Finding Text
Criteria: Under 2 CFR 200.403, costs charged to a federal award must be necessary, reasonable, and allocable to the award. They must also follow the limits and exclusions in the award terms and be adequately documented. Under 2 CFR 200.303, the non-federal entity must keep effective internal control over the award so that it can reasonably ensure compliance with federal statutes, regulations, and the award terms. The Emergency Food and Shelter Program (EFSP) award terms and Responsibilities and Requirements Manual define which costs are eligible, including eligible populations, cost categories, and documentation. Under 2 CFR 200.332, a pass-through entity must monitor its subrecipients to ensure that subawards are used for authorized purposes. Condition: The EFSP National Board reviewed the City's EFSP expenditures and found that costs of $1,074,061 charged to the program did not meet program requirements. It therefore determined these costs to be unallowable. Questioned Costs: $1,074,061 (Known) Context/Cause: The City's total EFSP expenditures for the year were $5,259,831. The National Board found unallowable costs of $1,074,061, or 20.4% of total program expenditures. The City did not have adequate controls to ensure that costs charged to the program, including those incurred by subrecipients, were reviewed against EFSP eligibility and documentation requirements before reimbursement was requested. Effects: Controls were not in place over the process of allowable costs. The City must repay the $1,074,061 in unallowable expenditures. Recommendation: We recommend the City enhance internal controls to ensure compliance with allowable cost requirements. Auditee’s Response: The City acknowledges the finding and recognizes the importance of ensuring that all expenditures charged to grant funded programs comply with applicable allowability and documentation requirements. During the period under review, the City engaged a consulting firm to provide compliance support for the program, including guidance related to allowable costs. The City relied on this professional guidance in administering the program. The finding highlights the need for additional City-level oversight of compliance and management will work to enhance controls to ensure compliance going forward.