Finding Text
2025-003 Allowable Costs/Cost Principles for U.S. DHHS 94.432 ACL Centers for Independent Living #2401MEICL-00 (Significant Deficiency in Internal Controls over Compliance and Noncompliance) Criteria: Management is responsible for ethe design and implementation of internal controls to prevent or detect and correct unallowable costs from being charged to a federal award program. Condition and Context: Through audit procedures testing internal controls over cash disbursements charged to major federal award programs, we noted that the Organization purchased alcohol beverages totaling $100 and included this cost in allocation of expenses towards the the Federal program. Cause: There is a lack of understanding allowable cost/cost principles and a lack of oversight on expenses being charged to federal award programs. Effect: Charging unallowable costs to a Federal program results in noncompliance with the Uniform Guidance and increases the risk of disallowed costs. Questioned Costs: Known questioned costs related to our testing totaled $100. Recommendation: We recommend that management enhance review and approval procedures to ensure all costs charged to Federal programs are allowable under Uniform Guidance and the related grant agreements. Additionally, management should reclassify the unallowable costs to a non-Federal funding source. Training should be sought for individuals involved in recording expenditures to federal award programs on allowable costs/cost principles. Views of Responsible Offices and Planned Corrective Actions: Management concurs in part and disagrees in part with this finding. Management has always understood that alcohol purchases may not be charged to a Federal program and are unallowable under Uniform Guidance, and we are committed to ensuring full compliance with federal cost principles. Upon identification of this exception, management initiated corrective measures to reinforce internal controls surrounding expense review and documentation. The accounting staff member did not have the itemized receipt at the time the expense was initially allocated. Had the receipt been available, the unallowable cost would have been identified, and the expense would not have been allocated to program costs. Once the receipt was reviewed, the alcohol purchase was identified as unallowable under Federal programs and allocated correctly to administration costs. To prevent similar issues moving forward, accounting staff have been re-trained on expense documentation and receipt tracking requirements, with emphasis on ensuring that itemized receipts are obtained and reviewed prior to allocation, reimbursement, or payment. Staff have also been reminded of the importance of validating expenditures against Uniform Guidance allowability requirements as part of their routine review procedures. Management will continue to monitor expense activity to ensure the effectiveness of these reinforced controls.