Finding Text
Finding 2024-003: Unsubstantiated Expense
Program Name: Rail and Transit Security Grant Program
Assistance Listing No. 97.075
Federal Award No.: EMW-2021-RA-00048
Federal Agency: U.S. Department of Homeland Security
Criteria
The code of federal regulations – 2 CFR 200.405 Allocable costs requires that:
A cost is allocable to a Federal award or other cost objective if the cost is assignable to that Federal award or other cost objective in accordance with the relative benefits received. This standard is met if the cost satisfies any of the following criteria:
(1) Is incurred specifically for the Federal award;
(2) Benefits both the Federal award and other work of the recipient or subrecipient and can be distributed in proportions that may be approximated using reasonable methods; or
(3) Is necessary to the overall operation of the recipient or subrecipient and is assignable in part to the Federal award in accordance with these cost principles.
The code of federal regulations – 2 CFR 200.1 Definitions defines Questioned costs as:
Questioned cost means an amount, expended or received from a Federal award, that in the auditor’s judgment:
(i) Is noncompliant or suspected noncompliant with Federal statutes, regulations, or the terms and conditions of the Federal award;
The following exceptions to the criteria were observed during the performance of the audit procedures:
1. As part of our procedures relating to the testing requirement of Sections A and B (Activities Allowed or Unallowed and Allowable Costs/Cost Principles), we identified a transaction erroneously included in the expenditure population that did not represent an expenditure allocable to Assistance Listing #97.075 incurred by Amtrak. The $24,200 amount included on the SEFA and in the underlying population related to a project funded by the Assistance Listing #20.315.
Cause
Amtrak’s control procedures in place as it relates to the review of manual journal entries related to reclassification of expenses between different projects under different funding sources were not operating effectively. The review process failed to identify the correct project to allocate the reclassification journal entry to.
Effect
Amtrak is in non-compliance with the related grant agreement.
Questioned Costs
This finding resulted in a total of $24,200 of questioned costs for Assistance Listing #97.075 – Rail and Transit Security Grant Program for Federal Award # EMW-2021-RA-00048.
Context
We selected 40 AB expenditure transactions, related to Assistance Listing #97.075, for internal control and compliance testing. One exception as described in the Condition section above was noted for matters 1-3 in the Criteria section above, indicating that internal controls were not functioning.
Identification as a Repeat Finding
Not a repeat finding.
Recommendation
We recommend that management strengthen the process to identify and review funding sources of underlying expenditures, that support the amounts of the reclassification journal entries. This could include reviewing approved budgets for the federal award in scope at a necessary level of detail to determine appropriateness of allocations in a timely manner.
Views of Responsible Officials
The invoice identified in this finding was initially charged to the incorrect project code, due to a manual process that was done incorrectly. The charges on the invoice should have been recorded to Amtrak’s annual grant, not the Rail and Transit Security Grant. The Company has moved the charges to the correct project code.
The review and approval controls within the procurement process would have normally prevented the assignment of the incorrect project code, but in this situation, the project code was not set up at the time the services were rendered and an incorrect project code was used. This created the requirement for a manual journal entry to reclassify the expenses and at that time the incorrect code was selected.
Amtrak will reinforce the need for proper project set up in advance and proper review of project charges once incurred.