Finding Text
2023-004 Finding – Federal Award
Type:
Allowable Costs – Non-Compliance and Material Weakness in Internal Control over Compliance.
Identification of Federal Program:
Research and Development Cluster:
AL Number: 81.086 Conservation Research and Development Program
Criteria / Requirement:
2 CFR section 200.303 requires that non-federal entities receiving federal awards establish and maintain internal control over the federal awards that provides reasonable assurance that the non-federal entity is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards.
Condition / Context:
It was noted during the audit that there were insufficient internal controls over expenses recorded through allocations related to federal grants, as allocation journal entries were created and posted by one individual. Of 25 expenditures sampled, 12 were allocation journal entries. The payroll allocation journal entries are a manual process in which time is tracked per timesheets but then is input into a workbook to allocate expenses to funders based on percentage of time dedicated to certain programs. Of the 10 allocated payroll expenditures, there were 2 instances where the payrate used to calculate the allocation did not match the approved current payrate with the associated employee. Cause:
Procedures were not in place to ensure that Forth is maintaining adequate internal controls over compliance in regards to allocated expenditures. Additionally, the manual process in which these allocations are calculated leaves open the possibility of misallocating amounts among funders.
Effect:
Failure to maintain sufficient internal controls and proper procedures may result in over-allocation or under-allocation of expenditures related federal awards and non-compliance with federal awards.
Questioned Costs:
None.
Recommendation:
The Organization should establish written policies and procedures regarding allocation processes, including ensuring internal controls are in place. It would also be beneficial to eliminate or reduce the amount of manual inputs into the allocation process.
Management’s response:
We agree with the auditor’s comments, and the following action will be taken to improve the situation. We will establish written policies and procedures regarding allocation processes, including ensuring internal controls are in place by November 30, 2024. Simultaneously, we will also consider options to eliminate or reduce the amount of manual inputs into the allocation process.