Finding Text
Finding No.: 2023-005 Pass-Through Entity: Republic of the Marshall Islands Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social and Political Development of the Territories Federal Award No.: Compact of Free Association Program, As Amended Area: Activities Allowed or Unallowed Area: Allowable Costs/Cost Principles Questioned Costs: $61,291 Criteria: In accordance with the applicable activities allowed or unallowed requirements, institutions must demonstrate that costs incurred are allowable under the relevant program legislation, federal awarding agency regulations, and the terms and conditions of the award and consistent with the purpose of the grant. 2 CFR 200.403(a) states that federal program expenditures should be necessary and reasonable for the performance of the Federal award in accordance with allowable costs/cost principles requirements and 2 CFR 200.403(g) states that costs should be adequately documented. Furthermore, 2 CFR 200.303(a) states that the subrecipient must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Conditions: 1. For one (or 9%) of eleven items, aggregating $74,721 of $359,456 in total non-payroll expenditures, no supporting documentation was provided to substantiate how the allocated amount charged to the program was determined and how the expenditure (PO# 23-PO- 1856 ; $35,492) directly relates to the purpose of the underlying subgrant. 2. For thirty-one (or 63%) of forty-nine items, aggregating $64,266 of $1,612,427 in total payroll expenditures, we noted the following: Item #s 1 through 6 relate to employee’s salaries and wages and related fringe benefits (employer contributions for social security and health insurance) allocated and charged to federal grant for which we noted either a) the hours paid is higher compared to the hours recorded on the approved timesheet or b) the rate paid is higher compared to the rate per contract. Item #s 7 through 14 relate to salaries – overload or adjunct that were not supported by adequate documentation (i.e. semester section offering or instructor’s schedule) to ascertain whether service was received. For item #15, we noted that the rate paid is higher compared to the rate per contract. Furthermore, the related salaries – overload was not supported by adequate documentation (i.e. semester section offering/instructor’s schedule) to ascertain whether service was received. For item #s 16 through 31, there were no approved timesheet on file to substantiate the actual number of hours worked. Further, for item #s 29 through 31, approval of the amount paid to employees relating to leave was not on file. Cause: The College lacks adequate internal controls over compliance with applicable activities allowed or unallowed and allowable costs/cost principles requirements, specifically, retaining sufficient documentation to support transactions and ensuring expenditures are necessary and reasonable for the performance of the Federal award. Effect: The College is in noncompliance with activities allowed or unallowed and allowable costs/cost principles requirements. The reportable questioned cost is $61,291 based on the items identified in Conditions above. For condition #2, item #s 4 through 6, 13 through 14, and 20 through 31, questioned costs related to federal expenditures that may result from discrepancies noted or unestablished allocation are not determinable. Identification as a Repeat Finding: 2022-008 and 2022-009 Recommendation: College management should improve internal control policies and strengthen controls and procedures over compliance with applicable activities allowed or unallowed and allowable costs/cost principles requirements, specifically, retaining sufficient documentation to support transactions. Views of Auditee and Planned Corrective Actions: The College agrees with the finding and provides details in its Corrective Action Plan.