Finding Text
Finding 2024-004 (Repeat finding 2023-004) – U.S. Department of Health and Human Services – COVID-19 – Maternal, Infant, and Early Childhood Home Visiting, 93.870
Material Weakness, Material Noncompliance – Allowable Costs/Activities
Compliance Requirement: Allowable Costs/Activities
Criteria – Per 2 CFR Part 200, Subpart E (2 CFR Section 200.403): (h) Cost must be incurred during the approved budget period. The Federal awarding agency is authorized, at its discretion, to waive prior written approvals to carry forward unobligated balances to subsequent budget periods pursuant to Section 200.308(e)(3).
Condition – Prepaid gift cards for grocery and gas were purchased in bulk and recorded as federal expenses. However, not all cards were distributed to eligible beneficiaries as of June 30, 2024 and, therefore, should not have been expensed as not all criteria for allowable costs had been met.
Cause – Current processes of the Organization record the purchase of gift cards as an expense, prior to all allowable cost requirements being met.
Effect – By reporting federal expenses prior to meeting all criteria for allowable costs, the Organization runs the risk that amounts may be determined as unallowed by the federal awarding agency and the Organization may have to return the federal funds.
Questioned Costs – Approximately $130,660 in expenses were reported that had not yet met all of the allowable cost criteria to be considered federal expenses.
Context – The Organization distributed prepaid gift cards to eligible beneficiaries as needed throughout the year ended June 30, 2024. However, not all of the prepaid gift cards had been distributed by June 30, 2024.
Recommendation – We recommend the Organization improve policies and procedures to record the purchase of gift cards as a prepaid transaction and only expense these items when all allowable cost criteria are met.
Management’s Response – Management concurs with the finding, see Corrective Action Plan.