Finding Text
Finding 2023-005: 21.027 - Coronavirus State and Local Fiscal Recovery Funds:COVID-19 - Material Weakness Compliance Requirement: Allowable Costs/Cost Principles Criteria: Under 2 CFR Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, specifically 2 CFR §200.308 (Revision of Budget and Program Plans), non-Federal entities are required to expend Federal award funds in accordance with the approved budget and program plan included in the Federal award. Significant deviations from the approved budget or program plan may require prior written approval from the Federal awarding agency or pass-through entity. Condition: During testing, it was noted that the Organization incurred and charged expenditures to the Federal pass-through award that were not consistent with the approved budget categories and allocations. In certain instances, expenditures exceeded the approved budget amounts within specific cost categories without evidence of formal budget modification approval from the pass-through entity which was required under the grant agreement. Effect: Failure to expend funds in accordance with the approved budget may result in noncompliance with Federal award requirements and could lead to questioned costs or required repayment if expenditures are determined to be unallowable or not properly authorized. Questioned Cost: None. Cause: The Organization does not have adequate internal controls or monitoring procedures in place to ensure expenditures are regularly compared against the approved grant budget. In addition, program and finance staff were not consistently aware of the requirement to obtain prior approval for budget revisions when reallocating funds across cost categories. Recommendation: We recommend the Organization strengthen internal controls over Federal grant financial management by: • Implementing procedures to monitor actual expenditures against the approved grant budget on a regular basis. • Establishing a process to request and obtain prior approval from the pass-through entity for budget modifications, when required. • Ensuring finance and program staff review grant budgets before charging expenditures to the award. • Providing training to relevant staff on Uniform Guidance requirements related to budget compliance. • Maintaining documentation of approved budget revisions and related correspondence with the pass-through entity. Response: There is no disagreement with the audit finding.