Finding Text
Finding: Use of funds for unallowed (non-program) activities. Criteria: Activities Allowed or Unallowed Per the Office of Management and Budget Compliance Supplement (2 CFR Part 200, Appendix XI), activities allowed or unallowed is a relevant compliance requirement for the Unaccompanied Children Program cluster. Per the Compliance Supplement, funds may only be used for activities and categories listed in the approved budget to provide temporary shelter and other child-welfare related services for the care of an unaccompanied child paced with the nonfederal (recipient) entity by ORR. Condition and Context: During our audit, we noted the unaudited profit and loss by class was showing significant income in excess of expenses for the Unaccompanied Children Programs. Based on discussions with the former President of the Organization, it was his belief that the indirect cost line of the budget was analogous to an “administrative allowance”, and that this could be used to offset the losses of direct costs from other programs. This is an inaccurate definition of the indirect cost budget item. Per the grant contracts, indirect costs should be calculated based a pre-approved rate times direct salary expense. Cause: An incomplete/ inaccurate understanding of grant requirements resulted in the former President instructing employees to improperly allocate expenditures to the Unaccompanied Minors programs for activities that were not related to providing temporary shelter and other child welfare related services for unaccompanied children. Result: Amounts identified as unallowable costs per the compliance guidance have been included in the contract liability as disclosed in Note 12. See the Summary of Unallowable Costs and Questioned Costs tables for detail on page 56. Recommendation: The auditors recommend the Organization ensure that individuals responsible for the oversight of expenditures and grant management have an in-depth understanding of grant requirements. A dedicated individual should be responsible for reviewing and understanding grant contracts and related regulatory requirements including but not limited to the applicable Health and Human Services grant policies, and Titles 2 (Federal Financial Assistance) and 45 (Public Welfare) of the Code of Federal Regulations. That individual should have the requisite skills, knowledge, and experience to interpret and apply compliance guidance and generally accepted accounting standards in the U.S.