Finding Text
ACTIVITIES ALLOWED OR UNALLOWED, ALLOWABLE COSTS/COST PRINCIPLES – VARIOUS Repeat of finding 2022-005, 2023-005 Finding Type: Significant Deficiency in Internal Controls over Compliance, Noncompliance ALN and Program Title: 93.676 – Unaccompanied Alien Children Program Federal Agency: U.S. Department of Health and Human Services Pass-Through Entity: Liberty Wilderness Crossroads Camp Contract Number: 90ZU0501 Criteria: Under 2 CFR 200.405(d), “If a cost benefits two or more projects or activities in proportions that can be determined without undue effort or cost, the cost must be allocated to the projects based on the proportional benefit. However, when those proportions cannot be determined because of the interrelationship of the work involved, then… the costs may be allocated or transferred to benefitted projects on any reasonable documented basis.” Per the Organization’s policies and procedures, certain costs that benefit all programs should be allocated using allocation percentages that are calculated semi-annually. Under 2 CFR 200.438 of the Uniform Guidance, “Costs of entertainment, including amusement, diversion, and social activities and any associated costs (such as gifts), are unallowable unless they have a specific and direct programmatic purpose and are included in a federal award.” Per the program compliance supplement and 45 CFR 75.465, rental costs under “less-than-arm's-length” leases are allowable only up to the amount that would be allowed had the non-federal entity continued to own the property. This amount would include expenses such as depreciation, maintenance, taxes, and insurance. Additionally, 2 CFR 200.303(a) of the Uniform Guidance requires non-federal entities to establish and maintain effective internal control over federal awards that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Condition: The auditor tested 70 program expenses (this was not a statistically valid sample) and noted the following: 1. For 4 expenses, the wrong allocation percentages were used to allocate costs for the period. 2. For 6 credit card expenses, the Organization did not have adequate supporting documentation. 3. For 2 credit card expenses, the total of the charges identified by the Organization do not agree to the expense recorded. 4. For 2 expenses, the costs are considered to be unallowable entertainment costs. 5. For 5 related party vehicle lease expenses, the portion paid over the amount allowed under 45 CFR 75.465 is considered to be unallowable. Cause: 1. Inadequate management review of allocations used for the costs and/or inadequate support for the allocation of the costs. 2. Management approval of credit card charges that are not supported by receipts or other documentation, or the Organization not maintaining the supporting documentation. 3. Difficulties with the credit card company where the Organization could not reconcile the costs in the statement to those that the employees were coding, and differences were typically coded to travel expenses. 4. Inadequate management review of costs that are allowable vs. unallowable for the program. Effect: Incorrectly allocated, unsupported, and unallowable costs were charged to the program, which could result in the grantor requiring repayment. Questioned Costs: Known questioned costs total $9,539, determined by calculating the difference between the costs allocated to the program and the costs that should have been allocated to the program using the allocation percentages in effect at the time the expenses occurred, and by totaling unsupported and unallowable costs. Likely questioned costs total $29,713, determined by dividing the known questioned costs by the total of the sample and applying the error rate to the population of expenditures. Recommendation: We recommend management more specifically review the allocations used when reviewing costs that are allocated among programs, that management ensure all credit card charges are adequately supported and not charge unsupported costs to federal awards, and that management gain a better understanding of allowable and unallowable costs for the program and ensure unallowable costs are not charged to the program. Views of Responsible Officials and Planned Corrective Actions: See management’s response and Corrective Action Plan on page 55.