Finding Text
Finding # 2023-003
Program: AL 20.509 – Formula Grants for Rural Areas and Tribal Transit Program – Allowability
Grant Number & Year: NE-2022-019; September 9, 2022
Federal Grantor Agency: U.S. Department of Transportation
Pass-Through Entity: Nebraska Department of Transportation
Criteria: The U.S. Department of Transportation adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards in Title 2 CFR § 1201.10 (January 1, 2023).
Title 2 CFR § 200.403 (January 1, 2023) requires costs to be reasonable, necessary, and adequately documented.
Title 2 CFR § 200.425(a) (January 1, 2023) states the following regarding the allowability of audit services:
A reasonably proportionate share of the costs of audits required by, and performed in accordance with, the Single Audit Act Amendments of 1996 (31 U.S.C. 7501–7507), as implemented by requirements of this part, are allowable.
A good internal control plan requires procedures to ensure that all methods used to allocate costs to a Federal grant are reasonable and adequately documented.
Condition: Kimball County’s allocation of audit costs between Federal and non-Federal activities was not reasonable.
Repeat Finding: No
Questioned Costs: $11,716 known
Statistical Sample: No
Context: During the fiscal year ending June 30, 2023, Kimball County paid for both the fiscal year 2021 and 2022 audits, totaling $39,987. Of this amount, the County allocated $23,987 to AL #20.509. Per the Transit Administrator, all audit costs above $8,000 each year were allocated to AL #20.509 because, prior to requiring a Single audit each year, the County paid a different CPA $8,000 for the annual audit. This CPA did not perform Single Audits; therefore, the County contracted with the Nebraska Auditor of Public Accounts (APA). This allocation was not reasonable because much of the additional audit costs incurred for the audit conducted by the APA were clearly unrelated to Single Audit Act requirements.
When sending the final invoice for the audit, the APA includes a detailed breakdown of how much of the total audit cost is attributable to each section of the audit. Based on that breakdown, we calculated a more reasonable allocation, as shown in table below. Based on this more reasonable allocation, we question costs of $11,716.
Cause: Procedures were not adequate to ensure that methods used to allocate costs were reasonable.
Effect: Increased risk for unallowable costs to be charged to Federal awards, leading to possible Federal sanctions.
Recommendation: We recommend the County implement procedures to ensure that all methods used to allocate costs to Federal grants are reasonable and adequately documented.
View of Officials: The main reason the costs to be allocated the way they were, was the county would not have switched vendors if the transit had not met the threshold requiring a vendor who could provide a Single Audit. KCTS does realize the decision was based on an inaccurate understanding of other county department’s cost allocations of federal dollars and the uniform code. Moving forward, we will work to research any additional factors that may need to be considered in the cost allocation.