Finding Text
2022-003 Compliance and Internal Controls over Allowable Costs and Earmarking (Significant Deficiency) Assistance Listing Number 64.033 VA Supportive Services for Veteran Families, VA Supportive Services for Veteran Families ? Shallow Subsidy, and COVID ? 19 VA Supportive Services for Veteran Families 2020-2021 and 2021-2022 Funding U.S. Department of Veteran Affairs Criteria: Under 2 CFR Section 200.303(a), non-federal entities must establish and maintain effective internal controls to provide reasonable assurance that the entity is managing the federal awards in compliance with statues, regulations, and the terms and conditions of the award. Additionally, grantees are required to have a detailed breakout of administrative costs along with any supporting documents for those expenses for auditing and oversight. Title 2 CFR 200.302 requires the financial management system of each non-Federal entity provide records that identify adequately the source and application of funds for federally-funded activities. Furthermore, the grant agreement requires that no more than 10% of supportive services grant funds may be used for administrative costs. Condition: Indirect cost allocation methodology used by the Agency to charge expenses to the grant is not allowable per grant. Additionally, administrative costs charged to closed out grants during the year exceeded the total allowable administrative costs by $6,365. Cause: The Company was charging administrative expenses to the grant based on an internally drafted allocation methodology and not on actual administrative costs incurred, which is not in line with grant agreement. Additionally, with the turnover in the Agency, reconciliation of grant funds received to the maximum allowed administrative costs per the agreement was not performed. Effect: While indirect costs charged to grants may be allowable, these need to be supported by actual expense incurred or the Agency risks elimination of indirect costs from future awards and / or loss of entire award and / or return of unsubstantiated administrative costs to the grantor. Questioned Costs: $6,365 Perspective: Grantor has identified that the Agency?s indirect allocation methodology is not in compliance with award requirements. Methodology as revised by the Agency was still not deemed in compliance. Recommendation: The Agency should establish and follow allowable indirect allocation policy based on identifiable measures. The indirect costs charged to grant should be able to be substantiated by actual costs incurred. Views of Responsible Officials: We concur with the recommendation, please see Corrective Action Plan.