Finding Text
Program: Head Start Cluster
Assistance Listing Number: 93.600
Federal Agency: U.S. Department of Labor
Federal Award Identification: 02HE00012301C6, 02HP000313-01, 02CH11211-03, 02CH01121101C3, 02HP000066-05, 02HP00006603C3, 02CH011112-03, 02CH011112-04, CT9250143, CT9250144
Criteria: Allowable costs – To receive reimbursement for the federal grant, the organization is required is required to incur qualified expenses under 2 CFR Subpart E. These expenses should be supportable by documentation and have occurred during the fiscal year.
Condition: During the course of our audit procedures performed on allowable costs, it was noted that the organization claimed reimbursement for expenses that did not exist, and there were instances where the expenses did exist, but had occurred in a prior period. Additionally, there were instances where sufficient documentation could not be provided.
Questioned costs: $325,059 related to funds requested for reimbursement for which there was no related expense. $1,508 related to expenses incurred in a prior period. $719 related to expenses for which there was insufficient support.
Context: We requested the detail of all expenditures reported in the schedule of expenditures of federal awards. The organization was not able to provide the detail of $325,059 of expenditures and determined they were reported in error. For the expenditures that could be supported, we tested 40 out of 5,418 transactions and noted that two were incurred in a prior period. The value of the sample was $42,793, and the value of the transaction related to a prior period was $1,508. Additionally, sufficient supporting documentation could not be located for the two of the 40 transactions tested totaling $719. The sample was not and was not intended to be statistically valid.
Effect: The federal agency was overbilled for reimbursement of expenditures.
Cause: The Settlement did not have adequate controls and procedures in place to ensure accuracy of expenditures requested for reimbursement.
Repeat finding: This is not a repeat finding.
Recommendation: We recommend that grant reimbursement requests be reviewed prior to submission by the Controller and/or CFAO. This review should include the verification of the existence of qualified expenditures.
Views of responsible officials and planned corrective actions: The Settlement agrees with the finding.
University Settlement has implemented a number of compensating controls to mitigate the risk of any future overdraws of government contract funds.
As part of the monthly process, it is required that the preparer of the invoice be separate from the reviewer and approver of the invoice and that the preparer provide an expense
report verifying the amount submitted for payment. The contract-specific monthly expense report (Director Report generated through Sage Intacct) is reviewed for accuracy and completeness by both the preparer and the reviewer. For OHS, specifically, the reviewer and approver receive both the monthly Director Report and a summary of payments received to date. The approver is either the Controller or the CFAO.
Once approved, the reimbursement request with expenses and backup documentation is submitted to the funder, who performs a final review prior to releasing payment for reimbursement.
Additionally, for year-end, the fiscal team begins the reconciliation process with the previously audited year-end A/R balances by contract. They then verify that subsequent receipts substantiate the receivable previously recorded in the books. Expenses for each contract are billed monthly by recording a receivable and revenue. Implementation began July 2022.