Finding Text
Statement of Condition During testing of expenditures and reimbursements related to the federal program, NEW received reimbursements based upon participant milestones achieved. The milestone payments were calculated based on an approved program budget, as established in the subaward agreement. Audit procedures identified that approved program budget on which milestone payments were based was significantly in excess of actual costs, causing total reimbursements received under the program to exceed actual allowable costs incurred by NEW for the period under audit. NEW did not obtain written approval or documentation from the pass-through entity indicating that funds received in excess of actual allowable costs could be retained. Furthermore, the pass-through entity indicated specific procedures surrounding the use of program profits, whereby profit earned over the contract term must either be reinvested into the program in accordance with a pre-approved plan, or returned to the funder. No such plan was submitted by NEW or approved by the pass-through entity. The contract term ended after the year under audit, in September 2025. Total excess reimbursements over the contract term are therefore unknown as of the report date. Criteria or Specific Requirement Federal awards and subawards funded under Uniform Guidance are subject to the requirement that costs charged to the award be allowable, reasonable, allocable, and adequately documented. The subaward agreement further provides that payment shall be based on line-item budget reimbursement and permits the pass-through entity to recover improperly incurred costs, overpayments, and funds not expended in accordance with the approved budget at the end of the contract term. Questioned Costs Undetermined. Effect NEW may have retained federal funding in excess of the amount allowable under the terms and conditions of the award. As a result, federal expenditures reported for the program and amounts reimbursed under the award may be overstated. NEW may also be subject to repayment of funds to the pass-through entity. Cause Management relied on milestone-based payment provisions contained within the program scope of work and did not perform a reconciliation of cumulative reimbursements received to actual allowable program costs incurred. As a result, excess reimbursements were not identified, reported, or returned to the pass-through entity on a timely basis. Recommendation We recommend that management: • Reconcile cumulative federal reimbursements received to actual allowable and allocable program expenditures over the contract term. • Return any amounts determined to constitute unallowable excess reimbursement. • Implement procedures requiring periodic reconciliation of reimbursement claims to actual allowable expenditures. Views of Responsible Officials and Corrective Action Plan Management agrees with the finding and will implement procedures to reconcile reimbursement amounts to actual expenditures and program activity.