Finding Text
2024–002 [2022–002]—Unallowable Disbursements Charged to Federal Program Type of Finding: (G) Instance of Noncompliance Related to Federal Awards Funding Agency: U.S. Department of Health and Human Services AL #: 93.231 – Epidemiology and Laboratory Capacity Award #: Various Award Period: 09/30/2021 – 09/29/2026 Estimated Questioned Costs: $7,600 Compliance Requirement: Allowable Costs/Cost Principles Statement of Condition AAIHB distributed gift cards to independent contractors as a gesture of appreciation for working extended hours related to COVID-19 contact tracing efforts. An annual bonus was also paid out to independent contractors that was not included in the signed contract. The total value of the gift cards was approximately $600, and the total value of the bonuses was approximately $7,000. Both were charged to the Epidemiology and Laboratory Capacity grant (AL #93.231). These gift cards and bonuses were provided in addition to their regular compensation. Neither set of disbursements were processed through payroll or formalized in contract terms, and there is no documentation indicating the entity obtained approval from the awarding agency. Criteria In accordance with 2 CFR §200.403, costs charged to federal awards must be necessary, reasonable, allocable, adequately documented, and conform to applicable limitations. To the extent the gift cards constitute promotional gifts, cite 2 CFR §200.421(e)(3). Payments to contractors also should conform to written contract terms and applicable procurement requirements. Contractor payments must align with procurement standards in 2 CFR § 200.318–200.324 and be governed by written contracts. Effect The use of federal funds to provide gift cards or bonuses constitutes an unallowable cost under Uniform Guidance. The questioned amount may be subject to repayment to the awarding agency or passthrough entity. Cause The auditee sought to recognize the extraordinary efforts of independent contractors during and towards the end of the COVID-19 public health response. However, they were unaware that the use of gift cards or bonuses not outlined in the contact for this purpose was inconsistent with Uniform Guidance and lacked prior approval or supporting policy. Recommendation We recommend the auditee discontinue the use of federal funds for gift card distributions or bonuses to contractors. Payments to contractors should be governed by written contracts and comply with applicable procurement standards. If the auditee believes these costs are justifiable, they should consult the awarding agency for a determination and, if necessary, reimburse the federal award. View of Responsible Officials and Corrective Action Plan We acknowledge the finding regarding the use of gift cards and bonus payments to contractors. During the Covid-19 pandemic, our staff and contractors were tasked with responding to urgent and overwhelming public health demands, particularly as the New Mexico Department of Health became overextended. To recognize the efforts and to ensure timely case reporting and investigations for tribal communities, gift cards and bonuses were used as a form of appreciation. Corrective Action Plan Moving forward, we will ensure full compliance with federal grant requirements. Specifically: 1. We will adhere strictly to the cost principles and allowability guidance outlined in federal regulations and the terms of each Notice of Award. 2. In instances where the allowability of an expense is unclear, we will proactively seek guidance and written approval from our Federal Grant Management Officer before incurring the cost. 3. We will provide refresher training to program and fiscal staff on allowable costs under federal awards to prevent recurrence of similar findings. These corrective actions will ensure future expenditures are fully compliant with federal guidelines. Corrective Action Plan Timeline As part of being a continued finding, AAIHB has already ceased the use of gift cards. Going forward we will also discontinue the use of bonuses for contractors. Within the next quarter, Finance and Program Leadership will review current grant guidance, the applicable Notice of Award, and other relevant federal requirements to ensure compliance. To prevent this issue for recurring, whenever there is uncertainty regarding the allowability of a cost, staff will consult Grants Management Officers prior to obligating or expending funds. Designation of Employee Position Responsible for Meeting Deadline Program Managers/Directors, Finance Officer, and Accounting Manager.