Finding Text
2023-001 – Internal Control over Compliance and Compliance with Activities Allowed or Unallowed and
Allowable Costs/Cost Principles
Information on Federal Program(s) -
Department of Education
Assistance Listing Number: 84.351
Assistance Listing Name: Arts in Education National Program
Grant Award Numbers: S351A220007
Award Period: October 1, 2022 to September 30, 2023
Criteria or Specific Requirement –
The Uniform Guidance in 2 CFR Section 200.303 requires that non-Federal entities receiving Federal awards (i.e.,
auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal
statues, regulations, and the terms and conditions of the Federal award.
In addition, per 2 CFR Section 200.403, “Except where otherwise authorized by statute, costs must meet the following
general criteria in order to be allowable under Federal awards:
(a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these
principles.
(b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or
amount of cost items.
(c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other
activities of the non-Federal entity.
(d) Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any
other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as
an indirect cost.
(e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and
local governments and Indian tribes only, as otherwise provided for in this part.
(f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federallyfinanced
program in either the current or a prior period.
(g) Be adequately documented.
(h) Cost must be incurred during the approved budget period. The Federal awarding agency is authorized, at
its discretion, to waive prior written approvals to carry forward unobligated balances to subsequent budget
periods pursuant to § 200.308(e)(3).”
Condition – In evaluating the Center’s compliance with the requirements of Activities Allowed or Unallowed and
Allowable Costs Cost Principles, our test work identified two instances out of a sample of sixty payroll transactions,
totaling $41,872.98, in which employees were not paid according to their contract. For the two exceptions, the
employees were underpaid a total of $1.48.
Cause – The Center did not adhere to their internal process to ensure approved salary information was accurately
applied.
Effect or Potential Effect – Without adequate internal controls in place to ensure costs are properly verified and
applied, the Center could inaccurately charge expenditures to the federal program.
Questioned Costs – N/A
Context – This is a condition based on testing of the Center’s compliance. Based on tested samples, we noted a total
underpayment of $1.48. The prevalence of the finding is detailed in the condition section above. The samples were
selected using a non-statistical method.
Repeat Finding – This is a repeat finding from prior year. While the prior year finding resulted in a net overpayment
and current year finding resulted in a net underpayment, the fact that management is not adhering to their internal
control processes requires this finding to be considered a repeat finding. This was reported as finding 2022-002 in the
2022 report.
Recommendation - We recommend management ensure the Center strengthen their internal process to ensure that
employee salary information recorded in the payroll system are approved, supported by salary documentation in the
personnel files, and accurately applied.
Views of Responsible Officials – After performing a detailed analysis, the Center’s management identified that the
likely net underpayment amounted to $111.52, while the likely net overpayment was $83.20. The likely underpayment
and overpayment were determined by management through examination of the total salary charged to the federal
program. The Center’s management agrees with the finding and will strengthen the internal process surrounding the
activities allowed or unallowed and allowable costs and will ensure adequate documentation is in place and approved
salary rates are consistently and properly applied. See the Center’s corrective action for more details.