Finding Text
Finding 2025-003: Information on the Federal Program: Assistance Listing Number 93.568 - Low-Income Home Energy Assistance Program (LIHEAP) Award Number : 2402SCLIEA Compliance Requirements : Period of Performance. Type of Finding : Noncompliance and Significant Deficiency in Internal Control over Compliance. Criteria: Under 2 CFR §200.405 (Allocable Costs) and §200.403 (Factors Affecting Allowability of Costs), costs charged to a federal award must be allocable to the period in which the benefit is received and treated consistently in accordance with generally accepted accounting principles. Costs that benefit multiple periods must be allocated proportionately to the periods benefited. Condition: Management charged the full annual DocuSign subscription expense during the grant period January 1, 2025 through December 31, 2025. However, the subscription term extended beyond the grant’s period of performance and crossed both fiscal and grant years. The expense was not allocated between the benefiting periods. Cause: Management did not implement procedures to identify and allocate prepaid or multi-period expenses in accordance with federal cost principles and GAAP. Effect or Potential Effect: Grant expenditures were overstated during the current grant period and understated in subsequent periods. This resulted in noncompliance with federal cost principles related to allocability and proper period recognition. Context: During our testing of LIHEAP expenditures for the year ended December 31, 2025, we identified expenditures totaling $25,641, that were charged to the program year January 1, 2025 through December 31, 2025; however, the related benefit approval or service period extended beyond the grant’s period of performance. Specifically, the subscription related expense was recorded in the current grant year even though the services benefited a subsequent period. This occurred because expenditures were not reviewed to ensure proper allocation between grant periods. As a result, costs were not properly aligned with the applicable grant year, which could result in expenditures in the amount of $15,385 being charged outside the authorized period of performance. Repeat Finding: Repeat finding of 2024-004. Recommendation: We recommend management implement procedures to review subscription and other multi-period service contracts to ensure costs are properly allocated to the benefiting periods. Prepaid expenses should be recorded and expensed monthly over the term of the subscription in accordance with GAAP and federal cost principles. Views of Responsible Official: Management concurs with the recommendation that prepaid subscriptions and other multi-period expenditures be allocated to the periods receiving the benefit and charged only to eligible award periods.