Finding Text
Questioned
Cost
$ 5,174
Finding No. 2023 002: Activities Allowed and Unallowed (Control Deficiency)
Allowable Costs and Cost Principles (Control Deficiency)
Federal Agency: U.S. Department of State
Assistance Listing
Number and Title: 19.015 – Cultural, Technical and Educational Centers
Condition
During our audit, we noted the following instances of noncompliance:
Activities Allowed and Unallowed / Allowable Costs and Cost Principles
Due to the application of an incorrect allocation rate, we noted salaries and wages were inaccurately allocated to the Cultural, Technical and Educational Centers program for 2 out of 26 individuals selected for testing. Furthermore, at the end of the fiscal year, management recorded an adjustment in an attempt to correct the error, however, the amounts calculated in the adjustment were inaccurate.
Criteria
Activities Allowed and Unallowed / Allowable Costs and Cost Principles
Section 200.403 – Factors affecting allowability of costs of Title 2 U.S. Code of Federal Regulations (“CFR”) Part 200, states “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… (g) Be adequately documented.”
Cause
Activities Allowed and Unallowed / Allowable Costs and Cost Principles
We were informed by management that the inaccurate allocation of amounts to the Cultural, Technical and Educational Centers program may be due to the untimely updating of level of effort allocation percentages on the individual’s “Personnel Budget Form.” The inaccurate calculation of amounts included in the correcting adjustment may be attributed to general management oversight.
Effect
Activities Allowed and Unallowed / Allowable Costs and Cost Principles
Failure to adhere to the allowable cost principles of Title 2 U.S. CFR Part 200 exposes the Center to an undue risk of misuse of federal funds. Furthermore, the inaccurate calculation of amounts included in the correcting adjustment resulted in the following:
• An overstatement of $5,174 in expenditures allocated to the Cultural, Technical and Educational Centers grant.
• An overstatement of $5,032 in expenditures allocated to a non Federal grant.
• An overstatement of $24 in expenditures allocated to the U.S. Agency for International Development – Foreign Assistance for Program Overseas grant.
• An understatement of $10,229 in expenditures allocated to the U.S. Department of State – Public Diplomacy Programs grant.
Context
Activities Allowed and Unallowed / Allowable Costs and Cost Principles
A sample of 26 salaries and wages related expenditures totaling approximately $117,000 were selected for audit from a population of approximately $14,020,000 in salaries and wages related expenditures. Our test found two instances in which salaries and wages were erroneously recorded under the Cultural, Technical and Educational Centers program. Our sample is a statistically valid sample.
Repeat Finding
This is not a repeat finding.
Recommendation
We recommend that the Center perform the following to ensure compliance:
Activities Allowed and Unallowed / Allowable Costs and Cost Principles
Ensure the level of effort allocation percentages on an individual’s “Personnel Budget Form” are updated in an accurate and timely manner. Also, ensure that correcting adjustments, as necessary, are calculated in an accurate manner.
Cause and View of Responsible Officials
Activities Allowed and Unallowed / Allowable Costs and Cost Principles
New payroll allocation procedures were implemented during fiscal 2023 in an effort to streamline the allocation process. Starting in fiscal 2024, management has reverted to the fiscal 2022 payroll allocation procedures to ensure that the proper percentages are used in calculating charges to its contracts and grants. The procedures used in fiscal 2022 and prior resulted in clean audit opinions and can be trusted to allocate payroll properly. The allocation errors noted during the audit were corrected in the subsequent fiscal year.