Finding Text
Finding # 2025-002 Internal Controls over Allowable Costs Federal Agency: All Federal Program: All Assistance Listing Number: All Type of Finding: Significant Deficiency in Internal Control over Compliance Other Matters Criteria Title 2, Chapter 2, Part 200 of the Code of Federal Regulations (2 CFR Part 200) establishes cost principles for determining costs applicable to federal awards with nonprofit organizations. An important method of adhering to these cost principles and ensuring allowable and allocable costs are charged to federal programs is through the use of a cost allocation plan. As important as the plan is, internal controls over the cost allocation plan are just as necessary. Nonprofit organizations must maintain internal controls over the allocation of costs to ensure costs are not over or under allocated, consistency across programs, and that they are traceable back to the accounting records themselves. Condition Although the Center has a written cost allocation plan in place, internal controls to ensure the plan was properly implemented and followed were not consistently applied. Questioned Costs None noted. Context The Center has made progress in implementing its corrective action plan. Most costs are now recorded in accordance with the Center’s cost allocation plan. However, inconsistencies remain in allocating costs to individual grant contract cost centers within the general ledger. Effect The Center incurs the risk of allocating disallowed costs to federal programs contrary to the Federal Regulations. Cause The Center was not consistently performing reconciling and other activities which would have served to ensure the cost allocation plan and underlying accounting records were in line and consistent. Repeat Finding Yes, repeat of prior year finding 2024-002. Recommendation The Center should strengthen internal controls over grant cost reporting to ensure that amounts reported to funders are fully supported by, and traceable to, the QuickBooks general ledger. Specifically, the Center should: • Perform documented reconciliations between grant reimbursement reports and QuickBooks cost center detail by expense category prior to submission to funders. • Record all allocation calculations, reallocations, and adjustments used for grant reporting as journal entries in QuickBooks so that the general ledger reflects the same amounts reported to grantors. • Implement a formal review and approval process to verify that reported payroll, fringe, indirect, guest support, and other direct costs agree to QuickBooks by cost center. • Retain reconciliation and review documentation to support reported costs and facilitate audit and grantor review. Management’s Response/ Views of Responsible Officials Management agrees with this finding and has outlined its resulting actions in a separately issued corrective action plan