FAC Explorer

Finding 370814 (2021-002)

Significant Deficiency
Requirement
B
Questioned Costs
-
Year
2021
Accepted
2024-02-27
Audit: 292503
Organization: Dallas County System of Services, Inc. (AL)
Auditor: Edwards and Wilkinson Cpa's

AI Summary

  • Core Issue: Significant weakness in how administrative costs are allocated for financial reporting, leading to potential distortions.
  • Impacted Requirements: The lack of a formal allocation method violates Uniform Guidance, which requires clear and explainable cost allocations.
  • Recommended Follow-Up: Develop a formal allocation method for indirect costs and review joint program costs to ensure accurate distribution based on measurable criteria.

Finding Text

Type of Finding: Significant weakness in allocation of administrative costs for financial reporting. Condition: For the major programs selected Dallas County System of Services, Inc. uses the de minimis 10% allocation of indirect administrative costs if indirect administrative costs are allowed for the grant. If not allowed for the grant, they are built in the approved grant budget at a rate lower than 10% allowed, so there is no reportable weakness for major programs. For financial reporting, there is no formal explainable allocation of administrative costs which could distort proper allocation of administrative costs. Costs are allocated for the administrative and accounting salaries at the budget level based on estimated time spent on programs and the remaining costs are posted to management and general for the program based on estimated non explainable allocations. Also noted in management and general, some costs that could be considered joint program costs (i.e. rent and occupancy for buildings which program supervisors are located) which could be spread to program costs of the grant based on square footages used by the program. Criteria: Under the Uniform Guidance (2 CFR 200) the organization has elected the 10 percent de minimis cost rate. Normally if the de minimis rate is elected under Uniform Guidance requires that you use the Modified Direct cost as your cost base which the Organization does on its grant budgets for federal costs. However, for financial reporting purposes there is no formal explainable allocation of indirect (administrative) costs which could distort the cost to run each program of the organization. Context: For financial reporting purposes the Organization is still using the same allocation method it used when there were only 4 grants with 1 large grant. With additional grants this allocation method may not be effective, and it is not easily explainable and there is no formal allocation of indirect costs to each program. Cause: Additional grants received by the Organization made the old allocation method not effective and not explainable. Recommendation: Come up with a formal allocation method to allocated indirect costs to each program using an explainable method (i.e. direct program costs to total direct costs) and review posting to administrative costs for joint program costs (i.e. Rent and Occupancy) and spread these costs to programs used based on an explainable method (i.e. square footage of program to total square footage). Planned corrective actions The organization agrees with the findings and will start implementing procedures to make their allocation of indirect costs using an explainable method allowed by uniform guidance and consistent with all programs.

Corrective Action Plan

Description of Finding Significant weakness in allocation of administrative costs for financial reporting. In the past, DCSOS has elected to use the 10% de minimis allocation for indirect administrative costs for all Federal grants. For State funded grants, administrative costs were a part of the budget where possible. As the organization has grown quickly in the past 3 years, a systematic process to allocate costs has not been developed and consequently, during the audit process, there was not an ‘explainable allocation’ method to review. DCSOS agrees with this audit finding. Statement of Concurrence or Nonconcurrence: Due to the rapid growth of the organization and limited staffing, a method of calculating and allocating indirect (administrative) costs has not been developed. It is noted through the audit that the absence of following the Uniform Guidance (2 CFR200) could distort the cost to run each program. Therefore, DCSOS agrees with the audit finding. Corrective Action: For the future grant application process, DCSOS will develop a formal method of allocating indirect costs to each program using an explainable method. This process will be implemented in the future grant year 2025. Proposed Completion Date: September 30, 2024 Person Responsible for Corrective Action: Financial Officer

Categories

Allowable Costs / Cost Principles Reporting

Other Findings in this Audit

  • 370813 2021-001
    Significant Deficiency
  • 370815 2021-003
    Significant Deficiency
  • 370816 2021-004
    Significant Deficiency
  • 370817 2021-001
    Significant Deficiency
  • 370818 2021-002
    Significant Deficiency
  • 370819 2021-003
    Significant Deficiency
  • 370820 2021-004
    Significant Deficiency
  • 370821 2021-001
    Significant Deficiency
  • 370822 2021-002
    Significant Deficiency
  • 370823 2021-003
    Significant Deficiency
  • 370824 2021-004
    Significant Deficiency
  • 370825 2021-001
    Significant Deficiency
  • 370826 2021-002
    Significant Deficiency
  • 370827 2021-003
    Significant Deficiency
  • 370828 2021-004
    Significant Deficiency
  • 370829 2021-001
    Significant Deficiency
  • 370830 2021-002
    Significant Deficiency
  • 370831 2021-003
    Significant Deficiency
  • 370832 2021-004
    Significant Deficiency
  • 370833 2021-001
    Significant Deficiency
  • 370834 2021-002
    Significant Deficiency
  • 370835 2021-003
    Significant Deficiency
  • 370836 2021-004
    Significant Deficiency
  • 370837 2021-001
    Significant Deficiency
  • 370838 2021-002
    Significant Deficiency
  • 370839 2021-003
    Significant Deficiency
  • 370840 2021-004
    Significant Deficiency
  • 370841 2021-001
    Significant Deficiency
  • 370842 2021-002
    Significant Deficiency
  • 370843 2021-003
    Significant Deficiency
  • 370844 2021-004
    Significant Deficiency
  • 370845 2021-001
    Significant Deficiency
  • 370846 2021-002
    Significant Deficiency
  • 370847 2021-003
    Significant Deficiency
  • 370848 2021-004
    Significant Deficiency
  • 947255 2021-001
    Significant Deficiency
  • 947256 2021-002
    Significant Deficiency
  • 947257 2021-003
    Significant Deficiency
  • 947258 2021-004
    Significant Deficiency
  • 947259 2021-001
    Significant Deficiency
  • 947260 2021-002
    Significant Deficiency
  • 947261 2021-003
    Significant Deficiency
  • 947262 2021-004
    Significant Deficiency
  • 947263 2021-001
    Significant Deficiency
  • 947264 2021-002
    Significant Deficiency
  • 947265 2021-003
    Significant Deficiency
  • 947266 2021-004
    Significant Deficiency
  • 947267 2021-001
    Significant Deficiency
  • 947268 2021-002
    Significant Deficiency
  • 947269 2021-003
    Significant Deficiency
  • 947270 2021-004
    Significant Deficiency
  • 947271 2021-001
    Significant Deficiency
  • 947272 2021-002
    Significant Deficiency
  • 947273 2021-003
    Significant Deficiency
  • 947274 2021-004
    Significant Deficiency
  • 947275 2021-001
    Significant Deficiency
  • 947276 2021-002
    Significant Deficiency
  • 947277 2021-003
    Significant Deficiency
  • 947278 2021-004
    Significant Deficiency
  • 947279 2021-001
    Significant Deficiency
  • 947280 2021-002
    Significant Deficiency
  • 947281 2021-003
    Significant Deficiency
  • 947282 2021-004
    Significant Deficiency
  • 947283 2021-001
    Significant Deficiency
  • 947284 2021-002
    Significant Deficiency
  • 947285 2021-003
    Significant Deficiency
  • 947286 2021-004
    Significant Deficiency
  • 947287 2021-001
    Significant Deficiency
  • 947288 2021-002
    Significant Deficiency
  • 947289 2021-003
    Significant Deficiency
  • 947290 2021-004
    Significant Deficiency

Programs in Audit

ALN Program Name Expenditures
17.259 Wia Youth Activities $205,225
17.258 Wia Adult Program $122,083
93.276 Drug-Free Communities Support Program Grants $121,715
16.540 Juvenile Justice and Delinquency Prevention_allocation to States $70,005
93.788 Opioid Str $46,453
93.243 Substance Abuse and Mental Health Services_projects of Regional and National Significance $35,622
93.558 Temporary Assistance for Needy Families $31,365