Finding Text
2025-003 Material Weakness in Internal Control over Period of Performance: Costs Charged Outside the Period of Performance Identification of federal programs: Federal Agency: Department of Commerce (DOI) ALN: 11.438 Pacific Coast Salmon Recovery Pacific Salmon Treaty Program Award: NA20NMF4380258 Criteria: In accordance with 2 CFR 200.309, a non-Federal entity may charge to a Federal award only allowable costs incurred during the approved period of performance. Costs incurred outside the approved period of performance are not allowable unless explicitly authorized by the federal awarding agency. Condition: During testing of expenses, the auditors noted one expense that was individually significant related to a grant with a performance period ended on June 30, 2025. The expense was paid out in April 2025 consisted of a prepayment of a contract amount, of which management believed would be completed by the end of the performance period. Management was unable to provide documentation demonstrating the follow-up that the related services were performed or costs were incurred during the approved period of performance. Cause: Management did not have adequate internal controls in place to ensure that contract expenses charged to the federal award were supported by documentation demonstrating that costs were incurred within the approved period of performance. In this specific case, the contract was originally intended to be administered and paid through a subawardee; however, the payment was ultimately made directly by the Organization. While the Organization did receive documentation of work to be done, it didn’t receive documentation supporting progress, services performed, and work completed. Effect or potential effect: Because sufficient documentation was not available to demonstrate that the prepaid contract costs were incurred during the approved period of performance, the expenditure is considered unallowable and questioned. This represents noncompliance with federal program requirements applicable to a major program. Questioned Costs: $65,438 Context: During testing of compliance for the period of performance, one instance showed a prepayment of contracted services. Upon further inquiry and review it was noted that the Organization had no further documentation supporting the dates of services performed nor had confirmation that services had been performed by June 30, 2025, the requirement grant ending performance date, been obtained. Identification of Repeat Finding: Not applicable. Recommendations: We recommend that management implement stronger controls over contract payments charged to federal awards to ensure that expenditures are supported by documentation demonstrating that costs are incurred within the approved period of performance. Management should also consult with the federal awarding agency or pass-through entity to determine the appropriate resolution of the questioned costs. Views of Responsible Officials: See Corrective Action Plan.