Finding Text
2023-001 – Equipment and Other Capital Expenditure
Statement of Condition: During the 2023 audit, vehicle lease expenditures similar to those questioned in one previous grant year. The previously questioned expenditures pertain specifically to the grant budget period from August 1, 2019 to July 31, 2020. Although the Home has received email guidance from the Administration for Children and Families (ACF) and annual budget approvals, formal written clearance of these specific lease arrangements remains pending.
Criteria: In accordance with 45 CFR 75.465, rental costs under leases which are required to be treated as capital leases under GAAP are allowable only up to the amount that would be allowed had the non-Federal entity purchased the property. The ACF has questioned the allowable portion of these vehicle leases, and a final determination is still under review.
Cause: Despite receiving email guidance from ACF indicating the appropriateness of the lease arrangements and obtaining annual budget approvals from the Office of Refugee Resettlement (ORR), formal written clearance of these vehicle leases has not been provided. This lack of formal approval prevents the complete resolution of the questioned costs.
Effect: Without formal written clearance from ACF, vehicle lease expenditures totaling $302,858 for the current fiscal year remain unresolved and may be subject to disallowance.
Context: Testing identified eight of sixty expenditures, totaling $302,858, as potentially disallowed based on prior communications from ACF.
Recommendation: We recommend that Sunny Glen continue to follow up with ACF to obtain formal written confirmation of the allowability of the specific vehicle lease arrangements.
Views of Responsible Officials and Planned Corrective Action: Management acknowledges the ongoing need for formal clearance and will continue its efforts to secure the necessary documentation from ACF. The Home continues to disagree with the prior finding regarding the allowability of vehicle leases. The Home provided ORR with the request to budget for the vehicle leases, as well as copies of lease terms, prior to the approval of the grant and the amounts budgeted were approved. Regarding the capital expenditures, these items were reasonable and necessary to facilitate the program.