Finding Text
#2025-002 – Major Federal Award Finding – Allocation of Costs Nature of Finding: Compliance Finding Allowable Costs and Material Weakness in Internal Controls over Compliance This is a repeat of elements of prior year finding #2024-005. Criteria/Condition: Federal regulations 2 CFR 200.405 provide that costs benefiting two or more projects in proportions that can be easily determined must be allocated to the projects based on the proportional benefit. If proportions cannot be easily determined, the costs may be allocated to the benefited projects on a reasonable and documented basis. Questioned Costs: $ 670 Identification of How Questioned Costs Were Computed: A sample of 40 non-payroll expenditures totaling approximately $21,000 was selected from a population of approximately $359,000 of non-payroll direct expenditures. Certain costs charged to the major program from two invoices did not have a properly supported methodology for the allocation percentages that were utilized. The portion of these invoices charged to the Crime Victim Assistance program totaled $670. Cause/Context: For 2 of the 40 non-payroll expenditures selected for testing, costs were allocated to the major program based on available grant funding allocation percentages, rather than proportional to the benefit provided. Controls were not properly in place to evaluate the allocation of costs to grants based on proportional benefit provided to each grant. Effect: Expenditures that involve an allocation of costs between grants are not properly supported. The lack of controls results in questioned costs as a disproportionate amount of expenditures may be charged to the federal program. Recommendation: We recommend management establish procedures and controls to allocate all costs between grants based upon actual costs attributed to the grant and the particular expenditure allowed by the grant. Any such allocations should be supported by activity-level substantiation. Documentation of the allocation methodology, review and approval should be maintained. Views of Responsible Officials and Planned Corrective Actions: Percentages used for allocations will be reviewed annually across all grants/programs and updated during the budget process. These allocations will be reviewed by the CFO. The Organization implemented this process during the year ended September 30, 2025 but discovered that corrections were not made to the entire process of allocations. This process has been improved subsequent to September 30, 2025.