Finding Text
Type of Finding: Significant Deficiency in Internal Control over Compliance
Federal Agency: Department of the Treasury
Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds
Assistance Listing Number: 21.027
Federal Award Identification Number and Year: DA-202201-00320-2022, DA-251-2022, DA-230-2022
Pass-Through Agency: King County Regional Homelessness Authority
Pass-Through Number(s): DA-202201-00320, DA-251, DA-230
Award Period: January 1, 2022, to December 31, 2022, January 1, 2022, to December 31, 2022, January 1, 2022, to December 31, 2022
Criteria or specific requirement: 2 CFR 200.303(a) states that a non-federal entity must "Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with 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)". In addition, 2 CFR 200.414(f) states that "...As described in § 200.403, costs must be consistently charged as either indirect or direct costs but may not be double charged or inconsistently charged as both. If chosen, this methodology once elected must be used consistently for all Federal awards until such time as a non-Federal entity chooses to negotiate for a rate, which the non-Federal entity may apply to do at any time".
Condition: During testing of indirect costs, 3 of the 11 contracts tested exceeded the 10% de minimis indirect cost rate elected by the organization.
Questioned costs:
ALN Contract Known Questioned Costs Likely Questioned Costs
21.027 DA-202201-00320 $5,554 None
21.027 DA-251 $22,994 None
21.027 DA-230 $463 None
Context: CLA tested the entire population (11 contracts) for indirect costs charged to the major program. Of the contracts tested, 3 were found to be out of compliance with the provisions for 2 CFR 200.303(a) and 2 CFR 200.414(f). Indirect costs exceeding the 10% de minimis cost rate elected by CCS totaled $29,011.
Cause: Due to the high volume of client assistance in these programs, there can be several general ledger reclassifications in each month. This is because clients may be eligible for a specific funding source or contract that differs from the original coding. This can lead to multiple general ledgers being sent between the accounting department and the program compliance teams. At times there has been a lack of communication to confirm the general ledger is finalized with indirect at 10%. Program managers will accidentally invoice before the adjustment.
Effect: Without adequate documentation and controls in place to ensure costs are reasonable and intended for the program charged, CCS could incorrectly charge expenditures to the federal program, report fraudulent expenditures, or not request appropriate reimbursement that CCS is entitled to under the terms of the grant. Inadequate allocation of indirect costs to federal programs may result in noncompliance with grant regulations, which could result in penalties or repayment obligations.
Repeat Finding: No.
Recommendation: CLA recommends that emphasis be placed during the billing process to ensure that no more than the 10% de minimis cost rate is charged each month.
Views of responsible officials: There is no disagreement with the audit finding.