Finding Text
"Finding 2022-005
Activities Allowed, Allowable Costs, and Period of Performance – Material Weakness.
Criteria: The 2 CFR section 200.400 requires that the Organization must take responsibility for administering the Federal funds in a manner consistent with the underlying agreements, program objectives, and the terms and the conditions of the award. This includes implementing internal controls to ensure that costs are related to activities allowed, the costs are allowable, and the cost are incurred in the period of performance.
Condition: The Organization does not have strong document retention policies to demonstrate that costs are for activities allowed, costs are allowable, and incurred in the period of performance. In addition, they did not have systems of controls in place to ensure that expenditures meet the appropriate criteria under Activities Allowed, Allowable Costs, and Period of Performance. The result is that there were several instances in which support for expenditures was not found. In addition, for all transactions that we tested, even though most of the underlying expenditures were allowed, allowable and within the period of performance, there was no system of controls operating at the client to ensure that the costs were consistently appropriate.
Cause: The year ended December 31, 2022 was the Organization’s first year receiving federal funding. In addition, there was a lot of turnover in the employees who were involved in processing the transactions related to the award, and a lack of sufficient training.
Effect: For 4 selections out of 60 had no available support in the sample that tested activities allowed, allowable costs, and period of performance. The total value of those 4 selections is included in the questioned costs below and these items resulted in the qualified opinion for the Report on Compliance for Each Major Federal Program. Further there were multiple other sample selections that were missing evidence of supervisor approval, had incomplete information, or were inconsistently processed.
Questioned Costs: $46,871 of costs that has no available support as described above.
Repeat Finding: Not applicable as the Organization is a first time auditee.
Recommendation: We recommend that the Organization provide additional training to employees to ensure that controls operate effectively so that only allowable costs are authorized to be charged to the federal awards. Further, we recommend that document retention controls are implemented to support that charges to the federal award are meet the criteria of Activities Allowed and Allowable Costs and Period of Performance.
Views of Responsible Official: See Corrective Action Plan."