Finding Text
Criteria: Management is responsible for only changing allowable costs to the federal award under Uniform Guidance cost principles. All costs charged to the grant must be reasonable. A cost is considered reasonable if, in its nature and amount, it does not exceed what a prudent person would incur under the circumstances prevailing at the time the decision was made to incur the cost.
Condition:
1. During June 2023, the Foundation paid for certain catering and audio-visual expenses from Tennessee Pharmacists Association’s annual conference since the conference included continuing education for pharmacists. The Foundation passed these expenses to the grant in the amount of $61,588. The conference included two hours of continuing education relating to vaccines, which is a priority of the grant. We question if the amount charged is reasonable.
2. During the audit, it was observed that 100% of certain information technology costs were charged to the grant. However, these expenses should have been allocated to the grant based on Uniform Guidance Costs principles. The total questioned costs amount to $10,000.
3. The Foundation charged the grant expenses related to an affiliate’s membership database subscription which are not allowable expenses of the grant. The total questioned costs amount to $7,266.
4. The Foundation charged the grant expenses related to membership platform used by an affiliate which are not allowable expenses of the grant. Further, these charges were for expenses related to 2024. The total questioned costs amount to $10,300.
5. The Foundation charged the grant twice for expenses related to professional fees of $15,098. Additionally, the Foundation charged the grant $1,544 which has not been paid and is a duplicate cost. Total questioned costs amounted to $16,642.
Cause: The primary cause of this issue is management’s inexperience with federal grants and the cost principles. This has led to the approval of expenditures that are not reasonable, necessary, or allocable to the grant.
Effect or potential effect: The Foundation was not in compliance with activities allowed, cost principles and period of performance under the grant.
Recommendation: We recommended that all management and staff involved in grant administration undergo mandatory training on federal grant management and cost principles. This training should cover allowable and unallowable costs, methods for determining the reasonableness of costs, and documentation requirements. Enhanced oversight measures should be implemented, including detailed review of grant expenditures before requesting reimbursement from the grantor. Additionally, the Foundation should also work with their grantor to determine if any amounts should be returned.
Views of responsible officers: Management acknowledges this finding and will address remediation in the accompanying management’s corrective action plan in appendix A.