Finding Text
Statement of Condition NEW did not submit the required expenditure reports to the pass-through entity during the contract period. As a result, the pass-through entity did not receive the cumulative payment and expenditure information for purposes of monitoring contract expenditures and reconciling payments to actual costs incurred. Criteria or Specific Requirement Pursuant to the terms of NEW’s subaward agreement with the pass-through entity, NEW is required to monitor expenditures and submit expenditure reports to the pass-through entity. This expenditure data is used, as necessary, to adjust payments during the contract term and contract closeout process to ensure payments to NEW do not exceed the allowable profit margin. Questioned Costs Undetermined. Effect Failure to submit required expenditure reports resulted in noncompliance with the reporting requirements of the federal award over the contract term. In addition, the absence of timely expenditure reporting limited the pass-through entity's ability to monitor expenditures and determine whether cumulative contract payments over the contract term remained within established contractual limitations, including allowable profit margin provisions. Cause Management did not establish and maintain effective internal controls to ensure that required financial reports were prepared, reviewed, and submitted to the pass-through entity in accordance with contract requirements. Recommendation We recommend that management establish formal policies and procedures to identify all required reports associated with federal awards, assign responsibility for report preparation and submission, maintain documentation evidencing timely submission, and implement supervisory review procedures to ensure compliance with reporting requirements. Views of Responsible Officials and Corrective Action Plan Management agrees with the findings and will implement procedures to identify, prepare, review, and submit all required reports associated with federal awards.