Finding Text
Federal Programs Affected:
• 11.302 – Economic Development Administration (EDA)
• 93.041 – Preventive Health and Health Services – Ombudsman
• 93.043 – Prevention and Public Health – Evidence-Based Health Promotion (Title III-D)
• 93.071 – Medicare Enrollment Assistance (MIPPA)
• 93.324 – State Primary Care Offices (HICAP)
• 93.499 – ACA – LIHWAP Cluster
• 93.791 – Money Follows the Person – ADRC
• 93.917 – HIV Care Formula Grants – Ryan White Service Delivery
• 97.067 – Homeland Security Grant Program – SHSP
Compliance Requirement: Allowable Costs/Cost Principles (2 CFR Part 200, Subpart E)
Type of Finding: Compliance and Internal Control Deficiency
Condition:
During our review of administrative expenditures, we identified a utility payment to NRG Business that included sales tax, which is unallowable under federal cost principles for tax-exempt entities. Specifically, the utility invoice dated June 30, 2023, in the amount of $713.43 included $51.47 in sales tax.
Although the vendor later issued a credit for the sales tax amount, the original charge—including the unallowable portion—was allocated to various federal grants through the administrative cost pool. It is not clear whether the vendor credit was properly reallocated to reverse the original federal charges.
The table below summarizes the impacted programs and amounts:
Federal Program ALN Check No. Amount Charged
Economic Development Administration 11.302 #70335 $66.99
Preventive Health & Health Services – Ombudsman 93.041 #70076 $56.16
Evidence-Based Health – Title III-D 93.043 #70335 $66.99
Medicare Enrollment Assistance – MIPPA 93.071 #70583 $75.50
State Primary Care Offices – HICAP 93.324 #71046 $80.00
ACA – LIHWAP Cluster 93.499 #69835 $43.14
Money Follows the Person – ADRC 93.791 #70335 $66.99
HIV Care Formula Grants – Ryan White 93.917 #70460 $35.63
Homeland Security Grant Program – SHSP 97.067 #69835 $43.14
Criteria:
In accordance with 2 CFR §200.403 and §200.405, costs charged to federal awards must be necessary, reasonable, allocable, and allowable under the cost principles. As a tax-exempt entity, sales taxes paid in error are considered unallowable unless excluded from reimbursement or properly credited. Additionally, per §200.302(b)(2), recipients must maintain effective control over and accountability for all funds and ensure proper allocation of costs.
Cause:
STDC’s internal controls did not identify the inclusion of sales tax in the vendor invoice prior to payment. Furthermore, no mechanism was in place to ensure that vendor credits—once received—were retroactively applied to reverse the original allocations made to federal grants.
Effect:
Although the vendor issued a credit for the unallowable sales tax, the original amount was temporarily charged to multiple federal programs. The lack of documented reallocation creates a risk that federal programs may have absorbed unallowable costs or that cost allocations remain inaccurate.
Recommendation:
We recommend that STDC:
• Strengthen internal controls to ensure that invoices are reviewed for unallowable costs (such as sales tax) prior to payment and allocation;
• Establish procedures to track vendor credits and ensure that corresponding cost reallocations are applied to the correct funding sources;
• Enhance documentation and reconciliation processes to demonstrate that post-payment adjustments are handled properly;
• Train fiscal and grant staff on exempt status implications and cost allowability under Uniform Guidance.
Questioned Costs: None (vendor credit issued); however, audit adjustments or reallocations may be necessary to ensure grant charges are corrected.