Finding Text
Finding No.: 2024-005 - Allowable Costs/Cost Principles Identification of the federal program: Federal Agency: U.S. Department of the Interior AL No. and Title: 15.875 Economic, Social and Political Development of the Territories Federal Award No.: Compact of Free Association Program, As Amended Criteria or specific requirement (including statutory, regulatory or other citation): 2 CFR 200.403(a) states that federal program expenditures should be necessary and reasonable for the performance of the Federal award in accordance with allowable costs/cost principles requirements and 2 CFR 200.403(g) states that costs should be adequately documented. Furthermore, 2 CFR 200.303(a) states that the subrecipient must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: Supporting documentation are insufficient to support whether transactions are necessary and reasonable for the performance of the Federal award. Cause: The College lacks adequate internal controls over compliance with applicable allowable cost/cost principles requirements, specifically, retaining sufficient documentation to support transactions and ensuring expenditures charged to federal program are necessary and reasonable for the performance of the Federal award. Effect or potential effect: The College is in noncompliance with applicable allowable cost/cost principles requirements. Questioned costs: Undeterminable. Due to insufficient information and unestablished allocation, questioned costs related to the federal expenditures that may result from discrepancies noted are not determinable. Context: We identified 2,122 transactions recorded during the year totaling $2,200,329. We tested 60 transactions totaling $191,938. The samples were statistically valid. Of 60 transactions tested, 20 (or 33%) have insufficient documentation to support whether transactions are necessary and reasonable for the performance of the Federal award. Details of samples with noncompliance are as follows: For item #s 1 through 4, we noted that rate paid to the employees is higher compared to the rate per employee contract on file. Further, for item #4, there is no supporting documentation on file to substantiate the hardship differential paid to the employee. For item #s 5 through 6, the hours paid is higher compared to the hours recorded on the approved timesheet. Item # 7 relates to payroll transaction of a salaried employee whose submission of timesheet is not required. However, we noted that hours paid is higher compared to the hours approved by the supervisor. Context, continued: For item #s 8 through 15 and #19, there were no approved timesheet on file to substantiate the actual number of hours worked. For item #s 16 through 19, approval of the amount paid to employees relating to leave was not on file. Further, for item #19, there is no supporting documentation on file to substantiate the hardship differential paid to the employee. Item #20 relates to employee’s related fringe benefits (employer contributions for health insurance) allocated and charged to federal grant for which no sufficient documentation was on file (i.e. semester section offering or instructor’s schedule) to ascertain whether service was received. Identification as a repeat finding, if applicable: 2023-005 Recommendation: College management should improve internal control policies and strengthen controls and procedures over compliance with applicable allowable costs/cost principles requirements, specifically, retaining sufficient documentation to support transactions. Views of responsible officials: The College agrees with the finding and provides details in its Corrective Action Plan.