Finding Text
Finding: Direct charges for property taxes. Criteria: Allowable Costs/ Cost Principles (Non-profit Organization) Per the Compliance Supplement for UC programs, excessive charges for facility expenditures related to leasing agreements are not allowable. Recipients that lease facilities under an arm's length transaction are unable to incur and charge ownership-type costs to the award. This includes normal costs of ownership such as depreciation, maintenance costs, taxes, and insurance. Per the supplement, the portion of arm's length leases in which the recipient is required to pay any combination of property taxes, property insurance, and maintenance/repair costs separate from the base rental amount, are unallowable for reimbursement eligibility under the federal award. Condition and Context, and Cause: During our audit, we tested a selection of rent expense charged to the general ledger and noted that the charges included property taxes in addition to base rent. See discussion above at 2024-006 additional context/cause. 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 re-implement internal controls to track allowable expenditures and reconcile qualifying costs with cash draws.