Finding Text
Allowable Costs/Activities Allowed (Significant Deficiency) ALN No. 14.218 - Community Development Block Grants/Entitlement Grants Criteria: The Uniform Guidance requires non-federal entities to maintain effective internal controls over federal awards that provide reasonable assurance that federal programs are administered in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Costs charged to federal awards must be necessary, reasonable, allocable, adequately documented, and consistent with the applicable cost principles and program requirements. Effective controls over allowable costs and activities include documented authorization and approval of expenditures before costs are incurred, including issuance and approval of purchase orders or equivalent documentation when required by the City's policies and procedures. Condition: During our testing of expenditures for allowable costs and activities allowed within the City's Community Development Block Grant (CDBG) program, we selected a sample of 17 expenditures and noted that, for 15 of the 17 selections tested, the City did not consistently maintain documentation demonstrating that purchase orders were issued and approved before expenditures were incurred. Specifically, purchase orders were not consistently issued and approved prior to invoice dates, indicating that authorization of certain CDBG expenditures was not documented prior to incurring costs. Effect: Without documented purchase order approval prior to incurring costs, the City may not be able to demonstrate that federal expenditures were properly authorized, allowable, and consistent with applicable program requirements. This increases the risk that unallowable or unsupported costs could be charged to federal awards and may result in questioned costs or noncompliance with federal award requirements. Cause: The City did not have adequate procedures in place to ensure purchase orders for federally funded expenditures were prepared, approved, and retained prior to incurring costs. Procedures for maintaining documentation supporting authorization of federal expenditures were not consistently followed. Questioned Costs: $0 Recommendation: We recommend the City implement and enforce procedures requiring purchase orders or equivalent authorization documentation to be prepared and approved prior to incurring federally funded expenditures. Evidence of approval should be retained in the grant expenditure file, and after-the-fact documentation should be limited to exceptional circumstances with documented supervisory approval. We further recommend the City implement a review process to verify that purchase order documentation is complete before expenditures are charged to federal awards. Repeat Finding from Prior Year(s): N/A Views of Responsible Officials: See management's corrective action plan.