Finding Text
Condition: Out of $263,000 in depreciation expense included in as eligible expenditures to the grant, approximately $240,000 related to vehicles purchased using MTA federal grants (80% federally funded, 20% matched). This amount was incorrectly included in the eligible cost pool, contrary to federal cost principles. Criteria: Per 2 CFR §200.436, depreciation charges must exclude any portion of the cost of buildings and equipment borne by or donated by the federal government. Cause: The inclusion of federally funded vehicle depreciation resulted from inadequate cost allocation practices and insufficient review of depreciation schedules before charging expenses to the grant. Effect: Although $263,000 of depreciation was incorrectly included, the reimbursed amount ($130,294) was fully supported by other allowable costs totaling $1.6 million. Therefore, the unallowable depreciation did not lead to improper use of federal funds or a material misstatement. This issue is isolated and does not indicate a systemic control weakness. Recommendation: Implement stronger internal controls over cost allocation and grant expense reviews, including: - Periodic reconciliation of depreciation schedules against federal funding sources. - Staff training on 2 CFR §200.436 requirements. - Pre-approval process for expenses charged to federal grants. Views of Responsible Officials and Planned Corrective Actions: Management concurs with the finding. Corrective actions will include: - Updating policies to ensure compliance with federal cost principles. - Conducting staff training sessions on allowable costs. - Implementing a review checklist for grant-related expenses to prevent recurrence.