was unaware that Uniform Guidance requires written procedures specifically addressing cost allowability, separate from general internal control or purchasing policies. Effect: Without documented procedures, there is an increased risk that unallowable or unsupported costs may be charged to federal programs, potentially resulting in noncompliance with federal cost principles and repayment obligations. Questioned Cost: None noted as a result of audit procedures performed. Recommendation: Management should develop and implement written procedures for determining allowability of costs consistent with the requirements of 2 CFR 200.302(b)(7). Procedures should clearly define responsibilities, documentation requirements, and approval processes to ensure all cost charged to federal programs are allowable, allocable, and reasonable. Management Response: We agree with the findings in the audit report and have developed a Corrective Action Plan to address each item promptly. This has been a challenging year for the organization, including turnover in the Chief Financial Officer ("CFO") position and the fact that this was our first Single Audit due to increased federal funding related to COVID-19 programs. These factors contributed to delays in audit readiness, gaps in technical accounting for grants, and weaknesses in internal controls over financial reporting and federal award reporting. We have implemented a comprehensive plan to address these challenges and will be hiring a new CFO in the first quarter of 2026.