Finding Text
Finding 2024-001 – Unallowable Subrecipient Costs (Deficiency)
Information on the Federal Programs: Continuum of Care – AL # 14.267 and Emergency Solutions Grant Program – AL # 14.231.
Criteria: According to 2 CFR Part 200, Subpart F, 200.516, “the auditor must report the following as audit findings in a schedule of findings and questioned costs… Known or likely fraud affecting a Federal award, unless such fraud is otherwise reported as an audit finding in the schedule of findings and questioned costs for Federal awards.”
Condition: During the current fiscal year the Corporation, based on monitoring procedures performed, determined that one of their subrecipients had been making payments to fictitious vendors and/or vendors with a significant conflict of interest resulting in resulting in questioned or unallowable costs from fiscal year 2023 and fiscal year 2024 across the federal programs listed above.
Cause: There was an apparent lack of internal controls and/or segregation of duties within the subrecipient entity that did not prevent these unallowable costs from being incurred at the subrecipient level. Additionally, Corporation management did not perform subrecipient monitoring procedures in a timely manner which resulted in unallowed costs being incurred before ultimately being detected by the Corporation.
Effect: Questioned or unallowable known costs of $242,398 (as identified by the Corporation) from fiscal year 2023 and fiscal year 2024 were incurred across the federal programs listed below.
Questioned Costs:
Federal Program
FY2024 Amount
FY2023 Amount
AL # 14.231
$24,753
$54,737
AL # 14.231 – COVID
$0
$46,176
AL # 14.267
$37,602
$2,928
Unknown
$6,813
$69,389
Context: As part of subrecipient monitoring, the Corporation identified some questioned costs related to one specific subrecipient. Management of the Corporation performed testing of the disbursements made to the subrecipient while the Executive Director was employed there (from July 31, 2022 through January 4, 2024) and determined that there were $242,398 of disbursements that were either unallowable based on the supporting documentation, or were questioned costs due to lack of supporting documentation. Crowe tested a sample of the disbursements from the same time period and the results from that sample agreed to the results the Corporation found.