Finding Text
Condition: During our audit, we identified the Agency had reported budgeted expenditures instead of actual expenditures for payroll and fringe benefit costs. This led to discrepancies between the reported amounts of federal expenditures and the actual expenditures incurred. Criteria: Under 2 CFR Part 200, entities are required to report actual expenditures incurred for federal awards. Budget estimates may be used for interim accounting purposes provided that the entity’s system of internal control includes processes to perform periodic after-the-fact reviews of charges to federal awards based on budget estimates, and a reconciliation to the actual amount incurred. Cause: The Agency’s internal control procedures do not include adequate measures to ensure that actual expenditures are used for reporting expenditures of federal awards. As a result, certain federal awards were charged based on budget, rather than actual expenditures incurred. Effect: Reporting budgeted expenditures instead of actual expenditures impairs the accuracy and reliability of financial reporting and could result in federal awards being charged improper amounts. Recommendation: We recommend the Agency implement procedures to ensure that actual expenditures are used for reporting of federal awards. This includes regular reconciliation of budgeted amounts to actual expenditures, and adjustment of future federal award draws when necessary. Management Response: Management agrees with this finding and has begun implementing corrective actions. These actions include revising internal control procedures to ensure actual expenditures are reconciled to budgeted amounts previously reported, and making adjustments when necessary.