Finding Text
Finding 2025-004 Noncompliance Over Activities Allowed or Unallowed/Allowable Costs/Cost Principles Significant deficiency/ Noncompliance Criteria: The Organization should establish and maintain procedures to ensure that amounts charged to federal awards are supported by adequate source documentation and are reviewed for compliance with applicable grant, contractual, and regulatory requirements. Under 2 CFR § 200.1, a questioned cost includes an amount expended from a federal award that, at the time of the audit, lacked adequate documentation to support compliance. Condition and Context: During our testing of the Organization’s compliance requirements, we selected a sample of 25 transactions. We noted that the Organization was unable to provide an invoice or other adequate supporting documentation for one sampled expenditure. The unsupported transaction item totaled $9. Questioned costs do not exceed the 2 CFR § 200.516 greater-than-$25,000 reporting threshold. This finding is being reported due to the identified significant deficiency in internal control over compliance related to maintaining and providing adequate support for amounts charged to the federal award. Cause: The Organization did not have sufficient procedures in place to ensure that adequate supporting documentation was retained for all transactions charged to the federal program. Effect: Failure to maintain adequate supporting documentation may result in costs being unsupported or disallowed and may increase the risk of noncompliance with applicable grant, contractual, and regulatory requirements. In addition, insufficient documentation reduces management’s ability to demonstrate that costs charged to federal awards are allowable, allocable, reasonable, and properly supported. Questioned Costs: The known questioned cost associated with this exception is $9. Based on extrapolation to the applicable population, likely questioned costs are estimated at $81. Repeat Finding: This is not a repeat finding. Recommendation: Management should establish or strengthen procedures to ensure that all expenditures charged to federal awards are supported by adequate documentation. Such procedures may include maintaining centralized electronic files for invoices and related approvals, assigning responsibility for documentation retention, performing periodic reviews of sampled expenditures, and requiring follow-up on missing documentation before costs are included in federal award reporting or reimbursement requests. Management Response: Management concurs with this finding. See Corrective Action Plan.