Finding Text
Accounting Policies and Procedures Repeat Finding: No Condition: The Organization has established written financial policies and procedures; however, the policies and procedures were not consistently implemented or followed during the year. The Organization did not have sufficient processes in place to ensure that policies for administering Federal awards were understood and consistently applied. The Organization's established policy provides for the allocation of certain indirect and shared costs based on full‐time equivalent employees (FTEs). However, certain indirect and shared costs were allocated to the Federal award based on grant budget amounts or predetermined allocation percentages rather than the methodology established by the Organization's written policy. We recalculated the applicable indirect and shared cost allocations using the Organization's established FTE methodology and determined that the resulting difference was not material to the Federal program. We also identified deficiencies related to the allocation and supporting documentation of personnel costs charged to the Federal award which are separately reported in Finding #2025‐003. Criteria: Under 2 CFR § 200.303, the Organization is required to establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that Federal awards are managed in compliance with Federal statutes, regulations, and the terms and conditions of the Federal awards. Effective internal control includes procedures to implement and monitor established policies and to ensure that personnel responsible for administering Federal awards understand and consistently apply those policies. Additionally, the Uniform Guidance establishes specific requirements applicable to the administration of Federal awards, including requirements related to allowable costs, procurement, cash management, property management, subrecipient monitoring, and other areas, as applicable to the Organization's Federal programs. Cause: The Organization did not have sufficient procedures in place to communicate, implement, and monitor compliance with its established financial policies and procedures. Effect: The failure to consistently implement and monitor established financial policies and procedures increases the risk that costs may be allocated or charged to Federal awards inconsistently and that transactions may not comply with applicable Federal requirements. Although the differences identified from recalculating the indirect and shared cost allocations under the Organization's established FTE methodology were not material to the Federal program, other deficiencies associated with personnel cost allocations resulted in separately reportable matters, as described in Finding #2025‐003. The broader lack of controls over implementation and monitoring of established policies increases the risk that additional noncompliance could occur and not be prevented, or detected and corrected, on a timely basis. Questioned Costs: None attributable to the indirect and shared cost allocation matters described in this finding. Questioned costs associated with personnel cost allocations, if applicable, are reported in Finding #2025‐003. Perspective Information: The Organization has established written financial policies and procedures; however, controls were not sufficient to ensure that those policies were consistently communicated, implemented, and followed. During the audit, instances were identified in which established allocation methodologies were not applied to indirect, shared, and personnel costs charged to the Federal award. For the indirect and shared costs addressed in this finding, the auditors recalculated the applicable allocations using the Organization's established FTE methodology and determined that the resulting difference was not material to the Federal program. Deficiencies specifically related to personnel cost allocations and supporting documentation are separately reported in Finding #2025‐003. Recommendation: We recommend that the Organization establish procedures to ensure that its financial policies and procedures are effectively communicated, implemented, and consistently followed. Personnel responsible for administering Federal awards should be provided with the applicable policies and appropriate training regarding their responsibilities, including the methodologies required for allocating indirect, shared, and personnel costs to Federal awards. Management should periodically monitor compliance with established policies and document its review, including reviewing allocation methodologies and supporting documentation to determine whether costs charged to Federal awards are consistent with established policies and applicable Federal requirements. The Organization should also periodically review its financial policies and procedures to ensure they remain appropriate for its current operations and applicable Federal requirements. Any changes to established policies or allocation methodologies should be formally documented and approved before implementation. Reporting Views of Responsible Officials: Management agrees with the finding and will develop and formally adopt written accounting and administrative policies and procedures addressing applicable Uniform Guidance requirements.