Finding 537555 (2024-002)

2024-002 – ALLOWABLE COSTS/COST PRINCIPLES Other Matter/Significant Deficiency U.S. Department of Housing and Urban Development ALN #: 14.871 – Housing Voucher Cluster CRITERIA According to 2 CFR 200.405(d) (Uniform Guidance), costs must be allocated to the federal award in accordance with the relative benefits received. The allocation methods used must be reasonable and documented to ensure that each federal award bears its fair share of costs. CONDITION The Authority's cost allocation plan is lacking in detail and relies on a secondary layer of interfund operating transfers in order to fund the deficits that result in certain programs. This approach would be obsolete under a revised and simplified cost allocation plan. CAUSE The Authority has not considered a more equitable cost allocation approach, such as one based on direct salaries. EFFECT The cost allocation approach that is currently utilized is prone to a misallocation of funds due to the overly complex nature of the methodology. QUESTIONED COSTS None identified. CONTEXT We considered the Authority's cost allocation plan as an activity-level control covering all of the Authority's expenditures. REPEAT FINDING This is not a repeat finding. RECOMMENDATION We recommend the Authority develop and document a comprehensive expense allocation policy that complies with Uniform Guidance requirements. AUDITEE’S RESPONSE AND PLANNED CORRECTIVE ACTION See Corrective Action Plan.