Finding Text
Activities Allowed or Unallowed/Allowable Costs/Cost Principles
Head Start ALN# 93.600
US Department of Health & Human Services
Federal Grant/Contract Number: 10CH011215-02; 10CH011215-03; 10HE000901-01
Grant period – 2021 & 2022
Criteria – Per 2 CFR 200.303, the non-federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should follow guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Per 2 CFR section 200.403 – Factors affecting allowability of costs – Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: paragraph (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles; paragraph (g) Be adequately documented.
Per 2 CFR section 200.404 – Reasonable costs – A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost.
Per 2 CFR section 200.405 – Allocable costs –focuses on how costs are allocable, ensuring they are directly tied to the federal award or its benefits.
Per 2 CFR 200.430(i), charges to Federal awards for salaries and wages must be based on records that are supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated and that are incorporated into the official records of the non-Federal entity.
Condition – The following exceptions were noted during testing of 138 program disbursements, 93 payroll disbursements, and 100 journal entry transactions:
• 20 invoices could not be located related to program disbursements
• 6 invoices tested did not agree to the approved allocation of Head Start expenses
• 1 timecard could not be located
• multiple instances where an approved pay rate covering the appropriate time-period could not be obtained
• 12 instances where supporting documentation for journal entries to adjust Head Start expenses could not be obtained.
Cause – Turnover in staff and the passage of time since the period under audit has caused documentation to be misplaced.
Effect – Inadequate or inconsistent documentation of expenses may result in erroneous or fraudulent transactions occurring, loss of funding, or disallowed costs.
Questioned Costs – $151,608.
Recommendation – Documentation should be prepared, reviewed, and retained to support the expense.
Management’s Response – Management has reviewed and accepted the finding. See “Corrective Action Plan”.