Finding Text
Statement of Condition During our testing of shared program and administrative expenses, we noted that NEW allocated costs to federal awards using budgeted percentages established at the beginning of the fiscal year. The budgeted allocation percentages were not subsequently reconciled to actual expenditures or actual program activity. As a result, amounts charged to federal awards were based on estimates rather than actual costs incurred for the benefit of each award. Criteria or Specific Requirement Under 2 CFR Part 200, costs charged to federal awards must be adequately documented, reasonable, allocable, and based on the relative benefits received by each program. Allocation methodologies should be supported by actual costs and updated periodically to reflect actual activity. Estimated allocations used for interim charging should be reconciled to actual costs in a timely manner. Questioned Costs Undetermined. Effect Costs charged to federal awards may not accurately reflect the actual benefit received by each program. Consequently, federal awards may have been overcharged or undercharged, resulting in potential questioned costs and noncompliance with federal cost principles. Cause Management did not have procedures in place to periodically compare budgeted allocations to actual costs and activity and to adjust charges to federal awards accordingly. Recommendation We recommend that management establish procedures to allocate costs based on actual expenditures and activity measures. Where estimates are used for interim reporting purposes, management should perform periodic reconciliations to actual costs and make any necessary adjustments to ensure federal programs are charged only for their allocable share of costs. For example, salary and related costs should be allocated based on contemporaneous time records kept by employees who are allocated to more than one program and/or federal grant source, while occupancy related costs should be allocated based on square footage utilized. Views of Responsible Officials and Corrective Action Plan Management agrees with the finding and will implement procedures to periodically reconcile allocation methodologies to actual expenditures and program activity.