Finding 563796 (2024-002)

.Activities Allowed or Unallowed; Allowable Costs and Cost Principles Program: ACL Centers for Independent Living (ALN 93.432) Federal Agency: U.S. Department of Health and Human Services Federal Award Year: September 30, 2024 Type of Finding: Significant deficiency in internal control over compliance, other matter compliance finding. Criteria 2 CFR 200.403(a) states that costs must "be necessary and reasonable for the performance of the federal award" to be allowable. Condition Three tested transactions were found to be unallowable in nature as they were not necessary or reasonable for the performance of the federal award. Questioned Costs $166 Context A sample of 40 was made from a population of 541 transactions charged to the major program for program expenses. Of the 40 sampled transactions, 3 transactions were found to be unreasonable and unallowable. Effect Charging unallowable costs to the major program results in erroneous charges to the federal award and raises compliance concerns. This can potentially lead to overcharging or undercharging the federal award, which may result in penalties or repayment obligations.Activities Allowed or Unallowed; Allowable Costs and Cost Principles Program: ACL Centers for Independent Living (ALN 93.432) Federal Agency: U.S. Department of Health and Human Services Federal Award Year: September 30, 2024 Type of Finding: Significant deficiency in internal control over compliance, other matter compliance finding. Criteria 2 CFR 200.403(a) states that costs must "be necessary and reasonable for the performance of the federal award" to be allowable. Condition Three tested transactions were found to be unallowable in nature as they were not necessary or reasonable for the performance of the federal award. Questioned Costs $166 Context A sample of 40 was made from a population of 541 transactions charged to the major program for program expenses. Of the 40 sampled transactions, 3 transactions were found to be unreasonable and unallowable. Effect Charging unallowable costs to the major program results in erroneous charges to the federal award and raises compliance concerns. This can potentially lead to overcharging or undercharging the federal award, which may result in penalties or repayment obligations. Cause The Organization had inadequate internal controls over compliance to detect charges that were unallowable prior to requesting reimbursement for the federal award. Repeat Finding No Auditor Recommendation We recommend that the Organization obtains a better understanding of allowable and unallowable costs for federal awards. We also recommend that the Organization implement a system of internal controls that can detect noncompliance prior to charging costs to the federal award. Views of Responsible Officials The Organization has reviewed, and agrees with, the finding and recommendation.