Finding Text
Finding No.: 2025-001 Criteria Pursuant to 2 CFR §200.302(b)(3), nonfederal entities must maintain financial management systems that provide for the identification of all federal awards received and expended, including accurate, current, and complete disclosure of expenditures by federal award. Further, 2 CFR §200.403 requires that costs charged to federal awards be allowable, allocable, and adequately documented. Costs must be directly associated with the benefiting program. Government Auditing Standards require that entities design and implement internal controls to provide reasonable assurance that transactions are properly recorded and compliance with applicable requirements is achieved. Conditions Found The Organization did not record expenditures directly to specific federal awards or grant programs at the time costs were incurred. Instead, expenditures were recorded in classes of accounts and subsequently allocated to funding sources in aggregate based on available revenue. This methodology does not ensure that expenditures are accurately identified with the benefiting federal award. Cause The condition appears to be the result of inadequate internal controls over grant accounting, including: • Lack of a formalized process for tracking expenditures by individual grant • Limitations in the accounting system and heavily reliance on supporting schedules outside of the accounting function • Insufficient training and oversight related to grant compliance requirements Effect As a result, the Organization is at risk of: • Noncompliance with Uniform Guidance cost principles and reporting requirements • Misstatement of expenditures by grant program • Inability to demonstrate that costs charged to federal awards are allowable, allocable, and properly supported • Potential questioned costs or repayment of federal funds • Inaccuracy of federal reporting Context This issue was identified through testing of expenditures across multiple federal programs and was determined to be pervasive in nature. The control deficiency impacts all major federal programs and financial reporting processes related to grant activity. Repeat Finding No Questioned Costs The Organization’s expenditures are similar amongst all programs and grants. At the onset of the audit, expenditures were not coded and reconciled to each grant individually; however, the Organization was able to identify, code and update the general ledger to properly identify the major program expenditures. We were able to determine there are no questioned costs. Recommendation We recommend that the Organization strengthen its internal controls over grant accounting by: • Implementing procedures to code expenditures directly to specific grants at the time of entry • Enhancing the chart of accounts to allow for tracking by funding source • Reducing the use of manual spreadsheets that allow for human error • Proper review and approval of grant allocations to ensure proper grant reporting • Providing training to accounting personnel on Uniform Guidance requirements for cost allowability and allocability Views of Responsible Officials See attached corrective action plan.