Finding Text
Condition: The Organization incurs various expenses which are not a direct cost of a particular program, but rather are joint costs of multiple programs. This finding is a repeat of preceding finding 2021-002.Criteria: The Federal Register provides that such joint costs need to be prorated using a base which accurately measures the benefits provided to each award or activity. Cause: Audit procedures tested a sample of expense vouchers, including both direct and joint costs. Certain more material expenses were also tested. The majority of costs appear to be reasonably allocated. However, based on these tests, it was observed that certain joint costs may have been allocated in a manner mis-measuring benefits provided to each award or activity. Examples include insurance expense allocated between the Community Services Block Grant (CSBG), Low Income Home Energy Assistance Program (LIHEAP) and CARES programs with no insurance expense allocated to the Shelter program, approximately half of the audit cost allocated to the CSBG program, with no audit cost allocated to the CARES program, and approximately two-thirds of the net rent expense allocated to the CSBG program with no rent expense allocated to the Shelter program. Effect: Misallocations of joint costs will misalign costs on a program-by-program basis. The effect will be more pronounced on individual financial status reports for payment requests. The effect on the financial statements may be mitigated by a.) overstatement of certain costs on one program offset by understatement of those costs in other programs, and b.) program costs which may appear under-allocated are offset by costs embedded in other programs.