Finding Text
FINDING REFERENCE NUMBER 2023-031 (See Finding Reference Number 2023-003)
FEDERAL PROGRAM (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF)
U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES
AWARD NUMBERS 2021G996117; 2022G996117; 2023996117 (Federal Award Years: 2021 through 2023)
ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM)
COMPLIANCE REQUIREMENT ALLOWABLE COSTS/COSTS PRINCIPLES
TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS
CRITERIA Uniform Guidance at 2 CFR 200 Subpart E §200.403, Factor affecting allowability of costs, establishes that:
“Except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards:
(a)
Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles.
(b)
Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items.
(c)
Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the recipient or subrecipient.
(d)
Be accorded consistent treatment. For example, a cost must not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost.
(e)
Be determined in accordance with generally accepted accounting principles (GAAP), except, for State and local governments and Indian Tribes only, as otherwise provided for in this part.
(f)
Not be included as a cost or used to meet cost sharing requirements of any other federally-financed program in either the current or a prior period. See § 200.306(b).
(g)
Be adequately documented. See §§ 200.300 through 200.309.”
STATEMENT OF CONDITION As part of our audit procedures over allowable costs requirements for TANF program, we selected seven (7) voucher payments related to activities of prevention. We found the following deficiencies:
(a)
When we obtained the vouchers related to payments of a contractor, we also requested the contract and the proposal, we noted that the Entity is a subrecipient and not a contractor. The transactions related to this contract were not identified as subrecipient in the SEFA (see Finding Reference Number 2023-058). We audited three (3) vouchers of this subrecipient, in each one, this Entity claimed reimbursement for utilities, supplies, and materials. When we observed documentation in the file, we noted that the entity administers other Federal awards; and no evidence was observed in the voucher that proper distribution of administrative costs is made among all Federal awards. In addition, the contract required a certification indicating absence of duplication of services provided, and it was not included in the invoice or supporting documentation.
(b)
In the other four (4) vouchers evaluated related to payments to contractors, reimbursement claimed by the contractors included the purchase of laptops and digital screens. No evidence was provided that indicated who is responsible for this equipment, where it is located, and how it is safeguarded. These suppliers were contracted to provide training and workshops for participants of TANF. In the invoices evaluated we noted that ADSEF is paying for all costs of the entity, including supplies, maintenance of vehicles, mileage for some personnel, telephone charges, internet, and other utilities. In the final draft of the SEFA submitted for audit procedures, ADSEF reported the amount of $2,411,184, which included all transactions related to preventive services.
QUESTIONED COSTS None.
PERSPECTIVE INFORMATION This is a systemic deficiency. Total transactions related to prevention services were one-hundred seven (107), amounting to $2,411,184. ADSEF does not have internal guidance and procedures establishing how transactions with sub-recipients will be handled and how they are accounted for. Furthermore, there are no internal controls documenting the evaluation of the operational costs of suppliers contracted to provide a service, and their operational expenses must be covered by them and not claimed directly from the program.
STATEMENT OF CAUSE ADSEF does not have a work plan and internal control guidance that clearly defines permissible activities and describes the activities that will be carried out to meet program requirements through the contracting of suppliers and sub-recipients.
POSSIBLE ASSERTED EFFECT ADSEF may be incurring non-allowable costs by reimbursing expenses not properly stipulated in the allowable cost regulations for program administration. Furthermore, the expenses incurred by the sub-recipient are not identified in the database in a manner that allows them to be identified for the preparation of the SEFA.
IDENTIFICATION OF
REPEAT FINDING No reported as prior audit finding.
RECOMMENDATIONS We recommend management to establish internal control processes consistent with the requirements of 2 CFR 200. In addition, design and implement internal control processes to meet the requirements of subrecipient monitoring and procurement standards.